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Weekly Feed5 Mins Read

Kristal Weekly Feed | 25th May 2020

These are tough times and it can get difficult to understand and analyze major events around the globe and how they affect your investments. In our weekly market update, we help you slice and dice the latest news updates to make informed investment decisions.


Headlines this week:

  • Markets around the globe were optimistic as news about positive developments in the clinical trials of a vaccine by Moderna raised hopes of a complete recovery from the pandemic. Statements made by the US Fed Chair, about the central bank being ready and willing to take more measures to fight the slowdown, boosted investor sentiment too.
  • Increasing tensions between the US and China kept the markets in check.
  • Overall, most major indices across the globe posted gains for the week.

Tracking COVID-19

Covid-19 now has upwards of 5.4 million confirmed cases around the globe and the death toll is at 346,685.
Some positive news snippets:

  • Moderna Therapeutics announced positive Phase I results from the clinical trials of the vaccine against COVID-19.
  • Around 2 million patients have recovered from the virus. A few other vaccines are also headed towards clinical trials soon.

Market Update

1. United States

This was a good week for the US markets as the S&P 500 Index managed to touch its highest level since March 6, 2020, on Wednesday. Midcap and small-cap stocks were the biggest gainers with the small-cap benchmark index – Russell 2000 – adding nearly 8% during the week. The US crude oil prices also surged for the fourth week in succession.

The boosters

The week started on a positive note with all three major indices surging more than 2%. Moderna Therapeutics made an announcement that the vaccine it was working on had produced antibodies in a small group of volunteers during the first stage of clinical trials.

Jerome Powell, Chairman of the Federal Reserve, announced that the central bank had various means to fight the economic slowdown. This added to the optimism in the market. US crude oil prices posted gains for the fourth consecutive week
The S&P 500 Index was up by around 30% from its lowest level on March 23, 2020.

 

The dampeners

There were a few factors that kept the optimism in check:

  • Some questions regarding Moderna having enough data to support its claim of the effectiveness of the vaccine caused some uncertainty in the markets.
  • An additional 2.4 million Americans filed jobless claims this week taking the 9-week total to 39 million.
  • A deterioration in the US-China relations caused the markets to shed some of their gains from earlier in the week.

 

Europe

The European markets posted gains this week as investors reacted positively to the news about lockdown restrictions being gradually lifted across the continent. The pan-European Stoxx 600 Index gained more than 4% on Monday. The investor optimism was supported by the Fed Chairman’s announcement regarding the central bank taking more measures to fight the economic slowdown and Moderna Therapeutics announcing claiming progress in the development of a vaccine.
During the week, the Euro one PMI data highlighted another slowdown in the region’s manufacturing and services activities. Although the figure was better than that for April, it is still in the contracting phase. Investors also reacted to the report by the World Health Organization stating that the number of new coronavirus cases had hit a record high. The increasing tensions between the US and China also dented investor optimism towards the end of the week.

 

Asia Pacific

Most major indices in the Asia Pacific region posted minor gains as investors cautiously weighed news about the pandemic, lockdowns, and tensions between the US and China. Here are some key points:

  • The US announced more restrictions on the Chinese telecommunications giant Huawei Technologies to use U.S. technology or software design in the manufacture of its semiconductors outside the U.S.
  • The US Senate also passed a bill that could lead to the exit of some Chinese companies.
  • Markets in the Asia Pacific region also reacted to Powell’s comment about the fact that the US economy will not fully recover unless a vaccine is available.
  • The markets responded favorably to Moderna’s announcement regarding positive developments in its vaccine trials.
  • The Chinese President announced a stimulus package of $2 billion to be provided over two years to help other countries combat the impact of the pandemic.
  • The markets lost some gains made earlier in the week as news from the WHO about the number of new coronavirus cases hitting a record high dampened investor confidence.
  • The news about China thinking of imposing a new security law on Hong Kong led to further dampening of the market sentiment.

Heading into next week…

In the coming week, a few important reports are expected in the US including the Conference Board consumer confidence for May, Quarter 1 GDP, PCE report for April, etc. In Europe, investors will await the business and consumer confidence reports in various countries for the month of May, unemployment rate reports, and inflation rate reports. Primarily, investors will keep an eye on the number of coronavirus cases as most countries are easing the lockdown restrictions. With developments on the vaccine front and fiscal stimulus packages being the two major drivers of the markets, investors will do well to keep them in perspective while investing.

Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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