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Weekly Feed5 Mins Read

Kristal Weekly Feed | 27th April 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:

  • As of writing, the number of confirmed Covid-19 cases have crossed the 2.9 million mark.
  • Crude oil prices entered the negative territory this week as the world struggled to store oil when the demand has come to a standstill. However, by the end of the week, there was some consolidation in prices.
  • The U.S. markets reacted strongly to the drop in crude oil prices but were supported by another economic stimulus of $484 billion.
  • Despite the €480 billion emergency rescue package signed off by the EU leaders, disagreement on handing out the package didn’t help the markets a lot. Most European indices posted losses for the week.
  • In the Asia Pacific region, markets remained volatile as the volatility in crude oil prices dictated market sentiment.

Tracking COVID-19

Covid-19 now has 2,938,733 confirmed cases around the globe and the death toll is at 203,798.
Some positive news snippets:

  • This week the University of Oxford started the first human trials of a potential COVID-19 vaccine. Scientists are expecting an 80% success rate.
  • In Spain, children will be allowed outside from the coming week.
  • India allowed manufacturing and farming to resume in rural areas.
  • China didn’t report any new death due to the virus for the 10th consecutive day.
  • Belgium released its plans to ease the lockdown from May 4, 2020.
  • In the US, some states have started easing quarantine restrictions

Market Update

1. United States

The US markets had a mixed week as a historic drop in oil prices triggered volatility in the markets. Most of the major indices experienced a moderate fall this week with investors consolidating their recent gains.

The boosters
On Wednesday, the US markets regained strength after losing more than 2 percent on the first two days of the week. This was triggered by the Senate passing a $484 billion economic stimulus package on Tuesday. Also, some surprisingly positive corporate earnings and an overall investor optimism due to rebounding oil prices. While this week another 4.4 million Americans filed jobless claims, investors took heart from the fact that the trend of these claims was on the decline.

The dampeners
The week started with a historic drop in crude oil prices due to the declining demand for crude oil due to the lockdown and storage deficiency. This was the first time that crude oil prices had fallen into the negative territory.
The post-midweek gains were dampened by rumors of a report that Remdesivir, the potential treatment for COVID-19 had failed in an early clinical trial in China. Further, anticipation and worry weighed heavily on the investor sentiment as people waited eagerly to hear some positive news about the end of lockdowns in some states.

U.S.market performance (week of 20-24th April 2020)

2. Europe

The European markets also had a mixed week too as investors responded to the historical crash in crude oil prices, the news of the failure of Remdesivir in China, and continuing disagreement regarding the fiscal response to the economic impact of the pandemic.

The boosters

The week started on a positive note for the European markets as the coronavirus hotspots of Italy and Spain showed a decline in the number of deaths due to COVID-19. However, investors remained cautious as they prepared themselves to brace for an economic impact due to the damage caused by the pandemic. Over the course of the week, as global markets recovered from the sharp drop in oil prices, most major European indices managed to stay in the green.

The dampeners
After the dramatic drop in crude oil prices due to dents in demand and growing concerns about storage, the European markets reacted negatively too. The UK employment figures for the month of March fell to 0.8% from 1.1% in February. This indicated early signs of the impact of the pandemic causing further concerns. While the EU leaders signed off a €480 billion emergency rescue package, they remained divided over handing out loans or grants. This dampened the investor sentiment as the hopes for a near-term fiscal response seemed unlikely.

Europe market performance (week of 20-24th April 2020)

3. Asia Pacific

Almost all major indices in the Asia-Pacific region posted losses this week. The markets responded to the historic drop in crude oil prices and news about the failure of the clinical trial of Remdesivir in China. The Chinese markets managed to limit their losses due to the cut in the loan prime rates. The primary theme of the Asia-Pacific markets this week was the volatility in the oil market.

APAC market performance (week of 20-24th April 2020)


Heading into next week…

As we head into the last week of April, Q1 earnings reports of big tech companies like Apple, Amazon, Microsoft, etc. are expected to be released. Further, Purchase Managers’ Index (PMI) for the US and Chinese markets are expected this week. While we don’t expect the PMIs to be upbeat, we will get an idea of the status of the manufacturing economy.
The Federal Reserve will be making rate announcements next week. However, the Fed has announced that it will not use negative interest rates and with the existing rates at their lowest, we don’t expect much movement. On the other hand, with the Eurozone already having negative rates, pushing them lower seems unlikely.

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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