Weekly Feed5 Mins Read
Kristal Weekly Feed I 27th January 2020
With a busy schedule, 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:
- Coronavirus fear grips the world markets with most major indices falling
- Gold reaches new highs as investors look for safer havens
- European stocks have a poor week but manage to recover on Friday as WHO doesn’t declare a global emergency for the coronavirus
- Despite the Lunar New Year, Asian markets struggle to overcome the fear surrounding the virus
While the World Health Organization has not yet declared coronavirus as a global emergency, markets around the world have started experiencing its effects. Investors are worried about a SAR-like situation and have started looking for safer investment havens. This led to a decline in most major indices and a rise in gold. Since the epicenter is in China, the overall economic impact is expected to be severe if the virus is not contained.
How did the week start?
- United States: On Monday, Wall Street was closed on the occasion of Martin Luther King, Jr. Day. Last week, the US markets had recorded their biggest gains since August 2019. While the sentiment was positive, the news of coronavirus spreading to different countries was an area of concern.
- Europe: European markets struggled to deal with the possible pandemic of coronavirus. Also, with the World Economic Forum (WEF) scheduled to be held on Tuesday, most major indices experienced a drop.
- Asia-Pacific: The People’s Bank of China announced no change in its prime lending rate (one-year and five-year) boosting the Asian markets on Monday. Asian pharmaceutical company shares also experienced gains due to the coronavirus outbreak in China.
As the week progressed, markets around the globe were primarily in red. Although there was some cheer by the end of the week, the coronavirus fear was primarily responsible for a drop in major indices around the globe.
Let’s take a look at how the global markets performed during the week:
The markets were closed on Monday on the occasion of Martin Luther King, Jr. Day. On Tuesday, markets opened with reports from the Center for Disease Control (CDC) about the first case of coronavirus in the United States. All three major indices closed in the red. Wednesday was a little better for the US markets as strong Q4 earnings reported by IBM pushed the tech stocks and helped S&P 500 and Nasdaq close in green.
However, the Dow Jones Industrial Average Index lost 0.03%. On Thursday, the news of China quarantining two cities to prevent the spread of coronavirus hit the markets hard. However, positive news from the US weekly jobless data helped the markets rebound to a certain extent. By the end of the week, the Dow Jones Index and S&P 500 experienced their worst week since August 2019. Also, this was Nasdaq’s first weekly loss of 2020.
European markets started the week with caution as major global business leaders and policymakers gathered in Davos, Switzerland for the annual World Economic Forum (WEF) to be held on January 21, 2020 (Tuesday). Investors waited for WEF to come up with some positive news on the international trade front and a plan to tackle geopolitical instability. On Tuesday, while the WEF commenced in Davos, increased concerns over the spread of the coronavirus hit the markets hard.
On Wednesday, European markets continued their downward trend with major indices closing in the red. Thursday was the worst day of the week for European markets due to two major reasons:
- China announced quarantining two cities to restrict the spread of coronavirus
- The European Central Bank (ECB) held its interest rates steady and took a dovish approach to the economic outlook of the Eurozone
By the end of the week, markets finally broke the four-day losing streak as the World Health Organization (WHO) announced that the deadly coronavirus was not yet a global emergency.
The week started well for most Asian indices as the People’s Bank of China announced no change in its prime lending rates. Tuesday was not a good day for most Asian indices as they experienced a decline. The Hang Seng Index took a huge hit when Moody’s announced a drop in Hong Kong’s ratings from Aa3 to Aa2 (from stable to negative). Wednesday was a better day for the Asian markets as major stocks made a turnaround and closed in the green.
Thursday was a bad day for Asian stocks as the death toll climbed in China due to the coronavirus. Also, the government declared quarantining two cities to restrict the spread of the virus. Almost all major indices declined. On Friday, most of the markets were closed due to the Lunar New Year that starts on Saturday, the Hang Seng Index and Nikkei 225 managed to edge higher as panic among investors reduced.
Heading into the next week…
This week was a clear indication of the effect of a possible pandemic on investor sentiment. While China is taking all measures to ensure that the virus does not spread, investors are increasingly flocking towards safer havens like gold and moving away from risk assets. This should be the theme of the markets over the next week too. We would recommend investors to keep a close eye on the developments around the virus and their effects on markets around the world.
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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