Company / Analytics

Analytics, 18 June 2020

Is post-COVID-19 market recovery nearer?

US Retail sales data

The U.S. government reported a record 17.7% increase in retail sales for May, beating economists’ estimates of 7.7%. The pickup in retail sales was driven by the relaxation of coronavirus-related business closures and stay-at-home orders beginning in April. Retail sales grew 1.4% year over year in May–a marked improvement from April’s 5.4% decline. But despite stores reopening, consumers still turned to the web in unprecedented numbers. Consumer spending through non-store channels increased 24.6% year over year in May—the highest growth rate ever recorded for the month, industry experts expect the e-commerce market to continue to post solid results as consumers remain cautious about returning to in-store shopping and become increasingly comfortable with ordering groceries online or using a curbside pickup.

The retail sales data showed that businesses are recovering from the worst of the fallout from the coronavirus pandemic, even though retail businesses still have far to go before they can get back to pre-coronavirus levels.

The US government is considering a $1 trillion infrastructure proposal

Sentiments were lifted following a Bloomberg News report that the Trump administration is drawing up a $1 trillion infrastructure proposal. The report said a preliminary version being prepared would set aside the majority of the money for traditional infrastructure projects such as roads and bridges, though funds would also be reserved for 5G wireless infrastructure and rural broadband.

According to analysts, an infrastructure bill would be a big deal for construction companies like Martin Marietta Materials and Vulcan Materials - two of the largest aggregate companies, which will see a rise in their orders. For instance, Martin Marietta, a Raleigh, North Carolina company with operations in dozens of states has a market valuation of $13.3 billion. Its stock price surged north of 7% during trading on Tuesday, closing at $214.13, which is down 23% from the start of the year.

Rising New Covid-19 infections in Beijing

The second wave of Covid-19 infections is rising in Beijing. The city has ordered the closure of all schools as it struggles to halt the new outbreak which is feared to have already spread to neighboring provinces. The city reported 31 new cases on Wednesday, making the total number of new infections to 137 at the time of writing. The nature of these new infections will impact on market sentiment, especially around various containment and economic recovery. Emerging research has shown that the speed of lockdown implementation can be crucial in containing virus spread.

Positive news on Covid-19 Drug

Trial results from a U.K. study on Tuesday showed dexamethasone — a widely available drug — can help critically ill coronavirus patients. The treatment reportedly reduced Covid-19 deaths in hospitalized patients by up to one third. The news has been met with optimism and has increased recovery sentiments. The market tends to react to good news on coronavirus vaccine, and the moment we get more positive announcements about a coronavirus vaccine, and rightly so, as the virus has affected all aspects of human life.

The emergence of Geopolitics

Geopolitics came back to the radar this week after North Korea said it would deploy troops into areas on its side of the border where it had joint projects with North Korea. This follows news that North Korea blew up an inter-Korean liaison office in an explosive rebuke to Seoul. German officials are also lining up to condemn Donald Trump’s latest verbal attack on the nation after the U.S. leader confirmed his plan to withdraw troops from Germany unless it boosts defense spending.

Conclusion

Global stocks are still experiencing volatility, even after seeing signs of recovery rallied by better than expected data, taking US retail sales data and positive developments in Covid-19 drug, for instance. A lot of hope is priced into stocks, but there is still some caution if you know where to look for it.

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