Company / Analytics

Analytics, 29 March 2020

Week 13 in Brief

Like previous weeks, Coronavirus and its related impacts on the global economy dominated the news. As of Sunday 29 March, over 710,000 had been infected while more than 33,000 have died across the world.

Europe is now the global epicentre with the largest number of cases in Italy, Spain, and Germany. Italy leads with over 97,000 infections and almost 11,000 deaths followed by Spain with over 78,000 infections and more than 6,600 deaths.

On a country basis, the US is the global epicentre with more than 135,000 confirmed cases and more than 2,000 deaths; New York City alone has over 31,000 active cases. In Africa, South Africa has the highest number of infections 1,187 while in Latin America Brazil leads with over 3,900 deaths.

On the financial markets, the Dow Jones Industrial Average dropped 915.39 points, or 4.1%, to 21,636.78. The S&P 500 slid 3.4% to 2,541.47 while the Nasdaq Composite closed 3.7% lower at 7,502.38, CNBC reported.

Boeing dropped 10.3% to lead the Dow lower after U.S. Treasury Secretary Steven Mnuchin said the planemaker had not requested for a government bailout. Chevron and Disney each fell more than 8%. Energy and tech were the worst-performing sectors in the S&P 500 as they dropped 6.9% and 4.6%, respectively. The energy sector was pressured by a 4.8% drop in crude prices, according to CNBC.

The major averages posted strong gains for the week. The Dow rose 12.8% week to date, its biggest one-week gain since 1938. The S&P 500 gained 10.3% this week, its best weekly performance since March 2009. The Nasdaq also had its biggest weekly gain in 11 years, rising 9.1%. But these gains are still more than 20% below the record highs set last month.

On the commodities side, a plunge in global crude demand sent oil prices down for a 5th straight week. Oil futures finished lower on Friday. West Texas Intermediate crude for May delivery CLK20, +1.53% fell $1.09, or 4.8%, to settle at $21.51 a barrel on the New York Mercantile Exchange, with prices for the front-month contract ending roughly 5% lower for the week, MarketWatch reported. Oil prices will continue to be impacted by a drop in global demand, in part caused by government measures to deal with COVID-19 such as lockdowns.

On the other hand, Gold had a price rally on Tuesday with prices having their largest daily percentage surge in more than a decade. The Gold price rally was driven by the closure of major gold refineries due to government lockdowns and moves by the U.S. Federal Reserve to purchase an unlimited number of treasuries and securities to support the financial market from the cash rush caused by the COVID-19.

The Gold for April delivery GCJ20, -1.246% on Comex rose $93.20, or about 6%, to settle at $1,660.80 an ounce. As the gold price surged Tuesday, in a research note, analysts at Goldman Sachs were of the view that the current market volatility tied to the outbreak of COVID-19 will help drive bullion prices higher. Read more from our piece on the Gold Rally this week.

On the policy side, U.S. President Donald Trump signed a $2 trillion coronavirus emergency spending bill following a unanimous vote in the Senate. President Trump and Chinese leader Xi Jinping also committed to “working closely together” to fight the COVID-19 pandemic. Meanwhile, UK Prime Minister Boris Johnson has tested positive for the coronavirus.

In Europe, leaders have called for the re-activation of the European Stability Mechanism (ESM), the post-financial crisis bailout fund for the eurozone countries. France and Italy, some of the most affected countries in the region want to re-activate the tool without any delays or conditions. The European Stability Mechanism (ESM) has already made €410bn available for emergency credit lines.

The European Commission already suspended the EU’s rules on-budget deficits in the Stability and Growth Pact to allow governments to support their economies during the COVID-19 crisis. The European Central Bank (ECB) also announced a public and private debt buyback plan worth €750 billion. These are all measures governments are putting in place to cushion the economic impact of the coronavirus.

This week?

Investors across the world are facing uncertainty over the economic impact of the Coronavirus; both the length of the economic quarantine required to contain the virus, the ultimate economic damage from the virus, and the time it will take to recover the damage after the crisis is contained.

We expect COVID-19 cases to rise across the globe, especially in the United States. Measures to contain the pandemic, impact of the pandemic and calls for economic measures to contain them will dominate the headlines this week. These uncertainties will drive investor decisions and market reaction.


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