Week 14 in Brief
The novel coronavirus and its related impacts on the global economy dominated news across the globe. As of Sunday 5th April, over 1.25 million cases have been diagnosed globally with 68,148 deaths. The United States has over 25% of all global COVID-19 infections (325,185).
On the financial markets, the major US stock indexes closed lower on Friday following a weak jobs report. The Dow Jones Industrial Average declined by more than 360 points to close at 21,052.53, the S&P 500 by more than 38 points to close at 2,488.65, while the Nasdaq Composite index dropped by more than 114 points to close at 7,373.08. Compared to the previous week, these are only slight changes. In South America, Brazil’s Bovespa was down -3.76% while Mexico’s Bolsa dropped -1.53%.
European markets ended the week lower as COVID-19 economic toll became clearer, with shares in France leading the region. The CAC 40 was down 1.57% while London’s FTSE 100 was off 1.18% and Germany’s DAX is lower by 0.47%, CNN Business reported.
The pan-European STOXX 600 index closed 1% in the red, with insurers. SXIP dragging the most. Bank stocks .SX7P fell 2.2% and were the worst-performing European sector for the week, shedding about 11%. The sector looked vastly less attractive after several banking majors suspended their dividend payouts earlier in the week.
Energy stocks outperformed other sectors for the week with a 9% gain due to a bump in prices along with extremely low stock valuations in the sector. Healthcare stocks .SXDP were among the few gainers, adding 5.8% for the week as the sector continued to benefit from safe-haven demand. Retail stocks .SXRP also gained after data showed eurozone retail sales jumped by more than expected in February. Economists expect euro area real GDP to shrink as much as 43% in the second quarter, Reuters reported.
Asian markets finished mixed to lower with shares in China falling as the Shanghai Composite dropped 0.60%. The Hang Seng lost 0.19% while the Nikkei 225 in Japan closed unchanged, according to CNN Business.
On the commodities side, oil price continued to plunge as futures of international benchmark Brent crude fell below $30 a barrel Monday for the first time since 2016, a stunning 54% drop year-to-date. US oil prices soared 25% — their biggest one-day gain on record — on Thursday after Trump tweeted that he hopes and expects Saudi Arabia and Russia will slash output by between 10 million and 15 million barrels per day. OPEC and Russia plan to have a meeting on Thursday, April 9, to discuss supply cuts and end a brutal price war.
The US economy lost 701,000 jobs in March — the worst report since 2009. It was the first time the economy lost jobs in a month since September 2010, and the worst month for American jobs since the depths of the Great Recession in March 2009. The unemployment rate shot up to 4.4%, from a near 50-year low of 3.5%.
More than 60 large U.S. companies in the S&P 500 are ‘susceptible to a dividend cut,’ due to intense pressure for companies to shore up cash reserves, not only by reducing investment and suspending share buybacks, but by cutting dividend payout, according to Jefferies. Investors who rely on income are already seeing companies reduce or eliminate dividend payouts as the coronavirus spreads. A Goldman Sachs analyst predicts dividends for the S&P 500 would decline by 25% in 2020.
- The coronavirus situation will hold investors’ attention in the week ahead; most will continue worrying about 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 the number of COVID-19 cases to rise across the globe, especially in the United States, but also a decline in new infections in other countries.
- Stocks are likely to remain lower as the virus spreads and economic activity across the world will depress.
- There are also some highly anticipated earnings announcements on the way as the quarterly earnings seasons begin.
- Jobless claims are expected to show many millions more in layoffs in the coming week, and the markets will get a look at investor sentiment.
- The OPEC-Russia meeting on Thursday will determine much of the movement of oil prices. An agreement on production cuts would lead to a rise in oil prices above the current price. A disagreement would only lower them further – prices could drop to less than $10 a barrel. __________
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