Week 17 in Brief
Oil price plunged into negative territory for the first time in history this week when the price of the West Texas Intermediate (WTI) crude — the U.S. benchmark oil price — traded below $0 (dropping by up to -$40.32) per barrel before settling in the negative thirties. Though prices have since recovered, the oil market is not likely to stabilize soon and experts fear the international benchmark Brent Crude could be next as prices remain near historic lows and concerns abound about oversupply.
Hopes were dashed this week when the trial of a potential coronavirus antiviral drug remdesivir, which initially appeared to be working was halted. Gilead Sciences, the biotechnology company behind the drug maintained the study was terminated early due to low enrollment which does not make its continuation statistically meaningful, and though inconclusive, “trends in the data suggest a potential benefit for remdesivir, particularly among patients treated early in the disease.” Shares in Gilead closed down 4.3% on Wall Street on Thursday but gained 1.87% on Friday to close the week at +2.40%.
Meanwhile, researchers at Oxford University have begun clinical trials on human subjects for an experimental new coronavirus vaccine. The Recovery trial has recruited over 5,000 patients and scientists hope to get some answers within weeks and a vaccine by Autumn.
Over 100 research projects are underway across the world to find a vaccine for COVID-19 which has so far infected close to 3 million and killed over 200,000 people. More than 50,000 people (over 25%) have died in the United States alone.
Virgin Atlantic Airways Ltd was all over the news this week with its billionaire founder Richard Branson pleading for government aid. The airline is seeking a total of £500m in commercial loans and guarantees, which was rejected by the British government. Its sister airline Virgin Australia which is also struggling went into voluntary administration this week after having its A$1.4 billion loan application rejected by the Australian government. Read more on the challenges facing the two Virgin airlines and why their complicated foreign ownerships could be responsible for their taxpayer bailout denials.
U.S stock indexes closed higher on Friday but logged weekly losses as investors digested economic data, mixed corporate results, and the latest economic aid package from Congress to combat the COVID-19 pandemic. The Dow Jones Industrial Average closed the week 1.9% lower (23,775.27), the S&P 500 closed the week 1.3% lower while the Nasdaq Composite Index retreated 0.2% compared to the previous week. The declines were the first losing week for the benchmarks of the past three weeks. On the other hand, the embattled small-cap Russell 2000 index finished 1.6% higher on the session and booked a 0.3% weekly gain.
European stocks closed the week lower after a European Union summit failed to agree on a much-needed stimulus package, even as Nestlé, the most heavily weighted stock in the main index gained. The Stoxx Europe 600 index slipped 0.4% to 331.58 and is set for a 0.6% loss for the week, after two straight weekly gains. The index is up around 19% from a 52-week low of 279.66 on March 18, 2020. The German DAX dropped 0.7%, while the French CAC 40 and the FTSE 100 index fell 0.5% and 0.7% each.
The rating agency Standard & Poor’s issued a more pessimistic view of about two dozen major European banks, meaning that the lenders face a higher risk of downgrades that would make it more expensive for them to raise money on capital markets. Among the banks now regarded by S&P as having negative outlooks are Deutsche Bank and Commerzbank in Germany; ING Group in the Netherlands; Barclays, Royal Bank of Scotland and Lloyds Bank in Britain; and BNP Paribas and Crédit Agricole in France, New York Times reported.
Asian markets finished broadly lower on Friday with shares in China leading the region. The Shanghai Composite is down 1.06% while Japan’s Nikkei 225 is off 0.86% and Hong Kong’s Hang Seng is lower by 0.61%.
The U.S government is providing an additional $454 billion in lending facilities to small businesses and has warned large corporations against taking up loans meant for small businesses. The funds provided under the Paycheck Protection Program are meant to support businesses to keep their employees on the payroll.
Over 26 million Americans have filed jobless claims in the last five weeks. On Thursday, the government reported that another 4.4 million new unemployment claims were filed last week. The rising unemployment is expected to intensify debates on when to lift restrictions meant to control COVID-19 across the United States where demonstrates against the measures that have already taken place.
The Week ahead will be dominated by a Monetary policy, Economic Data, COVID-19, and Geopolitics all of which will influence the broader market.
On a Macro scale, the markets will be looking to see if the IMF forecasts for 2020 are reasonable or on the pessimistic side. Here is a summary of what to expect.
The biggest American companies (34% of the S&P 500) will report their January to March earnings this week. These companies include Microsoft, Alphabet (Google), Amazon, Apple, and Facebook.
- Apple earnings are due late Thursday. Analysts see Apple earnings falling 7% to $2.28 a share with revenue down 6% to $54.79 billion. Investors will be looking for clues around the launch of Apple’s 5G phones which are expected to drive profits over the next 12 to 18 months;
- Tesla earnings report is due late Wednesday. Analysts expect a per-share loss of 26 cents vs. $2.90 a year earlier. Revenue should rise by 36% to $6.16 billion.
- Microsoft earnings are due late Wednesday. Wall Street expects fiscal Q3 EPS to rise 12% to $1.28 a share, on sales of $33.93 billion, up 11%.
- Amazon, whose shares are up nearly 30% this year as online deliveries soar.