In terms of exit strategies, EU leaders approved the guidance from Brussels which set out three criteria on how and when to end restrictions, including: a stable and significant decline in the spread of the disease; appropriate health system capacity; and the availability of widespread testing and tracing systems to monitor future outbreaks.
The Eurozone purchasing manager indexes (PMIs), where activity dropped at its fastest pace on record, were a mirror of those in the UK. In addition, the UK’s March retail sales saw their biggest monthly fall since records began, dropping 5.1%, while CPI numbers fell to 1.5% year-on-year as disinflationary pressures from weak demand started to come through.
There was some disappointing news in terms of a potential treatment last week. A trial of the drug made by Gilead showed that it did not improve the condition of COVID-19 patients or reduce the level of blood-borne pathogens, as well as causing significant side effects in some. This left scientists and investors disappointed.
On Wednesday 22 April, President Trump followed through on a threat to suspend immigration into the US by signing an order preventing people from applying for green cards for 60 days, and possibly longer.
Meanwhile the Q1 corporate earnings season clearly showed the effect of the shutdown, with Delta Air and United Airlines, as examples, announcing huge pre-tax losses. Even Coca-Cola, long regarded as less vulnerable to recessions, saw sales drop by 25% quarter-on-quarter. Meanwhile, the latest filing for US unemployment benefits saw claims increase by 4.4 million, down from 5.2 million the previous week, but bumping the total to a new record of 26 million.
On Tuesday 21 April, the US passed a US$484 billion interim relief package which should replenish funds for emergency small business lending and shore up national coronavirus testing.
EU leaders endorsed a short-term €540 billion package on Thursday and agreed to develop a ‘recovery fund’ to support governments with limited fiscal ammunition.
However, there were no indications about the size of that fund or whether it will be made up of loans or grants.
In terms of other news, and as we noted in Thursday’s update, US oil prices crashed into negative territory for the first time in history on 20 April, settling at under -$37 a barrel.
The news resulted in the MSCI All Country World Index ending down -0.9% in sterling terms, and -2.0% in US dollar terms. Friday then saw the US market up while other markets were down. Results remained mixed at the sector level too. Some cyclical industries, such as energy and materials moved higher from their lows, although others continued their downward trend, including financials and real estate. Some defensive sectors, such as healthcare and communication services, also continued to perform well.
What’s interesting to note is that even though we’ve seen a fairly spirited bounce in markets from the lows, it hasn’t been led by the sectors and styles that have particularly underperformed, and there continues to be a focus on high quality investments.
Many American states are set to reopen, while a number of other G10 countries are also contemplating exit measures. This represents a window of hope for global economic activity, although any second waves of infections would lead to further economic disruption.
In terms of economic data, the focus remains on weekly US jobless claims data published on Thursday as it is the most real time economic release. The Federal Reserve meeting may also result in more support for businesses via monetary measures, while the European Central Bank meeting should result in some much awaited support, particularly for those countries hardest hit.
More purchasing manager numbers will be published this week. China’s numbers, on Thursday 30 April, will give us an indication of how its economy has recovered as the lockdown was eased. Friday sees the release of the final PMIs from Japan, the UK and the US, and there’s also the ISM manufacturing reading from the US.
The euro area and US release Q1 GDP this week. Expected to be poor, they won’t show the full effects given widespread lockdown only really started in March. The euro area flash CPI estimate for April on Thursday 20 April should give us some idea as to how downward pressure from energy prices is affecting overall numbers.
Last but not least, the corporate earnings season is now in full swing, with 173 of the S&P 500 companies reporting, including a number of big names, such as Apple, Amazon, Alphabet (Google), Visa and Merck just to name a few.
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