Week from 30 March to 5 April 2020
These are frightening figures. About 10 million workers filed for unemployment benefits in the United States, in just two weeks, thereby reflecting the impact of the fallout from the coronavirus (Covid-19) outbreak on the labour market. Unfortunately, the pandemic is far from over in the absence of a cure or vaccine. The disease is spreading rapidly across the globe leading to widespread lockdown orders along with a devastating recession. Many economists now predict the GDP of western countries may fall 30% in the second quarter.
Unsurprisingly, stock indices quickly reversed a portion of their recent gains. The S&P500 slipped 2.08% over the week and the Nasdaq Composite dropped nearly 130 points (-1.72%). Small cap stocks significantly lagged behind large cap stocks (Russell2000 down 7.06%). Overall European and Asian equity markets followed the same trend – MSCI EMU down 2.32% WTD, Nikkei225 down 8.09%, but the Shanghai Composite managed to stay afloat in this sea of red (-0.30%).
Performance varied widely among the S&P sectors. Energy was undoubtedly the winner of the week (+5.38%) after oil prices rallied (WTI crude up 31.75% WTD) as Donald Trump sparked hopes of an end to the dispute between Saudi Arabia and Russia. Consumer staples and healthcare also finished the week in positive territory (+3.46% and +2.08% respectively). By contrast, utilities (-7.11%), financials (-6.78%), real estate (-6.15%), consumer discretionary (-4.69%) and industrials (-4.48%) lost ground after their strong rebound last week.
The U.S. 10-year Treasury yield continued to slid from 0.72% to 0.62% while the U.S. dollar drew its strength from risk aversion (EUR-USD down 2.3%), despite the decline in volatility (VIX index down 28.5% at 46.8). Investment grade bonds also fared well in Europe (+0.72%) and North America (+0.27%). It was more contrasted for high yield bonds (+0.72% in Europe but -0.78% in the U.S.). Emerging debt remained under pressure (-2.38% in local currencies), paring off most of its recent gains.
Lastly, gold prices stabilized after their best week since 2008.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2020-04-03/global