Week from 20 to 26 April 2020
It was another tough week in the U.S. as jobless claims hit 4.4 million bringing the five-week total to 26.5 million, hence a real unemployment rate of 20.6% which is the highest level observed since the Great Depression! The U.S. death toll from the Covid-19 pandemic now surpasses 52,000 and all the evidence suggests that the path back to normality will be long and chaotic.
In the battle between bulls and bears, the latter were the winners of the week even if Wall Street eventually moved higher on Friday. Most of the major stock indices finished the week in the red on the back of dire business activity surveys, especially in Europe where the IHS Markit France Composite PMI tumbled to a new all-time low of 11.2 in April vs. 28.9 in March. To make things worse, the 27 EU leaders failed to agree on a coronavirus economic recovery program on Thursday.
The MSCI EMU was down 1.84% WTD, the S&P 500 dropped 1.32% and the Nasdaq Composite inched lower (-0.18%). On the other hand, small cap stocks managed to remain in positive territory (Russell 2000 up 0.32%). In Asia, the Shanghai Composite lost 1.06% but did better than the Nikkei 225 (down 3.19%). The VIX index continued to fall (-5.8% to 35.93) but is still elevated compared with its long-run average.
Almost all the S&P sectors retreated but energy bucked the trend (+1.67%) though the spectacular collapse in oil markets showed no signs of easing. Thus U.S. oil futures contracts expiring on Tuesday fell into negative territory for the first time in history on Monday, dropping to -$37.63 per barrel over concerns that energy companies were running out of room to store it.
Once again, real estate was the worst perfomer (-4.35%). Utilities, consumer staples and financials were not far behind with losses of 3.76%, 3.19% and 3.13% respectively.
Treasury yields were virtually unchanged (0.6% for the 10-year U.S. T-note, -0.47% for the German Bund). Investment grade corporate bonds notched their fifth week of consecutive gains (+0.04% in the U.S., +0.43% in the eurozone). By contrast, the picture was complicated in the high yield space (-2.46% in the U.S. as bonds issued by shale producers are feeling the strain, -0.28% in the eurozone). Emerging debt also stalled (-1.08% in local currencies).
On the precious metals front, gold prices surged during the week rising 2.03% and closing at a weekly 7-year high.
Find the full report: https://www.trackinsight.com/en/weekly-flow-report/2020-04-24/global