Weekly Market Update

Author : Rachel Poole
Date : April 18, 2020

Global Market News

Global equities make gains
Global equities made gains this week despite grim economic data reports. However, the yield on the US 10-year Treasury note dropped 11 basis points to 0.62%. The price of a barrel of West Texas Intermediate crude oil fell significantly ending the week around $18. Volatility, as measured by the Cboe Volatility Index also held steady at 43.

China’s GDP drops 6.8% in Q1
This week, China reported a 6.8% drop in GDP for the first quarter of 2020. This is the first quarterly drop in economic growth since it began reporting quarterly data in 1992. Many are viewing this report as a foreshadowing of the economic hardship to come as the rest of the world continues to be in the thick of the Covid-19 pandemic.

IMF downgrades 2020 outlook
The International Monetary Fund (IMF) revised their 2020 outlook for global GDP which now forecasts a 3% decline in global growth which is a much deeper contraction than the 0.1% decline that followed the 2008-09 global financial crisis. On a more positive note, reports indicate the fiscal response to the crisis globally so far equates to roughly 10% of global GDP.

Earnings reports expected next week
Next week we expect the earnings reports from about a hundred S&P 500 companies and many European companies. US and European firms are expected to report decline in first quarter earnings which could reach as high a 22% in Europe. Analysts are expecting S&P 500 companies to post lower profits between 10-16% in the first quarter, with much higher declines in the second quarter.

Coronavirus Updates

Covid-19 by the numbers
Global Confirmed Covid-19 cases: 2,240,191

Global Covid-19 deaths: 153,822

US Confirmed Covid-19 cases: 706,309

US Covid-19 deaths: 36,607
*As of Friday evening

Trump to let governors decide state reopenings
On Thursday, US President Donald Trump announced the re-opening of the US economy would be made on a state-by-state basis after certain epidemiological benchmarks are met. The guidelines outlined by the White House Coronavirus Taskforce call for the nation to be reopened in three phases, but do not suggest specific reopening dates. President Trump says 29 states meet the criteria for reopening soon but final reopening decisions will be made by state governors. However, epidemiologists warn that measures probably will stay in effect at least through summer of 2021.

Europe begins to reopen

Some European countries, including Denmark, Spain and Austria, have begun cautiously reopening daycares, shops, and construction sites. Germany specifically will allow shops to open next week and schools to reopen beginning in May. However, strict social distancing rules will be kept in place including the prohibition of major gatherings until August 31st. European Union (EU) leaders have called on countries to reopen only if they meet certain conditions including large-scale testing, a sustained decline in cases, and a confirmation of health-system capacity to treat both coronavirus patients and others. President of the European Commission, Ursula von der Leyen, has encouraged countries to coordinate their economic restarts.

Geopolitics Spotlight

Trump stops WHO funding

The Trump administration has temporarily halted funds to the World Health Organization (WHO). President Trump has accused the organization of covering up the crisis in the early stages and mismanaging its spread. The US is the largest funder of the WHO, giving $500 million annually which is about 10 percent of the group’s budget. The move has sparked criticism from influential leaders around the world including United Nations Secretary-General Antonio Guterres and Bill Gates.At the same time the number of those advocating in Congress punishment of China is rising.

Libyan civil war escalates

Fighting in Libya continues to escalate despite coronavirus concerns. Libya’s UN-backed government has seized control of three cities between Tripoli and the Tunisian border after rival forces refused to accept a temporary ceasefire called for in response to the global pandemic. At least 14 hospitals have been forced to close because of the fighting and 23 more are at risk of closing. The UN-backed government said it will accelerate its campaign to reclaim land captured by rebel-leader General Haftar and has urged his supporters to withdraw their aid.

Updated Market Figures