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Weekly Focus - 30 March 2020

Weekly Focus                        30 March 2020

Can policymakers limit the infection rate?

 

 

During last week, stocks rebounded from 3 year lows; on Tuesday the DJIA had its best day since 1933 and the S&P500 since 2008. Energy prices recovered after US officials pressured S. Arabia to end its price war against Russia and airline shares bounced back after reports of a USD 60 billion bailout package for the industry. Boeing shares led gains for the industrial sector. Changes in spending patterns are also being noted during lockdowns. Going forward, a sustainable rebound in risk assets remains dependent on 3 factors; have policymakers provided a backstop for investor fears? Are we making progress on the medical and scientific front and what will be the economic impact of confinement measures?

 

On the issue of investor fears, the US FED has announced (i) unlimited asset purchases (ii) purchase of corporate bonds from primary market, i.e., direct purchases (iii) purchase of outstanding corporate bonds and (iv) term asset-backed security loans facility which will help auto loans, student loans and equipment loans. In addition, the US Senate approved a historic 2 trillion spending package which includes (i) USD 500 billion in direct payments to households (ii) an equivalent amount to large corporates (iii) USD 350 bn in loans to small business (iv) USD 350 billion in tax cuts (v) USD 150 bn in funding for hospitals. Across the pond, Euro Area countries have committed to fiscal easing of 2.5% and liquidity of 11.5% of GDP to struggling corporations. Furthermore the ECB implemented the Pandemic Emergency Purchase Program, a game changer as the bank will no longer be constrained by capitalisation rules of member states. It’s fair to say that these measures have reassured investors for now.

 

Policymakers are catching up on the medical front at great speed with technological innovations but still need to assess why South-Korea, Singapore or Hong-Kong have obtained better medical results at lesser economic costs. Hence the duration of lockdown periods and management of a possible second wave of lockdowns depends on a rethink of policy action. The trajectory of the rate of infections for major economies remains alarming (chart above) and will affect consumer and business confidence. But the capacity of policymakers and economic agents to limit the damage to a U-turn recovery should not be underestimated.

 

 

Value

1 Week

YTD

Equity Indices

 

 

 

S&P500

2,541

13.59%

-21.34%

FTSE JSE All Share

42,947

12.23%

-24.77%

Stoxx50

2,729

9.78%

-27.14%

FTSE100

5,511

10.36%

-26.93%

DAX

9,633

10.20%

-27.30%

CAC40

4,351

11.17%

-27.21%

SMI Index

8,996

10.24%

-15.26%

FTSE MIB

16,823

8.12%

-28.43%

Shanghai Comp

2,740

2.99%

-10.18%

BSE Sensex

28,967

11.49%

-29.78%

Nikkei

19,085

13.01%

-19.33%

Major currencies

 

 

 

USDZAR

18.03

1.09%

28.79%

EURUSD

1.11

3.25%

-1.25%

GBPUSD

1.24

7.31%

-6.54%

USDCHF

0.96

-2.92%

-1.25%

EURCHF

1.06

0.24%

-2.48%

GBPZAR

22.33

8.37%

20.19%

EURGBP

0.89

-3.76%

5.74%

USDAUD

1.63

-5.13%

14.30%

Dollar Index

99

-4.19%

2.97%

 Commodities 

 

 

 

Brent

26.84

-0.78%

-59.36%

WTI Oil

20.70

-11.69%

-66.21%

Copper

2.16

1.77%

-22.88%

Platinum

718.00

8.07%

-26.04%

Sugar

11.12

0.72%

-17.14%

Corn

344.62

0.26%

-11.19%

Gold

1,640.90

4.67%

7.29%

 Sovereign Yields

 

 

 

US10Y

0.66

-13.98%

-65.82%

UK10Y - price

136.27

-0.14%

3.72%

Germany10Y

-0.51

30.35%

172.19%

 Deposit rates with selected banks

 

The Mauritius Commercial Bank Ltd 6M

1.20%

 

 

 

Contact us: Durban +27 (0) 31 566 3365 | CPT +27 ( 0 ) 21 851 0920 | JHB +27 ( 0 ) 11 017 7230 | Email: enquiries@pwm-wealth.com

Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report
 

 



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