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Weekly Focus           20 April 2020

Highest ever monetary easing by FED stabilizes the S&P500
 

 

Large capitalisation stocks pushed major indices higher during the past week. Growth stocks had an edge over their value counterparts and the technology sector led gains after positive results from chipmakers and leaders Microsoft and Apple. Solid gains in Amazon also boosted the consumer discretionary segment and the healthcare segment gained as demand for this sector is considered relatively inelastic.

 

The funding stress which hampered the functioning of markets in March has dissipated further after the US FED decisively increased the size of its balance sheet (see chart above) and started purchasing commercial paper last week. The correlation between stocks and bonds which matter to balanced portfolios had turned positive a few weeks ago but is now improving and commercial paper spreads are also normalising. There is a willingness to further increase fiscal stimulus in most major economies even if it is unlikely to be at the same pace seen in recent weeks.

 

Another positive is that growth in the number of cases of the virus has been slowing in major economies during the past week. The focus has therefore turned towards planning for the easing of restrictions and this has improved investor sentiment, enhancing the perception that aggregate demand could recover in the second half of the year.

 

On a less favourable note, the soft economic data is indicative of a double digit contraction across regions. We have also started seeing hard data move in the same direction; US retail sales for March fell by 8.7% and industrial production fell 5.4%. It should be noted that these indicators captured a part of the post lockdown period and could further worsen in the coming months. For its part, the IMF projects that the global economy will contract by 3% this year but estimates that this will rebound to 5.8% next year.

 

The labour market fallout and instantaneous policy response helped risk assets rebound during the past two weeks. It is likely that future market action will be more reliant on the news flow.

 

 

Value

1 Week

YTD

Equity Indices

 

 

 

S&P500

2,790

4.74%

-13.65%

FTSE JSE All Share

48,012

3.83%

-15.89%

Stoxx50

2,893

3.46%

-22.76%

FTSE100

5,843

4.66%

-22.54%

DAX

10,565

4.86%

-20.26%

CAC40

4,507

3.70%

-24.61%

SMI Index

9,453

-0.10%

-10.96%

FTSE MIB

17,622

3.42%

-25.03%

Shanghai Comp

2,783

0.69%

-8.76%

BSE Sensex

30,690

11.23%

-25.61%

Nikkei

19,043

2.51%

-19.50%

Major currencies

 

 

 

USDZAR

18.08

-3.19%

29.20%

EURUSD

1.09

1.13%

-2.65%

GBPUSD

1.25

2.13%

-5.81%

USDCHF

0.97

-1.20%

-0.09%

EURCHF

1.06

-0.08%

-2.74%

GBPZAR

22.59

-1.11%

21.64%

EURGBP

0.87

-0.98%

3.41%

USDAUD

1.58

-3.92%

10.83%

Dollar Index

100

-1.22%

3.61%

 Commodities 

 

 

 

Brent

31.35

-5.66%

-52.76%

WTI Oil

22.93

-12.42%

-62.59%

Copper

2.33

4.07%

-16.73%

Platinum

748.05

0.07%

-23.15%

Sugar

10.43

-0.19%

-22.28%

Corn

 331.38

1.03%

-14.60%

Gold

1,741.25

2.72%

13.77%

 Sovereign Yields

 

 

 

US10Y

0.72

6.54%

-62.38%

UK10Y - price

136.83

0.22%

4.15%

Germany10Y

-0.35

-17.79%

86.63%

 Deposit rates with selected banks

 

The MCB Ltd, 6M- USD 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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