Market Monitor – 29 May 2020
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Market Monitor – 29 May 2020

The easing of lockdown restrictions in Europe and the US has fuelled another week of significant stock market gains. Investors apparently believe that the coronavirus-driven global recession may not be as deep or long-lasting as originally feared.

Amid the ongoing exuberance, two points are worth noting: firstly, that it will be some time yet before the true economic impact of the pandemic becomes clear. And secondly, that most indices remain well below the levels recorded in the first six weeks of 2020.

The US

In three trading sessions up to close on Thursday, with markets shut on Monday for Memorial Day, Wall Street saw consistent gains with the Dow Jones Industrial Average up 3.8% and the S&P 500 2.5% ahead for the week.

On Tuesday, the New York Stock Exchange opened its trading floors for the first time since March and investors responded by piling into what they saw as undervalued travel stocks – most of which had seen values slump dramatically as the pandemic hit.

American technology shares suffered a largely disappointing week, although this could simply reflect a pause – or profit-taking – after their recent strong performance. In the days ahead, however, growing tensions between the US and China over developments in Hong Kong could see this month’s gains trimmed back across all sectors – especially at businesses heavily reliant on global trade and financial flows.

Another round of poor US jobs data and the news that GDP fell by an annualised 5% in the first three months of the year did little to alter markets’ upwards trajectory on Thursday.

UK

In London, the FTSE 100 followed Wall Street to end Thursday 3.8% ahead for the week, while the more domestically focussed FTSE All-Share gained 4.2% as prime minister Boris Johnson unveiled further details of how the UK will emerge from lockdown. While British retailers will start to reopen in June, the picture for the likes of restaurants and hotels is less clear – nonetheless, the likes of Intercontinental Hotels Group and Whitbread, the pub and hotel owner, were among the week’s strongest performers.

The prospect of passenger flights and international travel returning to normal sooner than expected also led to strong gains for easyJet, cruise operator Carnival and engine maker Rolls-Royce, among others.

Europe

There were even more impressive gains on European markets, with the DAX in Frankfurt ending Thursday’s session almost 6.4% up for the week – its highest level since the first week of March. Advances in German shares were underpinned by new Ifo Institute data showing a return of business confidence, as well as the announcement that the government would provide monthly cash injections to the nation’s small and medium-sized firms.

One of this week’s biggest winners was airline Lufthansa, which reached agreement with ministers on a €9 billion bailout package at the start of the week – a declaration of state support that appeared to boost confidence across many of the sectors hit hard by the pandemic.

In France, the CAC-40 closed on Thursday up 7.4% for the week, with investors in Paris hopeful of a swift end to global lockdown restrictions and optimistic that a new European Commission plan to help EU member states recover from the coronavirus crisis will be effective.

22/5/2020
28/5/2020
Change (%)
FTSE 100
5993.28
6218.79
3.76
FTSE All-share
3301.88
3441.8
4.24
S&P 500
2955.45
3029.73
2.51
Dow Jones
24465.16
25400.64
3.82
DAX
11073.87
11781.13
6.39
CAC-40
4444.56
4771.39
7.35
ACWI
491.94
509.25
3.52

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 28 May 2020.

29 May 2020
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Market Monitor – 29 May 2020

Important information: Past performance is not a guide to future performance. Your capital is at risk.

The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back the amount invested. This document is not investment, legal, tax, or accounting advice. Investors should consult with their own professional advisors for advice on any investment, legal, tax, or accounting issues relating to an investment with Columbia Threadneedle Investments. The analysis included in this document has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. This document includes forward looking statements, including projections of future economic and financial conditions. None of Columbia Threadneedle Investments, its directors, officers or employees make any representation, warranty, guaranty, or other assurance that any of these forward-looking statements will prove to be accurate. Information obtained from external sources is believed to be reliable, but its accuracy or completeness cannot be guaranteed. Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. columbiathreadneedle.com

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