Market Monitor – 7 May 2020
Insights

Market Monitor – 7 May 2020

How quickly the global economy can return to some semblance of normality as coronavirus lockdown restrictions are eased is perhaps the key question facing investors at present.

There were sharp falls for shares on both sides of the Atlantic late last week and at this start of this as fears were raised that deteriorating relations between the United States and China could hamper efforts to reboot international trade and investment, and get global supply chains moving again. President Donald Trump, who is seeking re-election in November, has strongly criticised the Chinese regime’s handling of the initial Covid-19 outbreak and has suggested that the US could take punitive economic action in the weeks ahead.

The US

In the three sessions until close on Wednesday, US stock markets managed to put a lid on last week’s losses: the Dow Jones Industrial Average was down 0.25% while the S&P 500 posted a gain of 0.63%. After falling on Monday, share prices recovered strongly on Tuesday as major economies announced more detail of how they would emerge from lockdown.

Meanwhile, oil prices have recovered strongly this week – partly in recognition that the huge slump in values recorded in April was excessively negative. Other sectors of the economy continue to struggle, however, most notably aviation this week: on Monday, airline shares around the world slumped after veteran investor Warren Buffett said he had sold the entirety of his holdings in the major US carriers.

While most of the world’s passenger aircraft are grounded at present, there are also significant concerns over the extent to which flights and airports will be able to return to business as usual while strict social-distancing measures remain in force.

Meanwhile, the news on Wednesday that the US had lost more than 20 million jobs in April – the latest in a line of shocking unemployment statistics – did little to move markets on Wall Street.

UK

In the UK, the FTSE 100 has been the leading performer in Europe with a gain of 1.6% recorded by the end of trading on Wednesday. The bounce back in oil prices has played a big role in this rise, with BP and Shell making significant contributions to the index on Tuesday’s in particular. But much of the optimism in the City is based on the UK government’s announcement that lockdown restrictions will start to be eased as soon as next week, with detailed plans already in place for how businesses can start to get back to work in as risk-free a manner as possible.

However, news that the Bank of England has said the UK economy could shrink by 14% in 2020, shrinking by 25% in the current quarter before bouncing back a little during the rest of the year. 1

Europe

In Europe, this week’s performance has been skewed to some extent by the fact that bourses on the Continent were closed last Friday for May Day – as such, the losses seen elsewhere in the world late last week were simply postponed to Monday.

In Germany, the DAX closed Wednesday’s session 2.4% lower for the week, while the CAC 40 in France was down 3%. As well as US-China trade concerns, investors in Frankfurt and Paris have had to contend with further dire economic data from the eurozone, as well as some controversy over the role of the European Central Bank in helping euro-area economies deal with the pandemic. On Tuesday, Germany’s highest court ruled that the ECB’s ongoing bond-buying programme violates the country’s constitution because there is insufficient German involvement in decision making. While it remains unclear what practical impact the ruling is likely to have, it is the latest indication of the disagreement among leading EU members over how best to help the likes of Italy and Spain recover from the economic devastation caused by coronavirus.

01/5/2020
06/5/2020
Change (%)
FTSE 100
5763.06
5853.76
1.57
FTSE All-share
3189.41
3224.74
1.11
S&P 500
2830.71
2848.42
0.63
Dow Jones
23723.69
23664.64
-0.25
DAX
10861.6
10606.2
-2.35
CAC-40
4572.2
4433.4
-3.04
ACWI
478.56
478.02
-0.11

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 06/5/2020.

7 May 2020
Share article
Share on twitter
Share on linkedin
Share on email
Key topics
Related topics
Share article
Share on twitter
Share on linkedin
Share on email
Key topics
Related topics

PDF

Market Monitor – 7 May 2020

1Monetary Policy Report – May 2020, Bank of England, 7 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

Related Insights

18 June 2021

Stuart Jarvis

Investment Solutions Quantitative Research Director

Lorenzo Garcia

Head of Investment Solutions

Kavit Tolia

Investment Solutions Senior Quantitative Analyst

Is the bond broken?

An allocation to government bonds within a multi-asset portfolio has traditionally played a vital role in terms of risk management and diversification. But with a decade-long bull era in both government bonds and equities, is this assumption still valid?
Read time - 5 min
18 June 2021

Mark King

Head of Investment Content

Market Monitor - 18 June 2021

Global stock markets have managed to hold onto recent gains this week despite increasing speculation that interest rates could be raised sooner than expected.
Read time - 2 min
17 June 2021

Pauline Grange

Portfolio Manager, Global Equities

Fashion eyes sustainability via the circular economy

The textiles industry is one of the most pollutive in the world, emitting more CO2 than aviation and shipping combined. But a leading sports firm is showing one way the sector can embrace radical change
Read time - 4 min

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Funds and Prices

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.