Market Monitor – 1 May 2020

Market Monitor – 1 May 2020

Investors who held their nerve during the market falls and general volatility of late February and March have been rewarded by strong performance in April. All of the major indices on either side of the Atlantic recorded excellent months as share prices recovered from the shocks caused by the early stages of the coronavirus pandemic.

Most notably, the S&P 500 in the United States ended April up almost 13%, while the Dow Jones Industrial Average (DJIA) gained more than 11%: in both cases, these were the best monthly gains since the late 1980s. In Europe, Germany’s DAX was up by almost 10% while the FTSE 100 in London was up 4%.

These numbers add weight to the argument that it can be very difficult to make accurate timing decisions when it comes to stock market investing – and that using sharp falls as a cue to sell can mean foregoing any gains from markets as they recover.

As well as an impressive month, shares in general had also had a good week by close of trading on Thursday. Oil prices started to recover ahead of a planned production cut at the start of May, while government officials in Washington said they would do more to ease the current storage crisis. The price of Brent crude had gained more than 17% by the end of Thursday.

The US

In the US, the S&P 500 was up 2.7% and the DJIA 2.4%, in large part thanks to a renewed commitment from central bankers at the Fed that they would do everything necessary to head off a liquidity crisis and help the American economy recover from the impact of the ongoing lockdown.

Another major driver of sentiment this week was the news from pharma firm Gilead that trials of its Ebola drug remdesivir suggested there could be potential benefits. While tests are still at an early stage and need further confirmation, these reports sparked significant market gains around the world on Wednesday.

Europe

In Europe, the FTSE 100 had a positive week, up 2.6% by Thursday’s close but held back by weakness among airlines and oil companies. On Tuesday, British Airways owner IAG announced massive job cuts, with shares falling almost 6% on the news. Meanwhile, Shell’s decision to slash its dividend saw its price fall 7% on Thursday.

In Europe, progress on lifting lockdown restrictions was welcomed by investors. The DAX in Frankfurt was the star performer, up 5.1% by Thursday’s close – a reflection at least partly of Germany’s relative success in controlling the spread and impact of the pandemic. In addition, Deutsche Bank welcomed the news that the European Union was to introduce a package of capital relief measures for major lenders, gaining 12% on Wednesday.

In France, the CAC 40 was up 4.1% by the end of trading on Thursday despite official figures showing that the country had plunged into recession in the first three months of 2020: first quarter GDP was down 5.8%, a figure considerably worse than most analysts had expected.

Across the eurozone, GDP was down 3.8% between January and March. This is the worst contraction on record but, given the fact that most lockdowns were not introduced until mid-March, it is almost certain to be overshadowed by the second-quarter figures when they are published in the summer.

24/4/2020
30/4/2020
Change (%)
FTSE 100
5752.2
5901.2
2.59
FTSE All-share
3169.0
3262.5
2.95
S&P 500
2836.7
2912.4
2.67
Dow Jones
23775.3
24345.7
2.40
DAX
10336.1
10861.6
5.08
CAC-40
4393.3
4572.2
4.07
ACWI
472.6
489.2
3.50

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 30/4/2020.

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1 May 2020
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