Market Monitor – 12 June 2020
Insights

Market Monitor – 12 June 2020

Global stock markets suffered their worst week since early March as the recent bull run came to a halt. On Thursday 11 June alone, several major indices endured their worst trading day for several weeks as recent optimism about the long-term impact of the Covid-19 pandemic evaporated.

Clearly, global investors have become more concerned about future and continued disruption to the economy from the coronavirus – as well as the resulting lockdown and social distancing policies that are now in place around the world.

Values have been steadily rising since an initial slump in early March, as central banks have committed to pumping money into their respective economies in order to support businesses and maintain consumer demand. But this week, investors have started to worry about how long this support can be expected to last.

It is worth looking at this week’s losses in the context both of the pandemic as a whole, as well as in terms of the recent gains. Most major stock markets remain well above their March lows – when the coronavirus crisis first emerged in the west – even though they are now considerably lower than at the start of the year. Ultimately, though, global markets have never experienced an economic event such as this pandemic and it is inevitable that share prices will remain volatile over the months ahead.

The US

In the United States this week, the Dow Jones Industrial Average lost more than 7% of its value in trading up to close on Thursday 11 June, while the S&P ended the period 6% lower. This was despite a solid start to the week on Monday, as both indices headed upwards following US job market data which was not quite as bad as expected.

But the most significant event for American investors this week was the Federal Reserve statement on Wednesday1. While Fed chairman Jerome Powell restated his commitment to underpinning the US economy during the pandemic, there were no new support measures announced – and some investors are beginning to doubt whether central banks have the resources to contain the pandemic. Wall Street was also hit by news that coronavirus infections were on the increase in several states that had recently emerged from lockdown – raising fears of a deeply damaging second wave.

Europe and the UK

In Europe, major indices followed US stocks down, with the FTSE 100 in London ending Thursday 11 June down almost 6.3% for the week. By and large, it was companies who have been hardest hit by the crisis who suffered most this week, with travel companies including cruise operators and airlines recording big losses. They are among the businesses which will likely be most badly affected by a second wave of Covid-19.

In Europe, the DAX’s excellent run came to a dramatic end as shares in Frankfurt lost 6.8% by the close of trading on Thursday. In Paris, the CAC 40 performed even worse, with losses of 7.4%. The rout was started on Monday 8 June, when official figures showed euro area GDP had fallen 3.6% in the first three months of 2020 – the worst decline since records began 25 years ago. On Thursday, airline shares across Europe nosedived after German carrier Lufthansa announced plans to axe 22,000 jobs in response to the pandemic.

5/6/2020
11/6/2020
Change (%)
FTSE 100
6484.3
6076.7
-6.29
FTSE All-share
3589.76
3363.63
-6.30
S&P 500
3193.93
3002.1
-6.01
Dow Jones
27110.98
25128.17
-7.31
DAX
12847.68
11970.29
-6.83
CAC-40
5197.79
4815.6
-7.35
ACWI
539
514.89
-4.47

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 11/6/2020.

20 June 2020
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Market Monitor – 12 June 2020

1 FOMC Press Conference, federalreserve.gov, 10/6/2020.

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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