Market Monitor – 6 April 2020
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Market Monitor – 6 April 2020

Stock markets around the world have slipped back to some extent over recent days, but have largely managed to hold on to the solid gains they clawed back last week. Coronavirus-related uncertainty continues to mean high levels of volatility, and no one expects that picture to change for weeks, if not months. But while it is undoubtedly the dominant driver of investor sentiment, the pandemic is not the only factor at play.

Oil

Developments in the oil supply dispute between Russia and Saudi Arabia, two of the world’s biggest producers, also had a significant impact on share prices this week. On Monday 30 March, futures in Brent Crude were trading at less than $23. This is their lowest price for almost two decades, a consequence of both the price war between the nations and the widespread fall in demand that is expected to result from a coronavirus-driven global economic slowdown.
On Thursday 2 April, however, oil prices staged a major recovery – with futures pushing back towards the $30 mark. This was after US president Donald Trump announced he had spoken to his opposite numbers in Moscow and Riyadh and expected a resolution to the dispute – and a substantial cut in production – to be agreed in the next few days.

The us

By the end of trading on Thursday 2 April, US markets were down slightly for the week, with the Dow Jones Industrial Average down 1% and the S&P 500 0.6% lower than their closes on Friday 27 March. Investors on Wall Street were again happy to ignore the dire economic data coming out of the US economy, most notably the fact that on Thursday 2 April it was reported that new unemployment claims doubled last week to well in excess of six million.
By and large, investors all over the world have now priced in a significant economic downturn across most, if not all, sectors as a result of the pandemic. This means new figures relating to the likes of manufacturing output or jobless claims are considerably less likely to move markets than they might be in other circumstances.
Both the Dow and S&P 500 fell sharply on Wednesday 1 April after US politicians warned that the most acute phase of the coronavirus crisis was still to come. But the rebound in the oil price the next day pushed both indices higher, with the likes of Chevron and Exxon unsurprisingly making major gains.

The UK

In the UK, advances for fellow oil firms BP and Shell helped the FTSE 100 to offset some of the losses made earlier in the week, as the index closed on Thursday 2 April down 0.5% for the week so far.
On Tuesday 31 March, the FTSE closed at 5,672 points, which meant that, like many stock markets around the world, it had posted one of its largest quarterly falls on record. In fact, this was the index’s worst three-month performance since the aftermath of the Black Monday crash in 1987. Shares in London fell sharply the next day after regulators told the UK’s banks to suspend dividends and share buybacks in order to preserve cash to help them and their customers deal with the crisis.

Europe

In Europe, the DAX in Frankfurt was down 0.6% by close of Thursday 2 April, while the CAC 40 in Paris had lost 3% –French aerospace firms Safran and Airbus both dragging the index down in recent days.
One issue that is likely to loom large over eurozone markets in coming weeks concerns how the European Central Bank should support the members hit hardest by the coronavirus crisis. Italy and Spain, as well as France, Belgium and Ireland, are putting pressure on the ECB to issue joint debt – dubbed coronabonds – to help protect and eventually rebuild devastated economies.
At the moment, however, resistance to this proposal is strong, most notably from more fiscally prudent states such as Germany and the Netherlands. The way in which this dispute plays out has the potential to affect investor sentiment as we move forward.
27/03/2020
02/04/2020
Change (%)
FTSE 100
5510.3
5480.2
-0.5
FTSE All-share
3021.9
2998.5
-0.8
S&P 500
2541.5
2526.9
-0.6
Dow Jones
21636.8
21413.4
-1
DAX
9632.5
9570.8
-0.6
CAC-40
4351.5
4221
-3
ACWI
436.6
431.3
-1.2
Note: all market data contained within the article sourced to Bloomberg, as at 2 April 2020
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Market Monitor – 6 April 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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