Daniel Casali provides a round-up of key market activity during the week of 30th March.
- Donald Trump signed into law a historic $2 trillion stimulus package designed to prop up a US economy crippled by the spread of coronavirus.
- Russia sought talks with Saudi Arabia after a weeks-long oil price war between the two plunged the market into chaos.
- Bank of England Governor Andrew Bailey came under fresh pressure to stop £7.5 billion of dividends due to be paid out by British banks over the next few weeks.
- The US president’s announcement that social distancing guidelines from the Centre for Disease Control and Prevention would be extended until the end of April followed more dire case statistics from Europe over the weekend
- Japan planned an issuance of Japanese government bonds amounting to roughly 2.9% of GDP, in order to cover anticipated fiscal outlays
- The price of oil fell to $18 dollars a barrel, its lowest level in 18 years, as demand plummeted by about a quarter due to the virus, whilst Saudi Arabia and Russia continued to increase supply
- The Fed announced a Foreign and International Monetary Authority repo facility. This facility will lend US dollars overnight against Treasury holdings of foreign central banks. By avoiding forced selling, this facility should help smooth volatility in the Treasury market while also providing USD liquidity to EM economies.
- China’s official manufacturing PMI release was encouraging. After having fallen from 50 in January to 35.7 in February, the PMI rebounded to 52 in March. The rise was led by the output subcomponent, which rose from 27.8 to 54.1.
- Britain’s big banks last night bowed to orders to scrap dividends and cash bonuses or face supervisory action by the financial regulator.
- The FTSE 100 has posted its biggest quarterly fall (over 25%) for more than three decades amid the financial panic caused by the coronavirus.
- US ADP data, which measures levels of non-farm private employment, showed that private businesses in the US fired 27,000 workers in March 2020.
- More than 6.65 million people filed for unemployment benefits in the US last week, with the data showing the devastating economic impact of the Covid-19 pandemic.
- High street retailers in the UK suffered their worst month on record. The BDO's March high sales tracker numbers showed that in the five weeks to March 29, total like-for-like sales slumped 18% year-on-year, with bricks and mortar sales collapsing by 34%. There was however, a 14% rise in online sales.
- Oil prices rose 20%, to around $30 a barrel, after President Trump suggested that Saudi Arabia and Russia were close to agreeing an end to their price war.
- UK and Eurozone business activity dropped massively in March. The IHS Markit purchasing manager index for services showed that figures were down to 34.5 in March, from 53.2 in February, for the UK.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
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This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.