Market Commentary 1st April 2020 from Charlie Hancock

Throughout most of the week, investors appeared to be reacting to the stimulus measures being implemented by governments around the globe. Headlines throughout the week reported on the progress being made by US lawmakers in putting together a $2 trillion stimulus package. Markets around the globe rallied for most of the week, before giving up some gains on Friday.

Shares in cruise operator Carnival PLC experienced a choppy week, rising almost 40% between Monday and Thursday, before shedding just over 20% during Friday’s session. Investors were disappointed in the lack of support for the struggling industry, with no aid for cruise ship operators included in the US stimulus bill.

Despite cases of Covid-19 rising in most European countries, investors were broadly in a risk on mood, with their attention turned to the potential impact of fiscal stimulus measures. The German government is expected to loosen their fiscal rules, with reports suggesting they will be borrowing around €150 billion to finance a support package. Chancellor Merkel’s government is also expected to establish a bailout fund of around €500 billion to support key industries.

French oil giant, Total SA, saw their share price climb by 29.73% across the week, after announcing they would be halting their share buy back program as part of a larger cost cutting regime.

Investors were pleased with the details of a $2 trillion stimulus package prepared by the US government. The bill passed through the senate and the house of representatives swiftly, before being signed into law by President Trump on Friday. The stimulus package is the largest in history and investors hope this will soften the economic blow of the coronavirus pandemic.

As further evidence of the economic damage caused by the outbreak in China emerged, investors remained hopeful of a strong recovery throughout the remainder of 2020. It is reported that the Beijing administration is planning significant stimulus measures, including targeted investment into public health, 5G technology and data centres.

Demand for UK government bonds remained strong, despite a risk on environment persisting for most of the week. With yields remaining near historic lows, it appears investors are unphased by the significant increase in UK government borrowing.

Bond investors also appeared to place no significant weighting on financial strength ratings agency, Fitch, deciding to downgrade the UK’s credit rating from AA to AA-.

Treasury yields for all maturities fell sharply on Friday, coinciding with a decline in US equity indices.

GBP / EUR – Current 1.1182 Previous 1.0883

The Pound rallied strongly to recover from the lows experienced in the previous week. Sterling gained 7.15% against the US Dollar and 2.75% against the Euro.

The demand for US Dollars waned last week, with actions taken by the Federal Reserve to increase the dollar supply appearing to have the desired impact.

There were no reports to suggest that significant progress is being made in the Saudi Arabia-Russia dispute and with economic activity around the globe declining rapidly, demand for oil remained weak.