Markets in Brief – May 2020

All major global markets have risen during April, out of place against a backdrop of largely grim economic news. We do not yet know if this means we have reached the trough of the current bull market.

Whichever institution you turn to, the predictions are resoundingly bad. The IMF, to name one, is forecasting the worst slump since the Great Depression. However, we can take solace in the fact that future opportunities will emerge for some and governments around the world are providing stimulus packages to support their economies during the COVID-19 disruption.

UK

During April, Chancellor Rishi Sunak announced a range of measures across the month that should help to mitigate the virus’s short term effects. This month saw the ‘furlough’ scheme start and the government pledge to guarantee 100% of £50,000 loans to small companies from 4 May, not to mention 80% of loans to larger firms.

However, as you may imagine, most of the rest of the economic news from the country made for tough reading. With the country at home, the retail sector had a dire month following a March that was the worst month on record for the retail sector. Oasis and Warehouse have plunged into administration, and Debenhams looks set to do the same. On the Brexit front, US/UK trade talks have been indefinitely postponed.

We must remember that the country came into the crisis with – to quote Rishi Sunak – “a fundamentally sound economy” and the FTSE 100 echoed his optimistic tone, finishing April up 4% at 5,901.

Europe

The COVID-19 outbreak has hit the already weaker economies of Spain and Italy especially hard. In the middle of the month, the EU finally agreed a €500 billion rescue package for countries worst affected by the crisis, with opinion polls showing that German voters were in favour of supporting Spain and Italy’s economies. The Eurozone economy shrank rapidly during the first quarter, with GDP falling by 3.8%. Despite all this, European stock markets rose over the month. Germany’s DAX was up 9% to 10,862 and the French market was up 4% to 5,586.

US

Economic news from the US was similarly bad, unsurprising considering the country now has the highest number of COVID-19 cases and deaths. Over the last six weeks, approximately 30 million Americans have lost their jobs and some states have all but shut down their economies. However, in line with other global markets, the Dow Jones rose over the month, rising by 11% in the month to finish April at 24,346.

The Rest of the World

The Chinese economy shrank by 6.8% during the first quarter which might seem catastrophic. However, considering some pundits predicted this figure to be 10%, it isn’t as bad as it may have been. Clothing manufacturers are going to be hard hit by the crisis, an industry which employs many in South and Southeast Asia. The World Bank predicts that South Asia will see its worst economic performance in 40 years. This said, the India stock market led the way this month, up 14% in April to end the month at 33,718. Japan’s Nikkei Dow rose 7% to 20,194 and the Chinese market rose by 4% to 2,860.

Although you’re unlikely to be going very far from home this month, we hope that you manage to have a pleasant month and enjoy the longer evenings. If you have any questions about the latest market news, please get in touch.