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Weekly Market Update: 29 April 2020

April 2020

by Alex Brandreth

As we welcomed Boris Johnson back to 10 Downing Street this week, global stock markets have continued to recover from their lows. The rally in stock markets is being driven by the fact that a number of economies are now starting to take tentative steps back towards normal life by preparing to reopen some businesses. Also this week, company specifics are back in full view as we are now in peak earnings season for the first quarter of 2020 – which means we’ll get to see the impact of Covid-19 and hear from businesses in how they have been dealing with the pandemic.

On Tuesday, the US recorded its one-millionth coronavirus case and they have reached another grim milestone as they have now registered 58,351 deaths. The economic impact continue to be felt with another 4.4 million US workers filing for unemployment benefits last week as the coronavirus pandemic continued to cause one of the nation’s worst economic downturns, with 26 million people reporting layoffs since the outbreak began. To put 26 million into context that equates to around 16% of the US workforce. From 2009 to the end of last year, this had been the longest stretch of employment expansion in US history and created nearly 22 million jobs, which has now been fully wiped out amid the pandemic.

However, countries further through this including Spain, Russia and Nigeria are taking tentative steps back towards normal life by preparing to reopen some businesses. France announced on Tuesday that shops, markets and selected schools could reopen next month, with face masks required on public transport and work-from-home orders staying in place for several more weeks. Spain said restrictions would be slowly lifted over the next two months, while Italians will be able to exercise outdoors and visit relatives from next week but only if they wear masks and refrain from hugs and handshakes.

Also this week, we have three central bank meetings taking place; the Bank of Japan (BoJ), the Federal Reserve (Fed) and the European Central Bank (ECB). The response from Central Banks has been both swift and extensive and there’s no doubt the incredibly supportive environment is set to be with us for a long time yet. The BoJ meeting has already taken place – they made no change to interest rates but moved to introduce more flexibility and size to their quantitative easing (QE) programs. The BoJ will remove the upper limit of JPY 80 trillion per year on their purchases of Japanese Government Bonds – a move in line with the US Federal Reserve in having no upper limit to their QE policy. As mentioned earlier, the response from central banks has been both swift and extensive and the measures from the BoJ are further evidence of this. To highlight the sheer magnitude of this support, the Fed is buying around $70 billion of assets every day, which compares to the peak of $120 billion a month back in 2008/9.

Alex Brandreth
Chief Investment Officer

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