Market Report 22nd April 2020

Market Report 22nd April 2020 981 980 Realm
Global Equities were lower on Tuesday as oil prices fell sharply again.
  • European stocks ended sharply lower amid another sharp fall in crude oil prices and worries about the economic impact of the coronavirus pandemic.
  • US stocks moved sharply lower over the course of the trading day extending the pullback seen in the previous session. The major averages continued to give back ground after ending last Friday’s trading at their best closing levels in over a month.
  • Asian stocks tumbled amid broad risk aversion after crude oil futures turned negative overnight for the first time in history and U.S. President Donald Trump suspended all immigration into the U.S. for an indefinite period, blaming the “invisible enemy” of Covid-19.  

Global Macro

  • May future contract for WTI crude expiring today recovered some ground to trade just around $5 per barrel, rebounding from Monday’s record low of minus $40.32 per barrel after Saudi Arabia and other major oil producers said they were ready to take any extra measures to achieve oil market stability. The June contract was trading around $14 a barrel. Prices crashed below zero for the first time in history, as the coronavirus pandemic has caused global demand to collapse and buyers were willing to deliver crude at any cost because there is no place to store it.  
  • Sales of previously owned houses in the US sank 8.5% from the previous month to a seasonally adjusted annual rate of 5.27 million units in March of 2020, slightly below market expectations of 5.3 million. It is the biggest drop since November of 2015 but the lowest rate since April of 2019 only. The data includes contracts signed in January and February, before the coronavirus took a toll on the economy. Sales went down in all regions: the West (-13.6%), the South (-9.1%), the Northeast (-7.1%) and the South (-3.1%). Single-family home sales went down 8.1% to 4.74 million and existing condominium and co-op sales slumped 11.7% to 0.530 million. There were 1.5 million houses available; at March’s sales pace, it would take 3.4 months to clear the current inventory, higher than 3 months on February. The median house price increased 3.8% to USD 280,600.
  • The ZEW Economic Sentiment Index for Germany jumped by 77.7 points to 28.2 in April 2020 from an eight-year low in the previous month and well above market expectations of -42.3. It was the largest monthly increase since the survey began in December 1991, after posting a record fall during March. Investors started “to see a light at the end of the very long tunnel”, but do not expect to see positive economic growth until the third quarter of 2020, while economic output will probably return to pre-corona levels only after 2022. Meanwhile, the assessment of the current economic situation worsened dramatically, with the corresponding indicator dropping 48.4 points to -91.5. This constellation of values currently witnessed for expectations and the assessment of the current situation roughly corresponds to that seen in April/May 2009 during the financial crisis.
  • The U.S. energy secretary said he would talk with leaders in the U.S. House of Representatives later in the day and urge them to fund the purchase of crude to fill the emergency oil reserve. In March, President Donald Trump ordered Energy Secretary Dan Brouillette to fill the Strategic Petroleum Reserve, or SPR, to the top as the price of oil plunged while the coronavirus crushed global demand. So far, Congress has declined to fund the purchase, with some Democrats opposed to bailing out the oil industry.

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