Market Report 3rd March 2020

Market Report 3rd March 2020 981 980 Realm

Markets bounce back after worst week in more than a decade. 

  • European stocks tumbled after a firm start, but recovered gradually to close higher with investors making some purchases amid optimism about monetary easing measures from global central banks.
  • US stocks: After experiencing the worst week since the 2008 financial crisis, stock showed a strong move back to the upside during trading. The major averages moved sharply higher but only partly offset their recent steep losses.
  • Asian stocks recovered from early losses to end mostly higher as investors grew optimistic that major central banks will cut interest rates to support the global economy.

Global Macro

  • The volume of retail sales in Hong Kong tumbled 23.0% year-on-year in January 2020, following an upwardly revised 21.1% slump in the previous month. It was the twelfth consecutive month of decline in retail activity as the coronavirus outbreak kept citizens away from shopping centers.
  • The IHS Markit/BME Germany Manufacturing PMI was revised slightly higher to 48 in February of 2020 from a preliminary of 47.8 and 45.3 in January. The reading pointed to the smallest contraction in factory activity in the current sequence of 14 months of declining activity. Output, new orders and employment fell at a slower pace, despite an accelerated drop in new export orders and disruption to supply chains, both linked to the outbreak of Covid-19 in China. German manufacturers remained optimistic about the outlook for output over the next 12 months. That said, amid uncertainties about the impact of the coronavirus outbreak on supply chains and the global economy, confidence eased from January’s 17-month high.
  • The Caixin China General Manufacturing PMI plunged to 40.3 in February 2020, the lowest level since the survey began in April 2004 and well below market consensus of 45.7. Output, new orders and employment fell the most on record, as firms extended Lunar New Year shutdowns due to the COVID-19 outbreak. In addition, export sales dropped at one of the fastest rates in the series history on the back of shipping restrictions and order cancellations. Supply chains were also hit heavily, with average delivery times increasing at the quickest pace on record, leading firms to increase their use of current stocks. On the price front, input prices rose only modestly, while factory gate prices fell for the first time in three months due to efforts to boost sales. Finally, business sentiment hit a five-year high, amid expectations of a rebound in output once restrictions related to the virus are lifted.
  • The South Korean economy advanced 2.3% year-on-year in the fourth quarter of 2019, following a 2% growth in the previous period and surpassing the avance estimate of 2.2%. It was the fastest expansion in a year, as construction activities recovered (1.1% vs -3.7% in Q3); and output growth accelerated in services (3% vs 2.7%). Also, utilities shrank 0.4%, less than a 1.9% contraction in the prior quarter. On the other hand, growth slowed in manufacturing (1.7% vs 1.8%); agriculture, forestry & finishing (2.9% vs 4.2%). On the expenditure side, final consumption growth edged up to 3.1%, while gross fixed investment climbed 0.5% after contracting 2.1% in the prior period. Meantime, exports went up 3.7% (vs 1.8% in Q3) and imports rose at a softer 1.2% (vs 2.3% in Q3). Considering full 2019, the economy grew 2%, the slowest pace in 10 years.

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