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Market Report 13th May 2020

Market Report 13th May 2020 981 980 Realm

UK and European stocks are lower today. Markets are concerned about the potential for a second wave of coronavirus infections, as countries start to reopen their economies.

 

  • On Tuesday: European stocks ended mixed on Tuesday as investors largely stayed cautious amid rising concerns over a potential second wave of coronavirus infections.
  • US stocks turned in a lackluster performance for much of the trading session before coming under pressure late in the day. The major averages pulled back sharply after spending the bulk of the day bouncing back and forth across the unchanged line.
  • Asian stocks declined as tensions soared between Beijing and Washington, and concerns grew regarding a potential second wave of the coronavirus as several countries start to emerge from lockdowns.

Global Macro

  • Consumer prices in the United States declined 0.8% month-over-month in April, the largest drop since December of 2008, mainly due to a 20.6% fall in gasoline cost. Additional downward pressure also came from cost of apparel, motor vehicle insurance, airline fares, and lodging away from home, amid coronavirus lockdown restrictions. In contrast, food indexes rose, with the index for food at home posting its largest monthly increase since February of 1974.
  • The United States reported a record USD 738 billion budget deficit in April of 2020, compared to a USD 160 billion surplus in the corresponding period of the previous year but lower than market expectations of a USD 747.50 billion gap. An explosion in government spending and a shrinking of revenues amid the novel coronavirus pandemic put it deeply into the red. Outlays jumped 161% to USD 980 billion, with income security accounting for the biggest share, followed by medicare and general government. Meantime, receipts dropped 55% to USD 242 billion with socialinsurance and retirement accounting for the largest share.
  • China’s annual inflation rate fell to 3.3% in April 2020 from 4.3% in the previous month and below market consensus of 3.7%. This was the lowest rate since September 2019 as the COVID-19 crisis deepened. Food inflation eased also to a seven-month low of 14.8% from 18.3% in March, with pork prices rising at a softer rate (96.9% vs 116.4%. On a monthly basis, consumer prices dropped 0.9%, after a 1.2% decline in March
  • The Baltic Dry Index, which measures the cost of shipping goods around the world, dropped to its lowest level in nearly three months, due to falling demand for panamax and capesize segment vessels. The full impact of COVID 19 on supply chains is still unknown, with business leaders expecting problems to remain even as countries start to reopen their economies. In April, the index was able to increase above 700 points for the first time in three months, amid a gradual restart of industrial activity in China, whose demand accounts for almost 40% of total dry seaborne imports.

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