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Market Report 14th May 2020

Market Report 14th May 2020 981 980 Realm

Stocks are sliding this morning after the U.S. Federal Reserve Chair Jerome Powell warned that additional policy measures will be needed to pull the economy out of its downturn.

 

  • On Wednesday: European stocks tumbled as fears about a deep recession amid a potential second wave of coronavirus infections triggered a sell-off that sent stock prices crashing down to sharply lower levels.
  • US stocks showed another substantial move to the downside during trading on Wednesday. The major averages slid firmly into negative territory, with the tech-heavy Nasdaq pulling back further off the more than two-month close high set on Monday.
  • Asian stocks ended mixed as rising tensions between the U.S. and China over the novel coronavirus pandemic as well as deteriorating relations between Canberra and Beijing kept investors on the sidelines.

Global Macro

  • The Fed’s view on negative interest rates has not changed and it is not something the policy-setting committee is looking at, Fed Chair Powell said during his speech a the Peterson Institute for International Economics. Fed Chair also added that the coronavirus crisis poses significant downside risks to the economy and that the economic recovery may take some time to gather momentum while the Fed will do what it can to support the economy, which may require additional policy measures. Powell added that additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage.
  • Producer prices for final demand in the US slumped 1.3% from a month earlier in April of 2020, the largest decline on record and much worse than market forecasts of a 0.5% drop. Over 80% of the decrease can be traced to a 3.3% drop in prices for final demand goods, namely a 56.6% plunge in gasoline cost after international crude prices turned negative during the month for the first time in history amid storage concerns. The indexes for jet fuel, diesel fuel, basic organic chemicals, home heating oil, and corn also moved lower. In contrast, prices for beef and veal rose 12.6%. The indexes for distilled and bottled liquor (excluding brandy) and for electric power also increased. Prices for final demand services moved down 0.2%. Year-on-year, producer prices declined 1.2%, the largest decrease since November of 2015.
  • The Eurozone industrial production fell by a record 11.3% month-over-month in March 2020, following a 0.1% decline in February and compared with market consensus of a 12.1% drop, amid efforts to contain the coronavirus pandemic. Durable consumer goods output contracted by the most in March (-26.3% vs -1.6%), followed by capital goods (-15.9% vs -2.0%), intermediate goods (-11.0% vs 1.0%), energy (-4.0% vs 0.4%) and non-durable consumer goods (-1.6% vs 0.6%). Among the bloc’s largest economies, Italy’s industrial output plunged 28.4% and France’s production was down 16.4%. Output in Spain and Germany dropped 11.9 and 11.2% respectively.

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