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Market Report 15th May 2020

Market Report 15th May 2020 981 980 Realm

Stocks are higher this morning following a strong recovery in the U.S. after a weak open on Thursday.

 

  • On Thursday: European stocks declined sharply for a second successive day, as rising concerns about the economic impact of the coronavirus pandemic triggered a sell-off across several sectors on Thursday.
  • US stocks showed a substantial turnaround over the course of the trading day after moving sharply lower early in the session. The major averages bounced well off their lows of the session and into positive territory.
  • Asian stocks fell sharply after a stark warning from U.S. Federal Reserve Chairman Jerome Powell that the path ahead is both highly uncertain and subject to significant downside risks. Renewed U.S.-China tensions also dented investor sentiment.

Global Macro

  • Import prices in the US fell 2.6% from a month earlier in April of 2020, following an upwardly revised 2.4% decline in March and compared to market expectations of a 3.1% fall. It remains the largest decline in import prices since January of 2015, mainly due to a record 31.5% plunge in fuel prices, after WTI oil prices turned negative for the first time in history in April amid storage concerns. Excluding fuel, import prices went down 0.5%, driven by lower prices for industrial supplies and materials; foods, feeds, and beverages; and consumer goods, which more than offset rising prices for automotive vehicles and capital goods. Year-on-year, import cost went down 6.8%, the biggest anual decline since December of 2015.
  • Export prices in the US dropped 3.3% from a month earlier in April of 2020, following an upwardly revised 1.7% fall in the previous session and compared to market expectations of a 2.1% decrease. It was the largest decline in export prices since the index was first published on a monthly basis in December 1988, as cost fell faster for both nonagricultural (- 3.3% vs -1.7% in March), particularly nonagricultural industrial supplies & materials and consumer goods; and agricultural exports (-3.1% vs -1.5%), namely corn, meat, cotton, fruit, soybeans, and nuts. Year-on-year, export prices slid 7%, the largest decline since September 2015, after falling 3.8% in the prior month.
  • The number of Americans filling for unemployment benefits was 2.981 million in the week ended May 9th, the lowest level since the coronavirus crisis began two months ago. Still, filings came in above market expectations of 2.5 million and lifted the total reported since March 21st to 36.5 million, equivalent to nearly a quarter of the working age population. The 4-week moving average, which removes week-to-week volatility, eased for a third straight week to 3.617 million, while continuing jobless claims hit a new record of 22.833 million in the week ended May 2nd.
  • US government debt prices rose, as investors’ risk appetite continues to decline ahead of the jobless claims release later in the day which is expected to show that total unemployed since the coronavirus pandemic started in mid-March increased by about 36 million, nearly a quarter of the working-age population. On Wednesday, the Fed’s Powell advised that unemployment would reach a peak during the next month. The Chairman also warned for an extended period of weak growth due to the coronavirus pandemic and pledged for more stimulus but ruled out the possibility of negative interest rates. The US 10-year Treasury note decreased to 0.6202% and that on 30-year fell to 1.3157%.
  • Producer prices in Japan decreased 2.3% year-on-year in April 2020 after falling 0.4% in the previous month and compared to market expectations of a 1.6% decline. It was the sharpest drop since November of 2016 and was mainly explained by a 29.9 plunge in petroleum & coal prices, falling further from a revised 10.2% decrease in March. Chemicals (-5.1% vs -1.1%) and nonferrous metals (-9.1% vs -7.6%) also fell sharply. In contrast, prices for food & beverages increased by 0.6% after rising 0.9% in March. On a monthly basis, producer prices declined 1.5%, following a 0.9% drop in the prior month.

Disclaimer:  ‘Where the business has expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy. This communication is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell investments.