Market Report 17th March 2020

Market Report 17th March 2020 981 980 Realm
Markets nosedived again, with mounting fears of a coronavirus-led economic slowdown.
  • European stocks: After a gap down opening and a subsequent further drop that sent the markets to fresh multi-year lows, European stocks regained some lost ground in late afternoon trades but still ended the session sharply lower.  
  • US stocks moved sharply lower during trading on Monday, more than offsetting the strong gains posted last Friday in the worst day for the markets in over thirty years. With the sell-off on the day, the Dow fell to a new three-year closing low and the Nasdaq and the S&P 500 ended the day at their worst closing levels in over a year.
  • Asian stocks fell sharply despite emergency rate cuts by the U.S. Federal Reserve and the Reserve Bank of New Zealand and a fresh round of liquidity injections in China. Weak economic data from China added to investor worries about the impact of the coronavirus.

Global Macro

  • Overseas investors bought USD 122.9 billion of US assets, including short-dated instruments in January 2020, more than an upwardly revised USD 78.7 billion purchased in December while markets were expecting them to sell USD 19.8 billion. Meanwhile, foreigners bought USD 25.6 billion of long-term US securities, including government and corporate after buying USD 41.1 billion in the previous month. Overseas investors bought USD 20.9 billion of Treasuries in January after buying a revised USD 85.6 billion in the previous month.
  • The DAX 30 slumped 490 points or 5.3% to finish at 8,742, its lowest level since October 2014, as investors fled from riskier assets amid uncertainty surrounding the impact of Covid-19 on the global economy. Central banks in the US, Japan, Australia and New Zealand stepped up efforts to support their economies, but failed to boost sentiment as investors fear the world could be going into recession. In addition, data from China showed the biggest slump in factory activity in 30 years, alongside record falls in retail sales and urban investment. The recent crash in oil prices and the ECB’s decision to hold interest rates last week also added to concerns.
  • The FTSE 100 dropped 4% to 5,151 on Monday, the lowest closing level since November 2011, after suffering its worst week since 2008, as the coronavirus crisis escalated and stimulus action by policymakers across the globe failed to calm investors’ nerves. China’s data showing record falls in industrial production, retail trade and investment also added to concerns, as well as the recent plunge in oil prices and the ECB’s decision to hold interest rates last week. Travel and leisure stocks were down for the ninth consecutive session, on course for its worst such losing streak on record.
  • The US dollar continued to fall on Monday after the Federal Reserve cut the target range for its federal funds rate by 100 bps to 0-0.25% during an emergency move the day before. The measure aims to protect the economy from the impact of the coronavirus and follows another emergency 50bps slash on March 3rd. However, the cuts were not able to calm investors concerns about the outbreak, prompting a rush for safe haven and making the dollar less attractive as rates are now very low. The DXY was down near 0.7% to 98.06 around 10:00 AM NY time.

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