Market Report 24th March 2020

Market Report 24th March 2020 981 980 Realm
Stocks fell again on Monday but have rallied back today. 
  • European stocks: Despite several massive relief packages from global central banks and governments to limit the economic impact of the coronavirus pandemic, stock markets across Europe tumbled. The mood was quite bearish following the U.S. Congress failing to agree on a massive funding package on Sunday evening. 
  • US stocks: After coming under pressure early in the session, stocks fluctuated over the course of the trading day on Monday but largely remained firmly negative before closing notably lower.
  • Asian stocks ended mostly lower as a spike in coronavirus cases in the United States and Europe fueled worries about a deep global recession.

Global Macro

  • Tighter restrictions were imposed in the U.K. bringing it more in line with many other European countries. A ban on all unnecessary movement of people will last for at least three weeks and police have the power to break up gatherings.
  • The Federal Reserve announced  extensive new measures to support the economy as the number of coronavirus cases continues to increase and more states issue stay-at-home orders. Such measures include the provision of up to $300 billion in new financing for employers, consumers, and businesses; continuing purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning; purchases of agency commercial mortgage-backed securities; establishment of two facilities to support credit to large employers; establishment of a third facility to support the flow of credit to consumers and businesses; and facilitating the flow of credit to municipalities. On March 15th, the Fed lowered the target range for its federal funds rate by 100bps to 0-0.25% and launched a massive $700 billion quantitative easing program during an emergency move.
  • The annual inflation rate in Hong Kong rose to 2.2% in February 2020 from 1.4% in the previous month, but below market expectations of 3.1%. Cost of housing rebounded (2.7% from -3.0% in January), as the effect of the Government’s payment of public housing rentals and waiver of two-thirds of rent for tenants of Group B estates by Hong Kong Housing Society faded. Also, cost of miscellaneous goods advanced further (4.3% vs 3.6%), while fell less for electricity, gas & water (-15.9% vs -16%); durable goods (-2.4% vs -2.7%) and clothing & footwear (-3.1% vs -5.5%). In contrast, cost slowed for food (6.2% vs 7.4%) and transport (1% vs 1.8%). Additionally, prices of miscellaneous services dropped (-1.3% vs 4.8%). On a monthly basis, consumer prices went up 1.7%, after a 1.6% fall in January.
  • The au Jibun Bank Japan Manufacturing PMI fell to 44.8 in March 2020 from 47.8 in a month earlier. This marked the 11th straight month of contraction in factory activity and the steepest since April 2009, due to a deepening virus crisis that stoke fears over a recession. Output shrank the most since the aftermath of the Tsunami in 2011, while demand for goods dropped the most in 11 years amid lower orders from domestic and overseas clients. Also, supply chain disruption continued, restricting operating capacities at firms. On the price front, input prices fell following a rise in February, while output prices dropped at a faster rate. Looking ahead, confidence turned to negative, as more lockdowns and travel curbs applied.  
  • The Federal Reserve’s unparalleled steps to directly backstop the U.S. economy and its willingness to purchase vast sums of U.S. government debt, mortgage-backed securities and even corporate bonds could help boost depleted liquidity in the $17-trillion Treasury market.

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