Market Update

Global equity markets closed lower on Friday, marking weekly declines: the FTSE-100 ended down 1.72%, and the S&P 500 in the US finished 2.08% lower.
The focal point would typically be the US non-farm payroll report, but its survey period excluded the last two weeks of March, rendering it less meaningful. Despite the report revealing a loss of 701,000 jobs in March (the highest since March 2009), driving the unemployment rate to 4.4%, it provided little insight into the current state of the US economy. The rising number of states enforcing stay-at-home orders and businesses temporarily closing, alongside the nearly 10 million Americans applying for unemployment benefits in the past two weeks, paints a clearer picture of the pandemic's economic impact.
While backward-looking economic data will continue to worsen, governments and central banks have implemented stimulus measures to alleviate the financial strain. In the UK, the "Coronavirus Job Retention Scheme" allows employers to furlough employees, claiming 80% of their wages up to £2,500 per month. This policy aims to prevent job losses amidst the pandemic. In the US, hourly employees can apply for unemployment benefits in lieu of wages when their hours and pay are reduced due to the outbreak.
Despite the uncertainty, one certainty remains: this downturn is not a typical economic recession; it's a transient issue caused by the coronavirus outbreak. When the lockdowns end, and consumption resumes, a "V-shaped" global economic recovery is anticipated, resulting in significant job gains.
The key question now revolves around the duration of the lockdowns and the economic losses incurred before the recovery. Equity markets have likely priced in the worst-case scenario, paving the way for long-term investors to identify opportunities. Once the outbreak is contained, companies will operate in a world with low input costs (thanks to lower oil prices), a looser labor market (resulting in subdued wage growth), and accommodative monetary policies.
Looking ahead, focus will be on US jobless claims following this week's record 6.65 million claims. Additionally, the release of the Fed's meeting minutes from March 15, 2020, when US interest rates were cut to 0.25%, and the University of Michigan's preliminary consumer sentiment index will be crucial. Investors will also closely scrutinize the ECB's meeting minutes for hints about future policy changes and stimulus measures.
Despite the positive developments in coronavirus hotspots, leading to a decline in related deaths, equity markets have started the week on a positive note. The FTSE-100 is up over 2% at 5,525, with Germany's DAX up 4.3%, France's CAC 40 up 3.5%, Italy's FTSE MIB up 3%, and Spain's IBEX35 up 3.1%.
While this news is promising, elevated market volatility is expected due to ongoing lockdowns. Economic data is anticipated to worsen in the coming weeks and months as sales plummet in high street shops, cinemas, restaurants, and hotels. Nevertheless, if the timeline of lockdowns aligns with the improvements in coronavirus spread observed in China, a potential economic restart in May could lead to a sustainable recovery in equity markets for the UK, Europe, and the US.