Market Update

Global equity markets experienced a tale of two halves last week.
The week began on an optimistic note with hopes of major global economies reopening as lockdown restrictions started to ease. This positivity was fueled by declining coronavirus death rates. By Wednesday, April 29, 2020, the FTSE-100 had surged by 6.31%, and in the US, both the Dow Jones and the S&P 500 were up over 3.6%. However, this rapid rally, which marked the best monthly return for US markets since 1987, appeared to have escalated too quickly. By Thursday and Friday, a risk-off sentiment returned, causing a decline in equity markets. The FTSE-100 dropped by 5.76% over these two days, while both the Dow Jones and the S&P 500 fell by 3.7%, leading to a negative end to the week.
Several factors contributed to this shift in sentiment. President Donald Trump's threats to impose tariffs on China due to the coronavirus outbreak added to market concerns. Poor company results, including those from Amazon and Apple, also influenced the market tone. It's worth noting that some companies might be presenting worse results now, effectively 'kitchen-sinking' their figures by writing off assets and making provisions, aiming to enhance future profits.
Although April's rebound might seem surprising considering the ongoing economic impact of the coronavirus outbreak (as seen in the contraction of the US and Eurozone economies in Q1), there is a broader perspective suggesting that the worst might be nearly over. China's economy, for instance, exhibited signs of recovery as businesses resumed operations, with April's PMI readings above 50, indicating expansion.
Looking ahead to the upcoming week, numerous economic data releases are anticipated. Of particular interest will be the US weekly jobless claims on Thursday, May 7, 2020. Other vital US data includes factory orders, durable orders, trade balance, PMI, and employment data (non-farm payrolls, unemployment rate, participation rate, and average earnings). In the UK, PMI and a Bank of England monetary policy meeting are expected, while the Eurozone anticipates PMI and retail sales data.
Despite a slightly downbeat start to the week, triggered by Trump's comments about China and an increase in the forecast for US coronavirus-related deaths, it's essential to contextualize these events. Trump's rhetoric might be viewed in light of the upcoming presidential election, with his criticism of China and threats of tariffs historically resonating with his voter base.
In the Asian markets, although China and Japan were closed, PMI data from various countries, including South Korea, Indonesia, Malaysia, and the Philippines, indicated the economic challenges faced globally. These figures underscore the expectation of a significant economic downturn in Q2 before a potential recovery, forming the bottom of the V-shaped economic impact and recovery curve.