Market Update

Despite the concerning economic data revealing the impact of the coronavirus outbreak, major global equity markets ended the week on a positive note.
In the US, the latest data on Thursday (May 7, 2020) indicated an additional 3.17 million initial jobless claims, bringing the total claims filed in the past seven weeks to 33.5 million. Then, on Friday (May 8, 2020), the non-farm payroll data revealed staggering job losses of 20.5 million, resulting in an unemployment rate of 14.7% – a level not seen since the Great Depression of the 1930s. This contrasts sharply with the 3.5% unemployment rate in February, just before the crisis hit.
The apparent discrepancies in these job loss figures stem from the timing and nuances of data collection. The jobless claims data covered the week until May 2, 2020, while the non-farm payrolls data was collected in mid-April. Furthermore, the unemployment rate doesn’t accurately capture the complexity of the situation, as many individuals who lost multiple part-time jobs are now categorized as having only one job.
However, it's essential to interpret this data within the context of the current situation. Layoffs have been concentrated in sectors like restaurants, retail, and leisure – areas profoundly affected by the pandemic. Importantly, these losses are expected to be temporary since they stem from the pandemic's transient nature. When economies fully reopen, job gains are anticipated to be substantial.
The reality remains that the global economy has faced unprecedented challenges. Expectations are grim for the weeks ahead: more job losses, reduced profit forecasts, canceled dividends, and unfortunately, more coronavirus-related fatalities.
But why, then, have equity markets rebounded from their March lows? The answer lies in understanding that the stock market is not a direct reflection of the economy. It's crucial to recognize that the global economy is slowly starting to reopen. Therefore, it's more pertinent to focus on how long the economic decline might persist rather than dwelling solely on its depth.
Positive sentiment was also boosted by news that US and Chinese trade negotiators are discussing plans to implement a trade deal, despite President Donald Trump’s rhetoric about imposing tariffs on China for their handling of the coronavirus situation.
Looking ahead to the upcoming week, several economic indicators are anticipated, including US weekly jobless claims (May 14, 2020); retail sales data from the UK, US, and China; industrial and manufacturing data from the UK and US; CPI inflation figures from the US and China; Q1 GDP data from the UK and Eurozone; and Chinese industrial production data.
Furthermore, the easing of restrictions on movement announced by UK Prime Minister Boris Johnson signals the delicate balance between saving lives from a potential second peak and reviving the economy to prevent business collapse. Consumer responses to these changes, rather than past economic data, will be a key factor to watch. Encouragingly, demand for tickets to the reopening of Disney's Shanghai theme park sold out within minutes, offering hope that consumers worldwide might lead a robust economic rebound after weeks of confinement – potentially resulting in a sharp V-shaped recovery. Over the weekend, positive developments were reported in the US, with New York Governor Andrew Cuomo stating that the state is "finally ahead of the virus," and Apple announcing the reopening of its US stores.