Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for April 27, 2020.
European markets have followed Asia higher in early trading today as investors focused on how far central banks will go to save economies. The Bank of Japan removed limits on bond purchases and has bought up more corporate debt in a further expansion of stimulus, as a result the Nikkei closed up 2.7%.
Despite uncertainty in Europe over the various plans to protect member nations, expectations are that both the European Central Bank and the US Federal Reserve could announce more measures to bolster their countries when they meet later this week. Leading the way this morning is Germany’s Dax, up 2.5%, the FTSE is 1.6% higher and US futures are pointing towards an open around a 1% gain.
This week is another busy one in the US corporate earnings calendar, with 172 of the S&P 500’s constituent firms set to report. It is also a packed week in terms of economic data. In the US, Q1 GDP growth, April’s consumer confidence index, March consumer spending data and April motor vehicle sales are all due.
Over the weekend Boeing dropped plans to enter a joint venture with Embraer, which would have seen it take over the Brazilian firm’s jetliner business. Walking away from the deal will save Boeing $4bn but means it will miss out on tapping into Embraer’s smaller jetliner niche. Boeing is already dealing with the joint financial pressures of the continued grounding of its troubled 737 MAX fleet, and the fact that most global air travel is suspended due to the coronavirus pandemic. The firm is facing waves of cancellations of 737 MAX orders, including an order for 29 of the jets cancelled by the China Development Bank last week.
Markets post minor weekly loss as investors take a breather
All three major US indices posted a mild loss last week, as investors took a breather following a 15% rally since the start of April. According to an investment strategist note from financial advice firm Edward Jones, the recent gains represent the strongest bear market rally in 90 years, with the S&P 500 posting two of its best 10 days since 1928 in the past month. WTI crude oil future prices turning negative was one of the stories of the week, but US oil giants Chevron and Exxon Mobil shrugged off the turmoil and the share prices of both finished the week close to where they had started. It is worth remembering that energy stocks make up less than 5% of the S&P 500 by market cap. Investment firm T. Rowe Price noted that the consumer staples, financials and utilities sectors of the S&P 500 suffered the worst week, while the Nasdaq Composite posted the biggest weekly loss in part thanks to analysts cutting their ratings on Google and Facebook stock. In a Friday note, T. Rowe said that the latest $480bn stimulus bill passing is helping sentiment, as is the downward trajectory in weekly initial jobless claims data, even though the figures still remain at astronomical levels versus history. Edward Jones’ investment strategist team said that markets are unlikely to sustain the trajectory they have been on this month so far, and that while optimism about the reopening of the economy is justified, any economic recovery “may periodically fail to live up to expectations.”
- S&P 500: +1.4% Friday, -12.2% YTD (-1.3% last week)
- Dow Jones Industrial Average: +1.1% Friday, -16.7% YTD (-1.9% last week)
- Nasdaq Composite: -1.7% Friday, -3.8% YTD (-0.2% last week)
UK posts record fall in retail sales
Both the FTSE 100 and FTSE 250 posted a loss of around 1% last week, mirroring the US. Unlike the US, however, London-listed stocks have not enjoyed a double digit April rally, with the FTSE 100 up 4.4% over the past month, and still down 23.7% year-to-date. Like their US counterparts, BP and Royal Dutch Shell both finished out the week close to flat despite the chaos in oil markets.
In economic data, UK retail sales fell by a record 5.1% in March versus the previous month, with clothes sales down 34%, while alcohol, food and online sales totals jumped. The downturn was the steepest fall in sales on record (which began in 1996). UK inflation for March dipped from 1.7% annualised to 1.5%. Claimant count change, the change in the number of unemployed people in the UK, came in at 12,200 for March, well below the 150,000 plus expected. On Friday, the FTSE 100 fell 1.3%, with product testing firm Intertek Group, food services business Compass Group and hospitality firm Whitbread the biggest losers, all sinking by more than 5%.
