Improving economic data gave way this week to a sharp increase in Covid-19 cases in those areas of the world left behind in the race for vaccines. Most equity markets fell, with those sectors set to gain the most with the reopening of economies being hit hardest, including travel and leisure. Whilst healthcare notably bucked the trend. US Treasury yields, which move inversely to prices, fell even further this week, having already benefitted from overseas buying in recent weeks. The 10-year US Treasury fell as low as 1.53%, having been as high as 1.76% at the end of March. A number of companies released positive earnings results, although Coca-Cola described their end markets as “asynchronous”, with those more advanced with vaccination programmes exhibiting strong growth, whilst others, often in the emerging markets, showing weakness as coronavirus takes hold once more.
Global equities fall over the week
As of 12pm London time on Friday, US equities fell 1.2% over the week, with US technology stocks falling 1.7%. European equities lost 1.0% and UK stocks dropped 1.5%. The Japanese market fell by 2.3% as expectations rose that the country is about to declare a state of emergency in response to an increase in Covid-19 cases, whilst Australian stocks were flat for the week. China was one of the few markets to rise over the week, with domestic ‘A’ shares increasing by 1.4%. The market was led by companies that reported big earnings jumps for the first quarter, with healthcare and consumer staples being the lead sectors. However, the wider emerging markets complex fell by 0.5% in aggregate, with India falling by 2.0% as the country reported a world record 332,000 new coronavirus infections versus the previous day.
Government bonds continue their rally
10-year US Treasury yields are currently trading at 1.56%, German bunds -0.27% and UK gilts 0.73%.
Precious metals rose, with gold now trading at $1,786 an ounce, whilst it was a mixed picture for industrial commodities. Copper climbed back to levels last seen in February, trading at $9,421, whilst iron ore continued its recent ascent to new highs for the year, rising by over 5%. In contrast, crude oil traded down, with Brent crude now trading at $65.5 a barrel and US WTI (West Texas Intermediate) $61.7.
Economic data was largely positive
Despite the risk off tone to the week, much of the economic data released was positive. US initial jobs claims came in below expectations for a second month, helping to confirm that the previous month’s figures were not an aberration. Similarly, the UK’s unemployment rate came down to 4.9%, although the UK’s furlough scheme in all likelihood helps to flatten these figures.
Purchasing managers indices frequently exceeded expectations
Purchasing managers indices provide an indication as to how companies consider the environment they are operating in. The UK manufacturing PMI came in at 60.7, with any number above 50 indicating expansion, whilst the services sector PMI was recorded as 60.1, both ahead of expectations. It was a similar picture in Europe, with the composite PMI coming in at 53.7, beating forecasts. US PMI data is due to be released later today, with expectations of further improvement.
UK retail sales for March boomed
UK retail sales data for March was substantially ahead of forecasts, recording a month-on-month increase of 5.4%, versus expectations of an increase of 1.5%. This was despite most shops still being closed. The increase in sales was attributed to clothing sales and garden equipment.
Australian equities rally at the end of the week
The Australian market was a relative outlier this week to other developed economies, having finished the week flat. The market declined at the start of the week, with concerns over coronavirus case numbers rising in some countries. In addition, weaker oil prices this week also dragged on energy companies in the index. However, the Australian market bounced back on Thursday, with all sectors rising, but it was gold miners that lead the way, surging 2.7% on the day after the precious metal also rallied in price.