More key information to keep you updated about investment markets. Here is the latest news and podcast from the investment team at Architas which we hope you will find very useful…
* It was a very strong week for the US last week with the S&P 500 Index up 3%. This was driven by the consumer discretionary (or non-essential goods and services) sector, prompted by really strong performance for Amazon.
* China‘s gross domestic product (GDP) shrank by 6.8% in the first three months of 2020 as closures due to the coronavirus hit the world’s second largest economy.
* The next big focus for the market this week is going to be on a company called Gilead. This company has an Ebola antiviral drug called Remdesivir and they’ve been carrying out some tests on patients with Covid-19.
Unsurprisingly news continues to be dominated by Covid-19, but US markets were up last week. So what’s been driving this? It was a very strong week for the US last week with the S&P 500 Index up 3%. What’s driving this? In the US, the narrative has changed from focusing on the number of cases to ‘when are companies going to start reopening, and when are we going to see the lockdown end?’
You can see that the language is shifting towards what’s next. If we look a little bit underneath the surface, you can see that the best performing sector last week was the consumer discretionary (or non-essential goods and services) sector. This was prompted by really strong performance for Amazon. On the flip side the financial sector was particularly weak as a result of bad earnings coming out from JP Morgan and Wells Fargo, who reported profit declines of 70% and 89% respectively.
Quite a lot of economic figures have come out of China in the past week. What do these tell us about how China is coping with Covid-19? China’s GDP shrank by 6.8% in the first three months of 2020 as closures due to the coronavirus hit the world’s second largest economy. However, these unprecedented numbers were expected and generally speaking were broadly consistent with the economic activity data released from China over the past couple of months.
What is more informative is the March data, which shows there has been a notable rebound compared to February for factory production. This reflects the easing of control measures as well as further measures the Chinese government has taken to support the economy.
However, demand from consumers and businesses remains weak. This was evidenced by the weak retail sales and fixed investment
numbers. Despite showing a recovery compared to February, these were still considerably below normal levels, reflecting a reluctance to spend from individuals and businesses. Everyday life has by no means returned to normal in China despite the lifting of some restrictions.
What will the markets be focusing on this week?
This week there will be a number of companies reporting earnings. To date, around 9% of companies have reported their earnings so far. We’re expecting 30% of S&P 500 companies to report this week, so that will be a big focus.
Jobless claims in the US have been quite weak. Last week we saw an additional 5.2 million claiming unemployment benefit. So people will be focusing on seeing if that number is decreasing and the expectation is that we get a figure of around 3.5 million.
Activity in the US services and manufacturing sectors will be in focus as data will be released later this week after it contracted sharply in March as Covid-19 weighed on economic growth and ground business operations to a halt.
The next big focus for the market this week is going to be on a company called Gilead. This company has an Ebola antiviral drug called Remdesivir and they’ve been carrying out some tests on patients with Covid-19.
When looking at the results of those tests, they have reported that people have come off ventilators within one day of taking this antiviral drug. So this could be a significant development and the share price of Gilead was up 8% on that news. And that could be a big game-changer for markets.
WHAT IS NEXT FOR INVESTORS?
* Stock markets will likely remain turbulent but, for those with a long-term view, the benefits of having a diversified balanced portfolio might help to spread risk.
* It is going to be difficult to predict what will happen in the short term, but we believe that investors should expect volatility to remain elevated over the coming months.
* As such, the basic principle of diversification across asset classes, currencies, regions and investment managers is as important as ever.
Listen to the latest podcast HERE.