Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for March 30, 2020.
The price of US crude oil dipped to an 18 year low on Sunday, below $20 a barrel, after another weekend of headlines documenting the continued spread of the coronavirus pandemic. The ever bleaker outlook on global energy demand is being compounded by the ongoing Saudi-Russia price war, piling pressure on the oil price. Whilst the dip below $20 was brief, unless we see some material change in the situation, we may well see it challenged again. Demand has been further hammered as global aviation grinds to a standstill, with UK based easyJet the most recent airline to announce the grounding of all flights.
This is a historic price collapse, and it is not done yet as the system physically runs out of places to put all the oil,” said one former Obama administration energy adviser.
While markets posted a double-digit gain last week thanks to a $2trn stimulus package coming to fruition and new measures taken by the Federal Reserve, investors are now once more focused on the rapid progress of Covid-19. Despite the huge sums already spent to prop up the economy, US politicians are already reportedly looking ahead to the next potential spending package to combat the economic fallout from the pandemic, which may be even bigger than the last. On Sunday, President Trump — having said repeatedly that he wanted to open the economy back up as soon as Easter — announced that he was extending his administration’s social distancing guidelines through to the end of April. Those restrictions include instructing people to avoid nonessential travel and large gatherings, but individual states and cities have implemented their own, often tougher, restrictions as well.
Friday sell-off at end of double digit week for US stocks
The major stock indices broke their first multi-day winning streak in a month on Friday, sinking by up to 4%, with investors taking profits from the week as the coronavirus situation continues to get worse in the US. Per the Centers for Disease Control and Prevention, the US now has more than 120,000 cases with over 2,000 deaths, making it the country with the highest number of confirmed cases worldwide.
The Dow Jones Industrial Average fell 4.1% on Friday, dragged lower by names including Boeing and Chevron, which both sank by around 10%. Boeing in particular had delivered a stellar week, gaining more than 70% despite Friday’s sell-off; although it remains down 50% year-to-date. For the whole of last week, the Dow climbed 12.8%, despite figures showing a record 3.3 million Americans signed up for unemployment benefits last week, beating the previous record by more than four times.
Investors resumed buying government bonds on Friday too, taking the yield on the 10 year treasury below 0.7% after a week where it had been hovering around the 0.8% mark. Investment firm T. Rowe Price noted in a Friday note that the Fed purchasing treasuries and expanding lending facilities “aided market functioning” and helped push yields lower. The Fed also announced that it will be buying up corporate debt, helping to ease investor fears about the risks posed by corporate bonds.
- S&P 500: -3.4% Friday, -21.3% YTD (+10.3% last week)
- Dow Jones Industrial Average: -4.1% Friday, -24.2% YTD (+12.8% last week)
- Nasdaq Composite: -3.8% Friday, -16.4% YTD (+9.1% last week)
Rising sterling holds back FTSE 100’s rally
London-listed shares followed a similar pattern to their US counterparts last week, although the FTSE 100’s rally was pegged back to 6.2% as the value of sterling steadily rose over the course of the week. Having lagged significantly in recent weeks, the more domestically focused FTSE 250 gained 8.7%, although its year-to-date loss is still greater than 20%. One of the major coronavirus headlines in the UK on Friday was that both the Prime Minister and Health Secretary have contracted the virus, following weeks of criticism that the government failed to roll out stricter lockdown measures sooner.
In Friday’s sell-off, cruise firm Carnival, oil giants Royal Dutch Shell and BP, and banks including Barclays were among the FTSE 100 firms that had a rough trading session, with the index falling 5.3% overall. Along with other banks, Barclays has begun waiving charges and offering greater flexibility to its customers, a substantial number of whom are facing disruption to their incomes. Barclays is automatically waiving interest on all unauthorised overdrafts and is offering residential mortgage customers payment holidays of up to 90 days. In the FTSE 250, Royal Mail was one of the biggest fallers on Friday, sinking 17.6% after suspending its dividend and announcing that its turnaround program will take longer than planned due to the pandemic.
- FTSE 100: -5.3% Friday, -26.9% YTD (+6.2% last week)
- FTSE 250: -4% Friday, -32.5% YTD (+8.7% last week)
