What has occurred over the weekend?
Equity markets had a good week. The US-equity index S&P 500 gained + 10,3%. Also the European markets gained significantly. The EuroStoxx 50 gained 7,5%. A bit negative were the losses on Friday (S&P 500 – 3,4%, EuroStoxx 50 – 4,2%).
Volatility in the markets remained on a higher level, but liquidity improved. Liquidity improved because of the support measures of the central banks. That led last week to a reduction of credit risk margins for Corporate Bonds and also Italian government bonds. Yields of US-Treasuries and German Bunds decreased last week as well, whereas the fluctuation margin was smaller compared to the weeks before. 10Y German Bunds show currently a yield of -0,484%.
Additionally further fiscal policy measures are in preparation. In the USA preparation continues for a program to support micro companies and the US president signed the USD 2000 trillion stimulus package on Friday. In Japan Prime Minister Shinzo Abe announced to work on a further economic stimulus package. That should include direct payments to private individuals as well. The total amount of all previously announced and future packages together will surpass the packages created during the financial crisis 2008/2009.
In the USA the president announced a U-turn. After he wanted to loosen the steps to contain the virus before Easter, he extended all restrictions to reduce social contacts by a month. They are now valid until end of April. A small relaxation in the spreading of the virus seems to occur in Italy, while Spain is the new crisis center in Europe. Also Moscow and several cities in Nigeria announced stay-at-home orders. In regards to the virus there is also positive news: The Food and Drug Administration in the USA granted Emergency Use Authorization to a COVID-19 test by producer Abbott Labs that delivers results within a few minutes.
What will we pay attention to during this week?
We will continue to monitor the interaction of the two poles (containment measures and support packages). This week several important data publications are scheduled. That includes the global purchase manager indices, which give an indication for the extent of the decrease of economic activity. In China an increase is expected.
Also the development of the unemployment figures in the USA, which will be announced on Thursday are of great interest to the market participants.
Our dossier on coronavirus with analyses: https://blog.en.erste-am.com/dossier/coronavirus/
Prognoses are no reliable indicator for future performance.