Erste Asset Management Investment Blog

Stock market rally– Update from the Investment Division

Stock market rally– Update from the Investment Division
Stock market rally– Update from the Investment Division
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What has occurred since yesterday ?

Markets

Stock markets continued to rally yesterday. Europe was up slightly by 0.65%. USA clearly in positive territory at approx. 3%. Asia is slightly in negative territory as of this morning. The oil price fell back down to USD 20.30 (WTI). Gold remained strong at USD 1720 per ounce. EUR/USD remained at 1.09. Risk premiums on bonds tended to fall further.

Stress test

After the Easter holidays, as in many other countries today, school resumed in Austria. Home-schooling 2.0. In our private fully occupied home schooling office, this means our young swans can now also organize their own video conferences with their respective school classes via zoom. This means that up to four Telcos will be running simultaneously at our home. A stress test at least for our WLAN. Apart from the challenges that come with it, the teachers will soon recognize the advantages of this new method – one of them is that you can mute individual or all participants…

Outlook

The IMF released its semi-annual reports yesterday on the economic environment (World Economic Outlook) and financial stability (Global Financial Stability Report). One of the key messages is that the Great Lockdown has triggered the greatest global recession since the Great Depression of the 1930s. The People’s Bank of China (POC) has lowered the one-year interest rate on its medium-term lending facility by 20BP to 2.95%. Sounds unspectacular, but it may not be. It represents an additional one of several interest rate cuts. Our Chief Economist Gehard Winzer believes that this is an indication that China is preparing another strong stimulus. Positive for China, emerging markets and the global economy.

Precaution

As announced in yesterday’s update, the reporting season for US companies has begun for the first quarter. The results of the two major banks, JPMorgan and Wells Fargo, were eagerly awaited yesterday. Both banks have put billions of dollars on the books as a precaution against impending loan defaults (JPMorgan over USD 8 Billion, Wells Fargo USD 4 Billion). This means, however, that these amounts are missing on the profit side. As a result, profits at both banks have fallen significantly (by up to 90% depending on the comparable period). The shares of both companies also fell significantly over the course of trading (JPM -2.7%, WF -4%). We expect the reporting season to not only provide information on the economic scale, but also to separate the wheat from the chaff. Amazon closed yesterday at a new all-time high.

Our dossier on coronavirus with analyses: https://blog.en.erste-am.com/dossier/coronavirus/

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Prognoses are no reliable indicator for future performance.

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