This week in the markets


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Stocks rally on signs new infection rates may have peaked in key hot spots

April 9, 2020

As expected, capital markets continue to be focused squarely on the rate of new COVID-19 infections as the key indicator of when economies might “re-open”, rather than on now discounted economic data releases. Stocks around the world rose as the week started with positive signs in some of the hardest hit COVID-19 regions – notably Spain, France, and Italy, the original epicenter of Europe’s outbreak.

As the week progressed, more hopeful news appeared: New York state reported its first daily decline in fatalities, China lifted the lockdown in Wuhan province and reported its first day of zero deaths since the pandemic emerged. Other countries, including Italy, began to consider easing lockdowns. Further, Anthony Fauci, Director of the U.S. National Institute of Allergy and Infectious Diseases, reduced projections of U.S. coronavirus fatalities by almost half and suggested the U.S. could see the start of a turnaround soon.

The financial markets continued to ease: the U.S. dollar slipped lower, volatility indices dropped, yields on government bonds climbed higher globally, and gold reclaimed recent liquidity-driven losses. The progress of another round of stimulus through the U.S. Congress – perhaps as much as  U.S. $1 trillion – and another sweeping series of steps from the U.S. federal Reserve helped to boost investor optimism.

With regard to the energy space, oil prices fell sharply again after a strong bounce last week. Russia and Saudi Arabia agreed to cut production and end their price war, but the planned cuts fell short of the amount needed to offset the COVID-19 related drop in demand and were resisted by some other members of the Organization of the Petroleum Exporting Countries (OPEC). Saudi Arabia insisted other non-OPEC producers, including Canada, the U.S., Brazil, and Norway, also agree to participate in cuts. With plans to discuss the issue at a G20 meeting Friday (hosted by Saudi Arabia), markets will break for the Easter long weekend without a resolution.

The S&P/TSX Composite Index saw gains in all sectors. The strongest were in some that had been hit hardest year-to-date, including consumer discretionary, health care, and real estate. The energy sector was an exception, as crude prices remained in flux. The consumer staples and communications services sectors also underperformed. In the S&P 500 financials, materials, and real estate were top performers.

European stocks generally underperformed those in North America. Most markets gave up some of their earlier gains after European Union finance ministers failed to agree on a set of economic support measures. Equities in the U.K. were already underperforming after Prime Minister Boris Johnson was hospitalized for treatment for COVID-19. In Asia, Japanese stocks were especially strong following reports of a stimulus package totaling 108 trillion yen (CAD$ 1.4 trillion), or about 20% of Japan’s GDP. Australia’s gains trailed almost all other developed markets after Standard & Poor’s cut the outlook on Australia’s AAA credit rating to negative.

What’s ahead next weeks:

Canada

  • Bank of Canada interest rate decision (April 15)
  • Manufacturing sales (February)

U.S.

  • Consumer Price Index (March)
  • Import, Export Price Indices (March)
  • Retail sales (March)
  • Empire State Manufacturing Survey (April)
  • Industrial production, Capacity utilization (March)
  • Housing starts, Building permits (March)
  • Conference Board Leading Index (March)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
      CAD CAD CAD CAD
S&P/TSX 14,166.63 + 1,228.33 + 9.49% - 16.98% - 13.28% - 1.56%
S&P 500 2,789.82 + 301.17 + 10.72% - 7.05% + 1.64% + 8.19%
DJIA 23,719.37 + 2,666.84 + 11.28% - 10.54% - 4.89% + 7.98%
FTSE 100 5,842.66 + 427.16 + 8.50% - 21.74% - 21.20% - 4.80%
CAC 40 4,506.85 + 352.27 + 8.62% - 20.97% - 15.65% - 0.29%
DAX 10,564.74 + 1,038.97 + 11.06% - 16.80% - 9.29% - 0.22%
Nikkei 19,345.77 + 1,525.58 + 7.33% - 12.12% - 4.60% + 3.68%
Hang Seng 24,300.33 + 1,064.22 + 3.29% - 6.79% - 14.54% + 0.04%
CURRENCY RETURNS CAD Change 1-week YTD 1-year 5-year
US$ 1.3965 - 0.0240 - 1.69% + 7.51% + 4.76% + 2.11%
Euro 1.5264 - 0.0078 - 0.51% + 4.78% + 1.67% + 2.63%
Yen 0.0129 - 0.0002 - 1.61% + 7.68% + 7.36% + 4.30%
CANADIAN TREASURIES Yield Change COMMODITIES USD Change
3-month 0.22 + 0.05 Oil $23.33 - $5.01
5-year 0.60 + 0.01 Gold $1,683.89 + $63.08
10-year 0.76 + 0.05 Natural Gas $1.74 + $0.24