Weekly Market Insight

Daily Global Market Update 16th April 2020

16th April 2020

US Stocks tumbled Wednesday | Economic Data reveals hit from lockdown worse than expected | Apple to release new iphone for $399

(16/04/2020)

Corporate earnings and economic data changed the optimistic tone of recent positive trading sessions as US Stocks tumbled on Wednesday, a feat that matched European stocks. As stocks were sold off investors rushed into US treasuries with the yield for the 10 year note being pushed down to 0.63%, 0.12% lower.

Economic data revealed on Wednesday suggested the hit from the lockdown is worse than feared. Both US industrial output and retail sales recorded historically bad levels. Industrial output fell by its most in 70 years, the biggest drop since the end of the World War II. In retail, sales fell in March to its lowest since data began in 1992, recording a drop of 8.7%. While these figures are already setting historical records, April could see these figures surpassed as lockdown wasn’t in place for the entirety of March and is looking likely to continue for the full month of April.

Apple are set to release a new iphone for $399, a far fall from the previously new iphones released with price ranges upwards of $1000. This pandemic-era price highlights the potential need for businesses to reduce cost in order to attract business. Deflation in the cost of consumer goods could be a benefit to consumer pockets.

The Eurozone saw the biggest increase in cash in circulation since the 2008 crisis people in Europe have responded to the pandemic by hoarding cash. The value of banknotes distributed to individuals and businesses rose in the four weeks prior to 10th April by $41.2bn. According to a previous ECB study, approximately a third of all cash in circulation is kept for a “rainy day” by households. The large increase in cash withdrawals is comparable to the uptick in the weeks leading to Christmas, which shows the level of recent spending as people moved to stock up on household items.

Of the $349bn in small business loans that the US government has provided, already over 90% has been used up as businesses scramble to get funds for payroll expenses to keep themselves afloat. Approximately 1,525,000 companies have received funding totaling more than $324bn. The average rate of approvals ran at $2.8bn an hour between 8.30am and 9pm on Wednesday, a rate that could see the remaining funds run out in the next nine hours, highlighting the worry that the programme will be exhausted before the Democrats and Republicans make a deal to replenish it. The ECB’s decision to buy an extra $900bn in bonds this year has so far kept yields under control, however government debt is now catapulting to 100% of GDP. Central Bankers have warned that debt burdens could stifle growth, particularly in the weaker economies. Calls for a joint action such as a Eurobond are still ongoing to prevent another rerun of the 2010-12 Eurozone debt crisis.