Weekly Market Insight

Daily Global Market Update

26th March 2020

(as at close of markets 25/03/2020)

China’s economy has shown early signs of recovery as it begins to move on from the Covid-19 pandemic that originated in Wuhan. While it is heartening to see the once epicentre of the emergency recover, it will be a while before the true impact of the pandemic is realised in China.

According to Bloomberg, an estimated 8 million people in China have become unemployed as a direct result of the emergency, and SMEs are struggling to recover and repay loans. While manufacturing can make up for lost time, retail, restaurants and services cannot. While manufacturers may recover faster than SMEs, they also have to worry about demand for exports as the rest of the world is in the midst of, or just beginning their coronavirus emergency.

Europe and the US have taken two different approaches to supporting their economies in the past week. The more socialist Europe has provided business and economic supports, the libertarian Americans have put money into citizens pockets.

Where Europe is not stress-testing banks, the US is. This may be a flaw for Europe, which needs to be careful not to let Spanish and Italian bond markets get to a point where they get sold off. In an unscheduled ECB meeting last night, ECB President Christine Lagarde has stated that there are “no limits to our commitment to euro”. While it is yet to be seen what form this commitment will take, it is an unusually strong position for the usually more moderate ECB.

The US has reached out to Saudi Arabia to “rise to the occasion” and put an end to the oil price war with Russia. US Secretary of State Mike Pompeo spoke with Saudi Arabia’s Crown Prince Mohammed bin Salman about the feud in an effort to stabilise global energy markets in an already uncertain time

Moody’s and S&P have downgraded Ford to junk status on the back reduction in supply and demand under current economic conditions and the company’s planned restructuring over the coming years. This is the latest “fallen angel”, where old and trusted brand names are downgraded, after Kraft Heinz and Macy’s were downgraded to junk status recently. European car manufacturers Daimler, Volkswagen and Renault have been placed on Moody’s downgrade watchlist.