Weekly Market Insight

Latest Economic & Market Update 1st May 2020

01st May 2020

Latest Economic & Market Update: Graph of the week on the Eurozone outlook | Survey by BlackBee shows 1 in 6 worried about finances

Latest Economic & Market Update
Good Afternoon, it is 1st May 2020 and here is your economic and market update from BlackBee Today we are going to focus on:
  > Graph of the week on the Eurozone outlook
> S&P500 records greatest monthly performance since 1987
> ECB increases lending programme
> BlackBee and B&A survey shows 1 in 6 very worried about finances
Graph of the Week: Outlook on the Eurozone
Figures released yesterday showed the largest GDP contraction on record for the Eurozone. The EU Economic Sentiment Indicator gathers information directly from survey respondents in 5 sectors, giving an insight into economic development prior to the availability of economic data. The above graph shows how the EU ESI started to show a confidence drop in 2007 which eventually appeared as a contraction in GDP in Q2 2008. As the confidence levels continued to fall, the following GDP contractions replicated this by showing a worse performance. This year, the ESI initially saw a drop of 8.2% in March, but April has now seen confidence plummet starkly, with levels falling 28.8%, suggesting worse GDP readings are set to come. This would break new levels for the largest contraction on record.

1 Year inflation swaps are also a leading indicator for the inflation rate. The pricing for these derivatives has hit lower levels than that seen during the Financial Crisis for the Eurozone and is indicating a deflationary period. A deflationary period will add to troubles for the Eurozone economy making it more difficult to stimulate growth.

At a glance  In its greatest monthly performance since January 1987, the S&P500 gained 17.8% in April. The market performance is no longer based on the fundamentals of companies, instead it has been driven by the FED pumping liquidity into the market.The number of Americans unemployed has now surpassed 30m, as over 3.8mn Americans applied for unemployment benefit last week. Household spending declined worse than expected, at -7.5%.The Eurozone saw a much greater contraction in GDP than the US as it recorded a contraction of -3.8% in Q1, compared to the US figure of -1.2%. The lack of a common fiscal stimulus is a major factor in the amplified effect of the crisis in the Eurozone.The ECB has increased the size of its programme of lending to banks at record low rates. Unprecedented economic data has forced them to step in again, and the expectation of worse GDP readings for Q2 will add further pressure.
Best & Worst Performers of Large Cap Stocks on Thursday
Two in three ‘worried’ about their finances at this time – Survey

Significant drop in those looking to invest their money from March to April 

Three in ten people (30%) in Ireland said they were hoping to invest in stocks and shares prior to lockdown measures being introduced. However, a survey of over 1,000 people conducted by B&A on behalf of BlackBee Investments found that figure fell to just 17% after lockdown measures were implemented. 
When questioned in April, two out of three people said they were worried about their finances, with one in six saying they are ‘very worried’. In the 35 to 44 age group, 70% are worried about their finances and this drops to 57% for the over 65 age group. 
The comprehensive survey found that over half of respondents said they would only invest in organisations or funds that are ‘socially responsible’. The research shows that people are seeking out more investments that have a clear societal impact. The research highlights that momentum is gathering behind community focused initiatives in particular and that we can expect to see a rise in conscientious capitalism, with social values being prioritised. 

You can find out more about the findings of this study by following this link.

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