Share Prices Up on Hopes that Covid-19 May Be Starting to Lessen

April 6, 2020

Stock markets in the Pacific Rim rallied 4.3% in Australia, 4.2% in Japan and South Korea, 4.1% in Indonesia, 2.2% in Hong Kong, and 1.6% in Taiwan. China and India did not partake in this rebound as those markets were closed Monday for the Ching Ming Festival and Mahavir Jayanti Holiday. Equities in Europe have jumped so far by 4.8% in Germany, 3.7% in France, 3.3% in Spain, 3.0% in Italy and 2.2% in France.

Hope has been inspired because the pace of new deaths from Covid-19 slowed in Europe over the weekend. So far, the count of confirmed infections worldwide stands at 1,287,128 and has accounted for 70,527 deaths, 55% of which have occurred in Spain, Italy and the United States. China accounts for fewer than 5% of worldwide cases, although it appears that Chinese officials may have under-reported the true number. Spain’s position among the top hot spots has attracted some attention because an even worse pandemic in 1918 came to be called the Spanish flu. However, it should be noted that this label was not earned because Spain was hardest hit but rather because news outlets in much of Europe were largely censured but not so in Spain, which did not participate in the First World War. The Spanish flu actually began in Kansas but ultimately clobbered Europe much more severely than the United States.

Ten-year sovereign bond yields have risen six basis points in the United States, 2 bps each in Germany and Great Britain, and a basis point in Japan.

The price of West Texas Intermediate crude oil settled back 2.2% overnight after its very sharp rebound late last week. Comex gold is trading 1.6% higher.

The dollar rose to a new record high against the Mexican peso today and is up 1.1% on balance for the day. Alternatively, the dollar fell 3.5% against the New Zealand dollar and 1.3% versus Australia’s money, two currencies that have fallen very sharply during the coronavirus pandemic. Elsewhere, the dollar shows declines of 0.3% versus sterling and 0.1% vis-a-vis the loonie but has risen 0.4% relative to the yen and 0.1% against the euro and Swiss franc.

German factory orders fell less than expected in February. The drop of 1.4% reflected softer exports and followed January’s surprisingly sharp 4.8% leap.

A bunch more purchasing manager surveys were published today.

  • Euroland’s construction PMI dived to a 133-month low of 33.5 in March from 52.5 in February. Italy’s index printed at a mere 15.9 after 50.5 in the prior month; that’s the lowest reading in the 248 months that this data has been collected. The German and French construction PMI scores of 42.0 and 35.2 were their lowest in 7 years and 64 months, respectively.
  • The British construction PMI fell from a 14-month high of 52.6 in February to a 131-month low of 39.3 in March.
  • Ireland’s construction PMI reading of 28.9 was at a record low some 21.7 points lower than in the previous month.
  • The non-oil PMIs of Egypt, Saudi Arabia, and the United Arab Emirates dropped to a 39-month low of 44.2, a 127-month low of 42.4, and a record low of 45.2 last month.
  • India’s service-sector purchasing managers index fell from an 85-month high of 57.5 in February to a 5-month low of 49.3 in March. India’s composite PMI also dropped to a 5-month low and helped to depress the rupee, which dipped to a new record low versus the dollar.

Sentix, a measure of investor sentiment toward the euro area economy, slumped to a reading of -42.9 in April from -17.1 in March and +7.6 in the first month of 2020.

Chinese international reserves declined $8.78 billion last month to $3.107 trillion.

British car sales in March were a whopping 44% lower than in the same month of 2019. British consumer confidence in March had been initially reported at -9 versus -7. But due to the unusually rapid deterioration in the second half of last month, a second survey was taken near the end and found consumer confidence to have subsequently plunged to a 133-month low of -34. It’s drop from -7 in February constitutes the steepest month-to-month decline since this data series was launched in 1974.

Spain, Japan, and Indonesia also reported March consumer confidence data today. Spain’s index fell from 85.7 in February to an 80-month low of 63.3 in March. Japan’s reading of 30.9 was the weakest consumer sentiment reading in 132 months, and Indonesia’s 113.8 score was the lowest in 42 months.

In the twelve months through February, industrial production dropped 1.2% in Denmark and 1.1% in Ireland.

Singapore’s fiscal stimulus unveiled a week ago has been augmented by a further S$ 5.1 billion and altogether will be equivalent to 12% of GDP.

Finance ministers in Euroland are meeting today to discuss how to counter the effects of the Covid-19 outbreak.

The U.S. employment trends index and Bank of Canada Business Outlook survey get released today. An Israeli monetary policy review is also occurring.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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