Market Update: Shares Rally as US Launches Emergency Measures

Market Update: Shares Rally as US Launches Emergency Measures

30th March 2020

LAST WEEK – KEY TAKEAWAYS

Markets: Global shares recover as US announces substantial government support 

  • Markets rallied as the US launched a package of emergency measures worth US$2 trillion in an effort to offset the impact of the coronavirus on the country’s economy (see below);
  • Concerns about their potential impact weighed on the markets on Friday, but shares still recorded healthy gains for the week.
  • Omnis view: The markets welcomed the measures which are broader than those launched in response to the 2008 financial crisis.  However, whether shares continue to recover depends on global efforts to contain the virus and the trajectory of the number of new cases.

US: Federal Reserve and government unite to bolster economy 

  • The Federal Reserve- the US central bank- put no limit on the amount of government and corporate assets it will buy through its expanded programme of bond buying, known as quantitative easing;  
  • As part of the US$2 trillion of measures signed into law by President Trump on Friday, the US will offer emergency loans to businesses and send money directly to consumers.
  • Omnis view: These measures are designed to protect businesses and jobs and ensure the financial system continues to function during the temporary shutdown of economic activity. Handing money to consumers should boost demand and drive future growth.

Global economy: Coronavirus weighs on business activity and employment

  • Evidence of the impact of the coronavirus on the global economy emerged as business activity in the UK, the US and Europe slowed to the lowest point since analytics firm IHS Markit started measuring in 1996;
  • Meanwhile, the number of people claiming unemployment benefits in the US rose by over three million last week, according to the US Labor department[1]
  • Omnis view: While a recession- two quarters of negative economic growth- is likely in the first half of the year, the measures put in place by global authorities could lead to a relatively quick rebound if the spread of the virus can be contained.

LOOKING AHEAD - TALKING POINTS

Economic data

  • Tuesday- Japanese unemployment rate in February;
  • Wednesday- EU unemployment rate in February;
  • Thursday- US imports, exports and balance of trade in February;
  • Friday- US non-farm payroll report (job creation) in March.

[1] https://www.dol.gov/ui/data.pdf

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This update reflects Omnis’ view at the time of writing and is subject to change.

The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your Openwork financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.