Investment update for April 2020
Some optimism follows global responses to COVID-19
Global equity markets rebounded strongly in April in reaction to substantial fiscal and monetary responses to the economic impact of COVID-19, indications of economic re-opening, and optimism about treatments for the virus. Dispersion in performance between sectors and countries however was wide; it is notable that US equities, and the information technology sector were particularly strong performers, while European and UK equity markets lagged.
While the total global cases of COVID-19 passed three million in April, the number of new daily cases showed signs of plateauing or declining in some advanced economies. This prompted moves to ease some lock-down restrictions across Europe, Asia and the US by month end.
In China, 84% of small and medium-sized corporations resumed operations during April. Data indicated import and export numbers have improved over the month. Production, retail sales and investment all showed signs of recovery. Authorities continued monetary policy easing with The People’s Bank Of China cutting the required reserve ratio for small and medium-sized banks and The State Council announcing additional credit support to SMEs.
Globally, central banks continued with monetary and fiscal policy easing. The ECB provided liquidity support to the euro area financial system with a new pandemic emergency loan. Demand for oil fell 30% over the course of the month as a result of the strict global lockdown, resulting in a swelling of supply that had storage tanks at maximum capacity.
President Trump announced a $484 billion spending package to support small businesses, while the US Federal Reserve expanded the scope and eligibility for several credit facilities. The Bank of Japan expanded purchases of government bonds and corporate debt. Amongst Emerging Markets and Developing Economies (EMDEs) policy rate cuts were implemented by central banks in Mexico, Pakistan, Poland, Russia, South Africa, China and Turkey.
In Australia, quarantine measures remained in place for most states over the month and the number of active COVID-19 cases decreased. As a result, Australian equities rallied as sentiment grew more optimistic about easing social restrictions and economic reopening. The RBA meeting on 7 April indicated that the Bank has bought around $36 billion of government bonds in secondary markets since the quantitative easing started.
While listed property and infrastructure followed the broader equity markets in April and increased over the month, they remain one of the hardest hit sectors of the market since the downturn began.
Please view our full investment commentary brought to you by our advisers – Frontier – for a more in depth analysis of market conditions this month. The monthly commentary can also be viewed on YouTube.
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