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The Weekly Wrap – COVID-19 and Dire Data Weigh on Riskier Assets

Economic data reflected in the impact of the coronavirus in the week also indicated the likelihood of a global recession.
Bob Mason
US Economy

The Stats

It was a particularly busy week on the economic calendar, in the week ending 3rd April.

A total of 78 stats were monitored, following the 52 stats in the week prior.

Of the 78 stats, 43 came in ahead forecasts, with 29 economic indicators coming up short of forecast. 6 stats were in line with forecasts in the week.

Looking at the numbers, just 28 of the stats reflected an upward trend from previous figures. Of the remaining 50, 44 stats reflected a deterioration from previous.

For the Greenback, it was a relatively bullish week, with support kicking in after the previous week’s 4.33% slide. The U.S Dollar Spot Index rose by 2.25% to end the week at 100.576.

Economic data failed to sink the Dollar. Once more, the markets were focused on the impact of the coronavirus on the global economy.

As at the time of writing, the total number of coronavirus cases stood at 1,098,025. In the U.S, the total rose to 277,161, with France, Germany, Italy, and Spain reporting a combined total of 394,522.

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Out of the U.S

It was a busy week on the economic calendar. ISM Manufacturing and Non-Manufacturing PMIs were in focus along with labor market numbers.

At the start of the week, however, March consumer confidence figures set the tone. The CB Consumer Confidence Index fell from 132.6 to 120.0, reflecting the early effects of COVID-19.

Manufacturing sector activity fared better than anticipated. The ISM Manufacturing PMI fell from 50.1 to 49.1, which was far better than a forecasted 45.0.

That was about the only good news for the markets, however.

 

Initial jobless claims surged to 6.684m in the week ending 27th March, dwarfing the previous week’s record high.

At the end of the week, nonfarm payrolls also spooked the global financial markets. ISM Non-Manufacturing PMI numbers could have been far worse, however.

The ISM Non-Manufacturing PMI slipped from 57.3 to 52.5, with nonfarm payrolls tumbling by 701k As a result of the continued shutdown across the U.S, the unemployment rate surged from 3.5% to 4.4%.

In the equity markets, the Dow fell by 2.70%, with the S&P500 and NASDAQ declining by 2.08% and 1.72% respectively.

Out of the UK

It was a quieter week on the economic calendar.

Key stats in the week were limited to finalized March private sector PMI numbers and 4th quarter GDP and business investment figures.

The markets showed little reaction to the 4th quarter numbers as expected, with the focus remaining on March numbers.

Minor downward revisions to both the Manufacturing and Services PMI left the Pound on the back foot. The Pound’s weekly loss was minor, however, when considering the previous week’s bounce back.

In the week, the Pound fell by 1.53% to $1.2269, following the previous week’s 7.15% rally. The FTSE100 ended the week down by 1.72%.

Out of the Eurozone

It was a particularly busy week economic data front.

In the early part of the week, key stats in the week included March unemployment numbers out of Germany and the Eurozone’s prelim inflation figures.

Germany’s unemployment numbers impressed though had yet to reflect the impact of the coronavirus. Prelim inflation figures, however, showed inflationary pressures easing. The Eurozone’s annual rate of inflation softened from 1.2% to 0.7%.

In the 2nd half of the week, the focus was on March private sector PMI numbers.

While the Manufacturing Sector activity in France and Germany held up pretty well, it was a different story for Spain and Italy.

Service sector PMI numbers were even more disappointing for the 2 member states worst hit by the virus.

Spain’s Services PMI tumbled from 52.1 to 23.0, with Italy’s slumping from 52.1 to 17.4. Both saw PMIs fall to record lows

Finalized Service PMIs for France, Germany and the Eurozone were also worse than prelims adding further pressure on the EUR.

The Eurozone’s Composite PMI came in at 29.7, revised down from a prelim 31.4 and down from a February 51.6.

At composite level, Ireland ranked 1st with a 131-month low 37.3. Italy was last with a record low of 20.2. Germany (35.0), France (28.9), and Spain (26.7) also saw record-low PMIs.

ECB talk of a recession set the mood early in the week and the stats supported the negative outlook.

For the week, the EUR slid by 3.05% to $1.0801, partially reversing a 4.24% slide from the previous week.

For the European major indexes, it was a bearish week. The DAX30 and EuroStoxx600 fell by 1.11% and 0.59%, while the CAC40 slid by 4.53%.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 3rd April, the Aussie Dollar slid by 2.77% to $0.5997, with the Kiwi Dollar falling by 2.60% to $0.5878.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar on the economic data front once more. There were no material stats to provide direction.

Better than expected economic data out of China failed to deliver a 2nd consecutive weekly gain.

Negative sentiment towards the global economic outlook weighed on commodity prices and the Aussie in the week. This was coupled with a pickup in demand for the Greenback as coronavirus updates continued to spook the markets.

For the Kiwi Dollar

It was a relatively quiet week on the economic calendar, with key stats limited to March business confidence figures.

The ANZ Business Confidence Index tumbled from -19.4 to -63.5, which was far worse than a forecasted -24.1.

In spite of the slide, the Kiwi managed to stand its ground in the early part of the week. A 2nd half of the week pullback left the Kiwi in the deep red.

Building consent figures had a muted impact on the Kiwi despite a 4.7% jump in February.

For the Loonie

It was a quiet week on the economic calendar.

Key stats were limited to January and February numbers that had a relatively muted impact on the Loonie.

A narrowing in the trade deficit from C$1.66bn to C$0.98bn in February did little to support late in the week.

Outside of the numbers, crude oil prices certainly influenced, with sentiment towards supply and demand weighing.

Late in the week a rebound in crude oil prices on the hopes of a Trump instigated Russia – OPEC agreement to cut production provided little support.

OPEC and Russia may be willing to talk but agreeing to materially cut production is an altogether different story. The U.S and Canada would also need to cut production.

The Loonie fell by 1.57% to end the week at C$1.4205, partially reversing a 2.65% rise from the previous week.

For the Japanese Yen

It was a busier week than usual on the data front, though the numbers had a relatively muted impact on the Yen.

Key stats included Q1 Tankan survey numbers, and February retail sales and industrial production figures. The Tankan numbers were better than expected but negative nonetheless.

A bounce back in both retail sales and a further rise in industrial production were of little consolation.

Expectations are for an extended economic slowdown affirmed by finalized March private sector PMI numbers.

For the Japanese economy and the yen, the biggest risk remains a 2nd COVID-19 breakout…

The Japanese Yen fell by 0.57% to end the week at ¥108.55. In the week prior, the Yen had risen by 2.70% against the U.S Dollar.

Out of China

It was a relatively busy week on the economic data front. March private sector PMIs were in focus throughout the week.

Better than expected PMI numbers did give some much-needed support to riskier assets in the week. The numbers were ultimately not good enough to avoid a pullback in the commodity currencies.

Both large and smaller manufacturers reported a return to expansion in March. The NBS Manufacturing PMI rose from 35.7 to 52.3, with the Caixin PMI rising from 40.3 to 50.1.

Things were less upbeat across the services sector, however, which now accounts for almost 50% of GDP.

While the NBS Non-Manufacturing PMI rose from 29.6 to 52.3, the Caixin Services PMI rose from 26.5 to 43.0.

Perhaps of greater significance in the week was the easing of confinement measures in China’s 7th largest GDP contributor.

Borders remain closed and global demand remains particularly weak, however, removing the hope of a sharp rebound.

In the week ending 3rd April, the Yuan rose by 0.06% to CNY7.0915 against the Greenback.

The CSI300 rose by just 0.09% following a 1.56% gain from the previous week. The Hang Seng saw red, however, falling by 1.06% to partially reverse a 1.56% gain from the previous week.

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