March started the way February ended – i.e., with utter carnage – leaving the markets in a seriously bad way. Do they stand any chance of posting a significant recovery this week?
US: Will we see any respite for the markets?
At present it is hard to tell where any relief will come from, other than investors simply deciding that the markets have fallen far enough to become an attractive proposition despite the global uncertainty.
Various interventions by the world’s central banks, including an impromptu rate cut from the Federal Reserve, have garnered mixed results. For, while investors are desperate to see these attempts at stimulus, their sudden nature has only served to underscore the seriousness of the situation.
In terms of what could make things worse, well, a pandemic is yet to be officially declared by the World Health Organisation. A sharp rise in the death toll in the US would likely be felt market-wide, ditto any further outbreaks akin to those seen in Italy, Iran and South Korea.
Another round of company warnings would also further undermine sentiment, as sectors beyond those immediately impacted – like travel and commodities – start to assess the cost of the crisis.
As for the week’s economic calendar, it’s actually fairly light – we’re yet to enter that crucial time period when the really relevant data will be released. Monday has perhaps the most important figure, as February’s Chinese trade balance reading is posted, while Wednesday sees US inflation and Friday the preliminary UoM consumer sentiment numbers.
UK: Market sentiment and the annual budget
It is highly likely that the FTSE’s week will be dictated, as it has done for the last month, by the generalised market sentiment.
However, the UK does have something region-specific to deal with: the first annual budget of the Boris Johnson administration. Rishi Sunak hasn’t actually had too long to put the budget together, abruptly taking over the chancellorship following the abrupt departure of Sajid Javid. He may, then, be thankful it might get buried under the latest coronavirus headlines.
Most pertinent to the markets could be the section re-written to deal with the outbreak – namely how much money the government is prepared to spend to soften the blow of the crisis.
UK Stocks To Watch
Meanwhile the corporate calendar brings updates from Clarkson on Tuesday, Balfour Beatty and Dignity on Wednesday, and Computacenter, G4S and Galliford Try on Thursday.
Eurozone: ECB set to meet
The ECB are in a tougher position than some of its central bank peers. For the Brussels-based institution is already operating under negative interest rates – they currently sit at a record low of -0.5%. That may give Christine Lagarde and her team pause on Thursday, as the ECB becomes the first central bank to hold a scheduled meeting since the coronavirus became a major concern.
Elsewhere the German industrial production reading arrives on Monday, followed by the French and Italian figures on Tuesday.
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