Apr 20 2020

Last week saw European countries continue to release plans for the gradual end of lockdowns, with Switzerland’s government aiming to relax its shutdown in three stages in a similar move to other nations, and in a possible blueprint, eventually, for the UK.

Companies which provide personal services like hairdressers and physiotherapists will be allowed to return to work from April 27th, though numbers of customers allowed on premises will be restricted. After a two or three-week gap for monitoring, schools could reopen on 11th May, before bars and restaurants do the same on 8th June. No plans have been drawn up for when mass events like concerts or sports fixtures can restart.

It’s clear that populaces are beginning to itch for some semblance of normalisation. Encouragingly, we are still seeing a rolling-over of fatality numbers, with the chart below showing a seven-day moving average of announced deaths in various countries. Note the spike in China at the end of last week as deaths in Wuhan were summarily revised upwards by nearly 50%:

It is too early to say yet if UK fatality numbers have peaked, but the signs are encouraging, with an absolute drop in deaths on Sunday (20th April) and hospital patient numbers with COVID-19 generally falling over the last week or two, per the chart below:

Whilst most economic data in the western world is expected to be weak for some time, data in Asia is more positive. China’s trade performed better than expected in March, with both exports and imports declining less than expected, even as the coronavirus prompted business shutdowns around the world. The data indicates that global supply chains may be adapting better than first thought, and that China’s gradual economic restart is proceeding, though as a caveat, the full effect of a collapse in demand in US and European economies may not yet be fully apparent.

Fixed income markets remained buoyant last week as investors remained comforted by central bank purchases. High yield bonds were again the best performers, rising by 3.24%, whilst government bond returns were more muted.

Equity markets struggled for the first half of the week, particularly in Europe and the UK, before finding support on Thursday and Friday as optimistic news emerged around trials of Gilead’s drug Remdesivir in Chicago. Reports suggested the drug had been highly effective at treating patients with severe COVID-19 symptoms, but trials are still on-going, and we must wait for the release of hard data. 

We remain cautious around the near-term prospects for equity markets given the strength of their recent rallies, but nonetheless these developments are certainly much-needed positives that we hope will herald the start of a more concerted fightback against the virus.

The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The views expressed in this publication represent those of the author and do not constitute financial advice.

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Andrea Barker andrea.barker@fairstone.co.uk / Tel. +44 (0) 191 519 6243