May 04 2020

This week should bring more clarity to the Government’s plans surrounding lockdown. Further good news comes from the latest government statistics which show that the daily death toll in the UK fell this past week, despite now also accounting for deaths outside of hospitals.

315 deaths were sadly reported in the UK yesterday (Sunday 3rd May) down from 621 confirmed the day before. The trend is definitively downwards, as shown in the chart below that uses a 7-day moving average:

Daily new cases remain relatively high at over 4,000, though this can be at least partially explained by the enormous ramp up in testing seen in the past week as the government strove to meet its 100,000 per day target. Many more of the new cases are being identified in the community as opposed to in hospitals. Importantly, per the chart below, hospital patient numbers with COVID-19 continue to steadily fall, along with intensive care bed use:

Away from the virus, the Foreign Secretary Dominic Raab announced that the UK and US will start work this coming week on a free trade agreement. Brexit trade negotiations have started to reappear in news headlines over the past week or two, as focus starts to shift forward again.

In markets, risk assets had a positive first half of the week, being buoyed by more positive news stemming from trials of Gilead’s anti-viral drug Remdesivir. We still have no hard data from the comprehensive on-going trials, so although the rhetoric sounds positive, we must remain extremely cautious. In the latter half of the week, the impact of poor economic data weighed particularly on equity markets which fell from their highs.

Quarterly GDP numbers were released for several developed market economies, including the US, with all reporting heavily negative results. The US posted a negative 4.8% figure, which is expected to be much lower in the second quarter given lockdown measures only came into play in the second half of March, while French, Spanish and Italian GDP data were some of the worst on record.

Amidst this, US equities underperformed over the week, with the S&P 500 falling by 1.8% in Pound terms, whilst all other major regions were positive. Europe was best with the Euro Stoxx 50 index rising by nearly 4.5%, though a closure for a bank holiday on Friday flatters this figure. Emerging Market and Asian equities were strong, too, posting 2.6% and 2.2% returns respectively, helped by recovering Emerging Market currencies. In fixed income, most sectors were positive as corporate and high yield bonds continued to recover from their lows.

This week will see the release of important monthly PMI business survey data from across the world, which will give us further insight into the damage wrought by the impact of shutdowns. The data is backward looking through April and is unlikely to be pleasant viewing, but with economies beginning to reopen across Europe in particular, we hope that data for May will provide a boost to sentiment.

If you would like to discuss any of the above points or you would like to review your current position, please do not hesitate to get in touch.

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