Markets grapple with lockdown balancing act

Dr Anthony Fauci struck a cautionary tone when commentating on the risks of reopening too quickly, whilst Fed Chair Powell remarked that the path for a US economic recovery may extend to the end of 2021.

US-China tensions were also back in the spotlight as diplomats from both sides sparred on the pandemic, trade deals, and press freedom in Hong Kong. The US also moved to tighten restrictions around US companies supplying Huawei. US chip makers equities such as Qualcomm saw price falls as a result.

Economic data continued to see large declines, as measures of US industrial and retail activity collapsed in April, with both seeing the largest monthly drops since records began. Inflation figures also continued the negative data trend as the US Consumer Price Index fell 0.8% as the fall in demand outstripped the fall in the supply. Lower oil prices throughout April would also have contributed to the drop, although there has been a strong rebound in prices so far in May namely on the back of increased collaboration between Saudi Arabia and Russia. Democrats in Congress led approval for the latest stimulus package but it remains to be seen if it has sufficient bipartisan support.

Development of a COVID-19 vaccine continues as a number of new initiatives and funding were announced from a number of countries. However, even the most promising of proposals remain in the early stages.

Equities

All major equity markets moved down last week with the global index down 2.5% in local and Euro terms. The influential US market was down -2.3% in local terms and -2.4% in Euro terms

Fixed Income & FX

The US 10-year yield finished at 0.65% last week. The German equivalent finished at -0.54%. The Irish 10 year bond yield finished at 0.09%. The Euro/US Dollar exchange rate finished at 1.08, whilst Euro/GBP was at 0.89.

Commodities

Oil finished the week at $31 per barrel. Gold finished the week at $1,762 per troy ounce up 16.2% year to date in local terms and 20.5% year to date in Euro terms and copper finished the week at $5,156 per tonne.

The week ahead

Monday 18^th May

The minutes of the latest Fed FOMC minutes go to market

Thursday 21^st May

Flash US PMIs (manufacturing and service) for May go to print.

Friday 22^nd May

Eurozone PMIs for May are also released this week.