In the midst of the COVID-19 outbreak, social responsibility has become a central consideration for corporations. Prior emphasis on share buybacks and dividends has taken a backseat to the health and safety of workers, flexible work schedules, customer accommodations, and community services. Corporate preparedness during this crisis has amplified the evolution of ESG factors as a material business question.
Global stock markets had another volatile trading week as investors feared for a second wave of virus infections with economies reopening. New clusters of infections in countries where lockdown orders were lifted—China, Korea, and Germany—added to worries. Chairman Powell noted that the path to recovery remained highly uncertain with significant downside risk, emphasizing a potential need for more fiscal policy and stimulus to address liquidity and solvency problems. The S&P 500 and euro STOXX 600 ended lower 2.20% and 3.66%, respectively for the week. Read More
Despite a record drop in demand forecast for H2 2020, indications of future US production cuts along with a decline in US crude inventories for the first time in 15 weeks boosted WTI prices, WTI ended higher at $29.43 per barrel (bbl). Similarly, Brent ended higher at $32.50 per bbl. Read More
Last week central bankers for the Federal Reserve (Fed) and Bank of England notably resisted the idea of negative rates in the US and UK, respectively. Chairman Powell’s comments helped turn repo and fed futures positive, after the liquidity market had dipped into negative territory earlier in the week. As the Fed’s Secondary Market Corporate Credit Facility began historic purchases of ETFs, the long end of the US Treasury curve fell. The US 10-year yield ended the week at 0.64%. In Europe, sovereign bonds held relatively steady. Read More
The US dollar continued to rise amid uncertainty around recovery, up 0.76% last week. The British pound struggled as the government reiterated its refusal to extend the Brexit transition period beyond December, increasing the likelihood of a “no-deal” exit from the European Union. Read More
UK Q1 GDP fell by 2.0% QoQ and contracted by 5.8% MoM in March. Given the UK's relatively late adoption of the lockdown, we expect the economic impact of COVID-19 to be reflected more prominently in Q2 data. Read More
US Industrial Production (IP) fell 11.2% in April, the steepest one-month fall on record. The worse-than-expected reading came from a decrease in automobiles and parts production (-71.7%) after already seeing a 30% decline in March. Meanwhile, China IP rose more than consensus expectations, by 3.9% YoY in April, marking the first expansionary reading for 2020. Read More
April US retail sales fell 16.4% from prior month across all sectors. On a Year-over-Year (YoY) basis, clothing stores fared the worst (-89.3%) while grocers were the only sector showing gains (+13.2%). The University of Michigan’s Consumer Sentiment Index came in at 73.7 for May, up from 71.8 in April. Improvement in sentiment was driven by fiscal stimulus support and widespread price discounts. Read More
US weekly initial jobless claims came in at 2.98MM for the week ending May 9. The job losses during COVID-19 totaled ~36.5MM over the last two months. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
Japan GDP (Cons: -4.5%, Prior: -7.1%)
UK CPI YoY (Cons: 0.9%, Prior: 1.5%)
US Jobless Claims (Cons: 2425k, Prior: 2981k)
US Manuf. PMI (Cons: 38.0, Prior: 36.1)
US Services PMI (Cons: 32.3, Prior: 26.7)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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