Market Spice: Week of 23 March

By Delany Higgins

Market Spice: Week of 23 March 2020

The outbreak of COVID-19 left few parts of the global economy untouched, with national governments struggling to coordinate swift responses. A multi-trillion dollar stimulus package in the United States, and further measures from governments around the world, spurred equities over the week, leading to record gains. European leaders struggled to reach a consensus on their fiscal response to the outbreak, and China moved cautiously to restart schools and businesses.

Asia

China reported few domestic coronavirus cases, and has shifted its focus to preventing transmission from international travellers. The Shanghai Composite rose 4.2% over the week, and the CSI 300 rose 5.2%
China’s National Bureau of Statistics released industrial data indicating that profits of national industrial producers had declined 38.3% for the January-February period compared to the previous year, the steepest decline in over a decade.
Tokyo experienced an uptick in coronavirus cases. Japanese Prime Minister Shinzo Abe postponed the Summer Olympics for a year, and worked with his cabinet on a $500 billion stimulus package (about 10% of the country’s GDP).
Japan’s Nikkei 225 closed the week 17.1% up, but still down 18% over the past twelve months
Indian Prime Minister Narendra Modi has ordered a three-week quarantine across the nation. India’s S&P BSE Sensex was down 0.3% over the week, balanced by the U.S. rebound late in the week. Indian Finance Minister Nirmala Sitharaman announced a $22 billion coronavirus stimulus package.

Europe

European Union finance ministers altered EU deficit laws, enabling countries to increase their coronavirus spending. EU finance ministers also considered the European Stability Mechanism, a reserve bailout fund, but failed to agree on a strategy of execution during a teleconference on Thursday.
The European Central Bank enlarged the circle of bond type purchases included in its €750 billion asset purchase program.
European manufacturing and services showed the largest monthly fall since at least the beginning of the century, according to the IHS Markit purchasing managers survey’s index.
The STOXX 600 Europe closed up 6% for the week. Major European equity indices closed the week up 5-9%.

Americas

On Friday, the U.S. House of Representatives passed a $2.2 trillion coronavirus aid package, which had passed the Senate earlier that week. The measures in the bill include direct cheques to individuals up to a certain income ceiling, extended unemployment insurance funding, and bailouts for businesses and municipalities.
U.S. equities responded well to the fiscal stimulus. The Dow closed the week up 12.8%, the S&P 500 up 10.3%, and the Nasdaq up 9.1%.
On Monday, the U.S. Federal Reserve committed to buying as many government bonds and mortgage-backed securities as would be necessary to keep markets functioning smoothly, launched three emergency lending facilities (two of these for buying corporate debt), and revived TALF, a program funding banks to purchase specified asset-backed securities, among other measures.
The Brazilian Bovespa Index closed the week up 10.3%, despite a worsening domestic epidemic and controversy over President Jair Bolsonaro’s comments on it.

Cover Image Source: Reuters/Issei Kato

The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.