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Ongoing Markets Commentary: The COVID Effect

Daily Market Update: COVID

As financial markets continue to fall victims of the uncertainties related to the extent of the spread of COVID-19, it is important that we provide some context around investors’ concerns and to offer a grounded “road-map” of the potential market come-back.

Oil had its best single day on record and US initial claims for unemployment insurance indicated job losses more than doubled compared to the record figure reported last week. Nonetheless global markets remained relatively calm yesterday and US and European equity markets closed higher.

The summary as at 03.04.20

  • Stocks in Asia were little changed in Friday morning trade. The moves came after an overnight surge in oil prices, which saw U.S. crude futures soaring more than 24%;
  • On the data front, the number of Americans filing for unemployment benefits surged to 6.6 million in the week ending March 28, doubling the prior record high of 3.3 million from the previous period;
  • Meanwhile, a private survey released Friday showed China’s services sector shrinking further in March. While the Caixin/Markit services PMI rebounded to 43 last month from a record low of 26.5 in February, it still remained deep in contraction territory and was the second weakest reading or record;
  • President Trump tweeted he expects Saudi Arabia and Russia to cut supply by at least 10 million barrels, raising optimism that the two countries could soon negotiate a deal to end an ongoing price war;
  • Energy shares jumped 9.1% in the US, as WTI crude rebounded more than 24% to record its largest single-day gain in history;
  • On the local market, HSBC Bank Malta and GO followed BOV in postponing their final dividend for 2019.

The summary as at 02.04.20

  • Q2 2020 started off with pressure on global equity markets and increased risk aversion. Global manufacturing numbers reflected in the so-called PMIs, came in particularly weak across the globe. This marks the first wave of economic data that reflects the significant economic impact of COVID-19 as it began to spread more rapidly across Europe and the US in March.
  • US equity markets closed sharply lower yesterday with declines in excess of 4% for all major indices. Small cap stocks continue to come under the most pressure, as the Russell 2000 index closed –7% yesterday and is currently down 35.6% YTD;
  • 10yr US Treasury bonds closed –10bps/0.58% yield, which is rapidly approaching the 9 March record low close of 0.50% yield;
  • European markets are set to open largely flat Thursday as markets react to the coronavirus epidemic in the US;
  • Global markets will be reacting to news Thursday that the number of confirmed COVID-19 cases in the US surpassed 200,000 Wednesday, doubling since Friday;
  • President Donald Trump has warned that the country could see an even greater surge in cases over the next few weeks. White House officials are projecting 100,000 to 240,000 deaths in the U.S., with coronavirus fatalities peaking over the next two weeks;
  • European data Thursday includes German trade numbers and euro zone producer prices for February;
  • The Bank of England’s pressure on HSBC to cancel its dividend for the first time in 74 years has reignited a debate at the top of the bank over whether it should redomicile to Hong Kong;
  • Carnival Corporation in upsizing its rescue bond sale backed by its cruise ships to $4 billion after drawing strong demand, despite the world’s largest cruise operator warning it might only have enough cash to stay operational for eight months.

The summary as at 01.04.20

  • Yesterday in the US, the Dow closed the first quarter of the year down 23%, capping its worst first quarter ever;
  • Markets expected to open lower in Europe;
  • President Donald Trump prepared Americans for a surge in coronavirus cases, saying the U.S. will face a “very, very painful two weeks.” White House officials are projecting between 100,000 and 240,000 deaths in the U.S. with coronavirus fatalities peaking over the next two weeks;
  • Meanwhile in Asia, stocks traded mixed as a private survey showed Chinese manufacturing activity expanding slightly in March. The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) for March came in at 50.1, above expectations of a reading of 45.5 by analysts;
  • Shares of HSBC and Standard Chartered plunged 8.83% and 5.09%, respectively, after both British lenders cancelled dividend payments at the request of the U.K. financial regulator in light of the coronavirus pandemic;
  • In terms of European data, euro zone unemployment data for February is due, Spanish new car registrations for March and final euro zone manufacturing PMI data are also published;
  • Stock sell-offs saw equities across all S&P quality rankings tumble about the same amount, creating “an enormous opportunity to own high-quality names” when the virus threat subsides, Solita Marcelli, deputy chief investment officer for the Americas at UBS, wrote in a note to clients;
  • Moving to the local market, today Bank of Valletta will be presenting their accounts for the FY2018

The summary as at 31.03.20

  • US equity markets enjoyed a strong session on Monday, with the main indices gaining in excess of 3%. Shares of Johnson & Johnson popped up by 8% after it announced a vaccine candidate for the coronvirus;
  • With Monday’s gains, the S&P 500 is now up 17% from its coronvirus sell-off low reached on March 23;
  • From a statistical point of view, we continue of observe a decrease in global new cases of coronavirus infections recorded by the WHO, although driven by geographically differing trends. Italy, Spain and France are down from peak levels, while others such as Germany and the UK are still at high levels. US still increasing with a peak in new cases recorded yesterday at almost 20,000;
  • The trajectory of Chinese data should hopefully serve as a future template for other major economies. China’s PMIs – a gauge of manufacturing activity – plunged to a record low of 35.7 in February only to recover strongly to 52.0 in March. Analysts polled by Reuters had expected the official PMI to come in at 45.
  • At a meeting via video-link last week, EU-27 leaders clashed over the best response to the crisis. Countries such as Spain, France and Italy favoured the issuance of EU-backed debt or ‘coronabonds’. However, the idea of burden sharing was rejected by some other members states that included Germany, Austria and the Netherlands. The latter group preferred that countries would ask for funds through other means, where they come with strings attached.

The summary as at 30.03.20

  • Last week was a good week for equity markets as they bounced from their lows following further easing from central banks and the $2 trillion fiscal stimulus package in the US which on Friday was given the final approval by the House of Representatives;
  • Last week the S&P rallied 10% whereas the DAX rallied 8%. Had there not been profit taking on Friday, these markets would have closed the week much higher than that;
  • Today European markets are set to start the week lower as the coronavirus pandemic remains in focus for investors;
  • Oil prices fell to the lowest in most than 17 years as demand plunged as a result of the pandemic and an unrelenting price was between Saudi Arabia and Russia showed no signs of easing;
  • Global markets continue to take stock of the evolving coronavirus pandemic. The virus has already infected more than 720,000 people worldwide and caused at least 33,925 deaths;
  • President Donald Trump on Sunday extended the national social distancing guidelines to April 30, backing off from his previous remarks that he wanted the country to reopen for business by Easter;
  • This week will be a very important week as it marks the end of the first quarter, meaning that companies will start to report and we will also get important data on the state of the economies,

The summary as at 27.03.20

  • Yesterday Wall Street recorded its first three-day rally since February on Thursday as investors digested an unprecedented surge in US unemployment claims and looked ahead to a $2tn stimulus package that had cleared the US Senate overnight;
  • The US benchmark S&P 500 index closed up 6 per cent as the House indicated it could vote on the deal as early as today. The Dow Jones Industrial Average registered its’ strongest three-day percentage increase since 1931, rallying by 21% from its Monday low;
  • The urgency of the congressional activity was underscored by data showing that more than 3m people filed for unemployment benefits in the US last week as coronavirus shut businesses across the country;
  • Investors took heart from comments by Jerome Powell, chairman of the Federal Reserve, who said the US central bank would not “run out of ammunition” in supplying the American economy with liquidity as it grapples with the pandemic;
  • Chinese President Xi Jinping called on leaders from the Group of 20 nations for greater international coordination of macroeconomic policy to restore confidence in global growth in face of the impact of the coronavirus. Leaders from major world economies, including the U.S., Japan and Germany, held an extraordinary meeting via video conference to respond to the global pandemic;
  • The US now has more confirmed coronavirus cases than China, making it the country with the largest outbreak in the world;
  • Volkswagen has called on the European Central Bank to speed up its plans to buy commercial paper directly from the world’s largest companies to help them ride out the coronavirus crisis.

Over the past few days, we have started to observe some improvement in investors’ confidence as policy authorities world-wide have rolled out more stimulus measures to combat the coronavirus pandemic. With markets down 30% from their February highs, some are starting to see opportunities in the market and don’t want to miss out of buying good quality investments at bargain prices.

Notwithstanding this, we continue to air caution and a balanced approach in the deployment of cash knowing that it could take a bit more time for the markets to settle.

The summary as at 26.03.20

  • Major US equity indices registered their first back-to-back gains since February on Wednesday after some wild swings, the Dow Jones Industrial Average soaring more than 1,00 points, then shedding much of its gains in the final 15 minutes of the trading day;
  • European markets are expected to open lower Thursday as global market sentiment sours once again, ahead of upcoming U.S. jobless claims data that are expected to show a massive spike in unemployment claims;
  • The moves in global markets come despite Washington’s pledge of massive aid for the economy to mitigate the impact of the virus. The Senate unanimously approved a $2 trillion economic relief package late Wednesday and the stimulus bill now heads to the House, which will push to pass it by voice vote Friday morning as most representatives are out of Washington;
  • In Europe, EU leaders will hold a virtual summit to discuss their response to the coronavirus outbreak amid some criticisms of a lack of coordinated response to the crisis;
  • Italy and Spain are the worst-hit countries in Europe, with the death toll in each country surpassing 7,000 and 3,500 respectively;
  • The death toll in the U.S. has now surpassed 1,000;
  • The US has raised the pressure on Saudi Arabia to change course in its oil price war with Russia, calling on the kingdom to “rise to the occasion” and start working to stabilise global energy markets;
  • Investors are turning their back on high-dividend stocks, worried that a growing list of companies postponing their annual general meetings is adding to the risks posed to payouts by the coronavirus outbreak;
  • Former Federal Reserve chairman Ben Bernanke said in an interview that the coronavirus halt resembles more like a snowstorm or a natural disaster than an economic depression. He also expects a sharp US recession but also a fairly quick recovery.

Essentially, we continue to face a health problem and that needs to be the primary thing the market feels has been addressed before it is able to move forward. This means that the infection rate has to peak and we get a sense of the damage done by the shutdown. Without that it’s very difficult for the market to assess the downside. In the meantime, policy authorities are building an economic buffer which is essential to stabilise the downside risk for the next few months.

The summary as at 25.03.20

  • Asian stocks rallied as congressional leaders in Washington agreed on a $2tn package to soften the US economic blow from coronavirus, the prospect of which had on Tuesday propelled Wall Street to its best day in more than a decade;
  • In Europe Tuesday evening, the Eurogroup of euro zone finance ministers failed to come to an agreement over the use of the European Stability Mechanism (ESM) to help euro zone members fight the economic impact of the coronavirus;
  • E.On releases earnings and Credit Suisse releases its annual report;
  • With regards to economic data Germany’s Ifo Institute releases its March survey of business sentiment;
  • China’s central bank is in discussions to cut the interest rate banks pay on deposits for the first time since 2015, in a bid to help banks eke out higher profits as they are enlisted to help spur an economic recovery following the coronavirus outbreak;
  • Frenzied trading around the coronavirus crisis helped the world’s biggest investment banks boost markets revenues by as much as 30 per cent in the first quarter;
  • SoftBank Group explored an audacious attempt to take the Japanese technology conglomerate private over the past week, holding discussions with investors including hedge fund Elliott Management and the Abu Dhabi sovereign investment vehicle Mubadala.

The summary as at 24.03.20

  • Asia-Pacific stocks rallied after the US central bank vowed to buy whatever amount of government bonds necessary to shield the economy from the impact of the coronavirus pandemic;
  • The Federal Reserve announced on Monday that it will embark on an unlimited asset purchase programme to support markets. That represents unprecedented support by the Fed as it is effectively committed to keep expanding its balance sheets as necessary, rather than a commitment to a set amount;
  • Equities markets across Europe were set to rise sharply on Tuesday, reversing direction from significant falls in the previous session;
  • A series of key surveys of business executives covering Europe’s biggest economies is due later this morning. The figures are expected to be bleak, but provide economists and investors with a reading on just how bad the situation has become;
  • President Trump suggested he will not allow the coronavirus to do long-lasting damage to the US economy hinting that a shutdown could be a question of weeks rather than months. On Sunday, he twitted that the cure cannot be “worse than the problem itself”;
  • In Italy, the Milan region, which accounts for about half of Italy’s coronavirus infections, finally started to see the number of new cases slowing down;
  • The New York Stock Exchange conducted its first day of fully electronic trading yesterday due to the spread of the coronavirus with no humans on the trading floor.

The key uncertainty in the market is how long Europe and the US will be locked down. Lower interest rates and stimulus packages are not helping if people cannot go out and spend or even if they can but they don’t want to because they are scared.

The summary as at 23.03.20

  • The number of Covid-19 cases world-wide more than doubled in a week to nearly 330,000 on Sunday, with deaths surpassing 14,000. US infections topped 32,000, jumping 10-fold from a week earlier;
  • US equities suffered their biggest one-week decline since the financial crisis in 2008 last week, with the S&P dropping more than 13%. Those losses put the broad market average more than 32% below its record set on Feb 19th.
  • US lawmakers and administration officials had hoped to reach agreement on a $1.3 trillion deal so both chambers of Congress could approve it on Monday. But the package hit a procedural roadblock in the Senate on Sunday, a sign of political discord in the midst of a national emergency.
  • On a decisively more positive tone, China’s government is talking up the prospects for a rapid economic rebound from the coronavirus. Since Friday, government officials have pointed to the control of the outbreak and the resumption of activity as reasons for optimism with regards to China’s outlook.

The key uncertainty in the market is how long Europe and the US will be locked down. Lower interest rates and stimulus packages are not helping if people cannot go out and spend or even if they can but they don’t want to because they are scared.

The summary as at 20.03.20

  • European markets are set to open sharply higher Friday after a volatile week, as central banks and governments around the world adopt a “whatever it takes” approach to mitigating the economic hit from the coronavirus pandemic.
  • Tesla has told employees it reduced the number of workers at its California vehicle factory to curb the spread of coronavirus as Chief Executive Elon Musk said the company may start producing ventilators to ease a U.S.
  • U.S. Senate Majority Leader Mitch McConnell defended plans for Congress to aid airlines, saying it was not a bailout but loans that would be need to be repaid, while U.S. President Donald Trump backed the idea of the government taking equity stakes as part of corporate rescue packages.
  • As of its Thursday close, the Dow Jones Industrial Average has fallen 13.36% so far this week, putting it on track for its largest weekly percentage loss since the financial crisis. The 30-stock index remains 32% below its all-time high level from February, while the S&P 500 is 29% below its high.
  • Clearly there is a lot of forced selling going on. A lot of positions are being unwound

The summary as at 19.03.20

  • The ECB announced a new €750bn bond buying programme, covering both sovereign bonds and corporate debt, for the duration of the pandemic crisis, but at least until the end of the year. Another big support package for the market, which has in recent days been resistant to stimulus and support programmes.
  • In the US, the Dow Jones Industrial Average closed below 20,000 point for the first time since early 2017, effectively erasing all the gains made under US President Donald Trump. At its February peak, the Dow had surged more than 60% from Trump’s election day.

In the current market circumstances having an element of cash available in your portfolio is of paramount importance because it provides investors with the opportunity to “drip feeding” buying opportunities as the situation evolves.

In the circumstances we continue to favour exposure to defensive sectors and generally have a tilt towards US names, in view of the significantly better economic fundamentals and range of policy tools at its disposal.

The summary as at 18.03.20

  • Equity markets recovered some ground on Tuesday, clawing back a significant portion of Monday’s steep losses;
  • US markets are still down by some 25% from its February 19th record closing high as we haven’t had back-to-back positive days for two weeks;
  • The Trump administration unveiled a $1 trillion stimulus package that could deliver $1,000 cheques to Americans within two weeks;
  • Many other governments look to fiscal stimulus. Britain unveiled a £300 billion rescue package for business threatened with collapse while France is to pump €45 billion of crisis measures into its economy to help companies and workers;
  • The US Federal Reserve stepped in again to ease funding stress among corporates by reopening its Commerical Paper Funding Facility to purchase short term corporate debt to help companies be able to continue paying workers and buy supplies through the pandemic;
  • The yield on the 10-year Treasury note rose to 0.994% from 0.722%, its biggest one-day gain since September 2008;
  • US benchmark oil futures sank to near their 2016 trough of around $26 per barrel on prospects of slow demand and a Saudi-instigated price war.

The global transmission of the coronavirus remains a key risk to global growth and financial markets. The economic fallout from the outbreak will likely be an unknown variable for the next several months. Growth expectations have been lowered as a result and may need to be revised downwards if contagion spreads without adequate remedies. Aggressive and transparent accommodative monetary and/or fiscal policy should help alleviate some selling pressure, but unfortunately, it does not provide a cure or curtail the degree of the outbreak.

The summary as at 17.03.20

  • On Monday, US equities suffered their third-largest daily percentage drop on record, beaten only by the 1987 “Black Monday” rout and the crash of October 1929;
  • In Europe, shares plummeted to 2012 lows, with markets in France and Spain leading losses as the two countries joined Italy in enforcing a national lockdown;
  • Gauges of volatility on Wall Street and in Europe, which measure the fear among investors, jumped to record highs on both sides of the Atlantic;
  • Investors appear increasingly worried about how effectively policymakers will be able to mitigate the economic damage from the spreading virus, with Trump already hinting at a possible recession in the US;
  • Meanwhile, initial trials of a vaccine to protect against COVID-19 started on Monday. The vaccine was developed by NIAID scientists and their collaborators at Moderna Inc, a US listed biotech firm.

The US

The S&P 500 index of US stocks fell 12 per cent on Monday, a day after an emergency rate cut by the Federal Reserve, as the US and other countries around the world imposed stricter curbs on public activity.

President Donald said the country could be heading for a recession due to the coronavirus outbreak.

The Dow Jones Industrial Average suffered its worst day since the “Black Monday” market crash in 1987 Monday and its third-worst day ever. This was despite the Federal Reserve embarking on a massive monetary stimulus campaign to curb slower economic growth amid the coronavirus outbreak.


European markets are expected to open higher Tuesday with the fast-spreading coronavirus putting the continent in shutdown mode and fueling fears of an impending recession.

Emmanuel Macron also said he was ordering people in France to stay at home for up to 15 days because of the coronavirus outbreak.

In the U.K., the government stopped short of closing schools but stepped up its advice to the public, with U.K. Prime Minister Boris Johnson telling the country on Monday to avoid social contact.


Stocks in Asia Pacific were mostly higher Tuesday trade as they seesawed in reaction to Wall Street’s plunge and the Philippines shut its markets temporarily.


These 64 stocks in the S&P 500 fell at least 20% yesterday as the coronavirus panic intensified

  • MGM Resorts International
  • Apache Corp.
  • Capri Holdings Ltd.
  • Tapestry Inc.
  • Ventas Inc.
  • DXC Technology Co.
  • L Brands Inc.
  • Noble Energy Inc.
  • Alliance Data Systems Corp.
  • Discover Financial Services
  • Simon Property Group Inc.
  • Synchrony Financial
  • LyondellBasell Industries NV
  • Realty Income Corp.
  • Lincoln National Corp.
  • Darden Restaurants Inc.
  • Wynn Resorts Ltd.
  • Welltower Inc.
  • Vornado Realty Trust
  • Lowe’s Companies Inc.
  • Capital One Financial Corp.
  • Boeing Co.
  • Ameriprise Financial Inc.
  • Coty Inc. Class A
  • Aptiv PLC
  • Apartment Investment & Management Co Class A
  • Gap Inc.
  • Weyerhaeuser Co.
  • Healthpeak Properties Inc.
  • Universal Health Services Inc. Class B
  • Ulta Beauty Inc
  • Fifth Third Bancorp
  • Citizens Financial Group Inc.
  • KeyCorp
  • Expedia Group Inc.
  • Hartford Financial Services Group Inc.
  • PulteGroup Inc.
  • Travelers Companies Inc.
  • CarMax Inc.
  • Stanley Black & Decker Inc.
  • Kohl’s Corp.
  • Hologic Inc.
  • Western Digital Corp.
  • TJX Companies Inc
  • Nordstrom Inc.
  • Ross Stores Inc.
  • Applied Materials Inc.
  • Microchip Technology Inc.
  • D.R. Horton Inc.
  • SL Green Realty Corp.
  • NVR Inc.
  • Broadcom Inc.
  • Micron Technology Inc.
  • Kimco Realty Corp.
  • Sysco Corp.
  • Home Depot Inc.
  • TechnipFMC Plc
  • CenterPoint Energy Inc.
  • Assurant Inc.
  • Unum Group
  • Lennar Corp. Class A
  • Whirlpool Corp.
  • Paychex Inc.
  • Federal Realty Investment Trust

The summary as at 16.03.20

  • Major US equity indexes staged a significant rally last Friday, posting their best day since October 2018, as the US declared a national emergency, effectively opening the doors to more federal aid;
  • However, futures on Monday point to another weak open after the Federal Reserve slashed its benchmark interest rate to near zero on Sunday evening and announced plans to buy $700 bn in Treasuries and MBSs;
  • The market reaction shows investors are concerned about the economy because it comes before many data points have signaled a sharp slowdown;
  • Data out of China this morning underscored just how much economic damage the COVID-19 had already down, with industrial output and retail sales plunging 13.5% and 20.5, respectively.

We expect the markets to continue to oscillate, possibly retesting new lows. Eventually, the volatility will subside and fundamentals will have to return.

The summary as at 13.03.20

  • U.S. lawmakers and the White House were close to a deal on economic relief amid the coronavirus outbreak.
  • Yesterday markets were hammered by coronavirus uncertainty
  • Today markets are up following the Federal Reserve intervention
  • Additional countries taking extra measures to contain the disease
  • China says virus has peaked at epicentre
  • Epidemics balloon from Italy to Iran
  • The dollar surged as people sought to secure dollar funding, while palladium and gold prices plunged

Federal Reserve

  • The Federal Reserve moved to stem a market meltdown on Thursday
  • Offers $1.5 trillion in short-term loans
  • Some Analysts say could point to more aggressive in coming days to stimulate the economy and stabilize the financial system
  • Treasury yields rose as the Federal Reserve intervened to stem a market meltdown with a dramatic injection of cash.


  • Provides additional liquidity to banks, cuts loan cost
  • But rates unchanged
  • Markets extend losses
  • Crisis-fighting arsenal nearly exhausted


Germany pledges unlimited cash for virus-hit businesses

The German government has pledged unlimited cash to companies hurt by the coronavirus pandemic, and said it may need to take on additional debt to finance the extra spending, Guy Chazan in Berlin writes.

Mnuchin says coronavirus sell-off will be great opportunity for long-term investors like ’87 crash

Treasury Secretary Steven Mnuchin said Friday that the current market sell-off will be short-lived and, as such, looks like a compelling investment opportunity for investors looking to buy equities at a discount.

The summary as at 12.03.20

  • The past 10-year bull market run is now over as major uptrends have been broken
  • Quarantine measures will cause pressure on corporates and households alike
  • We expect governments to intervene more decisively with policy stimulus measures
  • Whether this will have any impact on investor confidence remains to be seen
  • Selling pressure will ultimately be offset by buying sentiment – however prospects of any major rebound in short term seems unlikely

This article was issued by Calamatta Cuschieri. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.