The coronavirus-powered global stock market rollercoaster has shown no sign of returning to normal over the Easter period. Indices all over the world continue to fluctuate in the face of terrible economic news and forecasts, as well as ongoing uncertainty.
Ahead of the Good Friday shutdown, markets on both side of the Atlantic had surged, with the Dow Jones Industrial Average gaining almost 13% during Easter week and the FTSE-100 in London up by just under 8%. These rises were chiefly the result of growing optimism that infection rates in some of the countries hit hardest by Covid-19 – such as Germany, Italy and Spain – were starting to slow, with the relaxation of lockdown policies set to follow.
Wall Street was especially buoyed at the start of the week with the news that the daily death toll in New York had fallen for the first time since the crisis began, and reports of an end to the lockdown in the Chinese province of Wuhan, where the virus originated, was also welcomed by investors.
The same was true of further measures announced by central banks, including the Fed in the US and the Bank of England, to underpin government support for struggling businesses.
Another factor driving values higher was the news that Russia and Saudi Arabia, two of the world’s biggest oil producers, had finally reached an agreement in their long-running price war.
Since markets opened after the Easter break some, but by no means all, of these gains have been given up: by close of trading on Thursday 16 April, the FTSE 100 was down 3.7%, while the DAX in Frankfurt was 2.5% lower and the French CAC-40 had lost 3.5%. In the US, however, shares have managed to hold on to recent gains with the Dow just 0.8% lower and the S&P 500 recording a 0.4% rise on the back of last week’s 12.1% increase.
It has become clear over recent weeks that some significant economic disruption and damage is already priced in to equity values – and as we have reported previously, the potential for new economic data to drive markets remains very limited.
For example, the rise in US share values over the Easter period has coincided with a further 11 million jobless claims in the country: there are now an estimated 20 million people out of work, equivalent to one in every eight working Americans.
Forecasts for Europe are little better, but there was welcome news that a number of states were planning to ease lockdown restrictions – with some business activity allowed to re-commence in Spain, and German chancellor Angela Merkel announcing plans for small firms to resume trading in the coming weeks.
