Please find below our “Weekly Market Update” as at 7th February 2020
Blue Sky Comment
A snap back in equity markets.
Some mixed messages this week as the Coronavirus continues to spread across the globe.
Equity markets snapped back in the first 4 days of this week, helped by the announcement that China will offer monetary stimulus, which will serve to ‘oil the cogs’ of the economy and support the banking system. At the beginning of the week, the Chinese stock market fell, experiencing its biggest one day sell off in four years. Yet, the next day, it rebounded by 2.6% (CSI 300).
We suggested in our monthly market commentary that the fall in prices most probably, will be short lived, but we didn’t expect that there would be such a strong snap back, so quickly. The Hang Seng has risen by more than 6%, closely followed by the S&P 500.
Today however, we are in danger of seeing the ‘froth blown off the top’ as last night, Asian equities slipped, following the day before, experiencing its biggest daily jump since June. As reported by Bloomberg today, the news of further infections on a cruise ship, off the coast of Japan, has reminded everyone that we should not be complacent about the virus and in economic terms, it could have far reaching effects. Singapore has lifted its national disease response to Orange, its second highest.
It’s really difficult to work out the extent of the impact, the Blueberry Group PLC being a case in point. It has just scrapped its financial guidance for the year as the virus hits Chinese sales.
We will have to brace ourselves for a whole raft of announcements that this virus will have on company and economic data. However, trying to time investments, in and out of the market, is very difficult and sudden announcements of stimulus, as we saw in China, can move the markets significantly.
We also have to look out for other news. The Euro has weakened as data showed that German industrial production has had the biggest drop since the financial crisis. Contradicting perhaps, that European markets, (the MSCI Europe index), despite concerns over Germany, rose this week by circa 4.5%, up until today.
The risk to investors is that growth won’t rebound in the 2nd quarter of the year and the outbreak of this virus is prolonged.
I’m going to leave you on some good news… for most of us anyway… average house prices rose from December through to January, according to the Halifax, which also reported that average prices for the year, increased by 4.1%.
Have a good weekend
The Blue Sky Investment Team