April 30, 2020 / 8:15 AM / a month ago

Daily Briefing: April the cruellest month? Not for stock markets

LONDON (Reuters) - April is said to be the cruellest month, and for those stricken by coronavirus or its economic fallout that may seem to be the case.

FILE PHOTO: The New York Stock Exchange is seen in the financial district of lower Manhattan, April 26, 2020. REUTERS/Jeenah Moon

But it’s been unexpectedly kind to equity markets. MSCI’s index of world stocks are set for their best month ever and the S&P500 looks likely to post its best monthly gain since 1974.

World stocks have added another 0.3% after yesterday’s scintillating session, which was driven by news that Gilead's Remdesivir trials had shown improvement for COVID-19 patients.

Asian shares were similarly firm, with the Nikkei up almost 3% and Nikkei’s volatility gauge down 11% to eight-week lows. Wall Street futures are pointing upward.

Adding to optimism is the declining COVID-19 curve in the developed world – South Korea, for instance, posted no new cases for the first time. The picture is different for developing countries, with more people being infected in Brazil, Russia and others but more on that later.

A woman wearing a protective mask holds flowers near a makeshift memorial for medics in central Saint Petersburg, Russia, April 28, 2020. REUTERS/Anton Vaganov

Today will be another eventful day. The dollar, which lost ground after the Federal Reserve vowed to use its "full range of tools" to shore up the U.S. economy, has firmed a bit, possibly before the ECB meeting.

Suffice it to say the Fed has signalled further action in coming months, noting “considerable risks” for growth.

Indeed, Wednesday data showed the U.S. economy contracted in the first quarter at 4.8%, the sharpest pace since the Great Recession. One analyst said the data and the Fed message "poured cold water over hopes of a V-shaped recovery."

Today we get weekly data on initial jobless claims. After 26 million Americans lost their jobs over the past five weeks, claims for unemployment benefits likely totalled 3.50 million, a Reuters poll predicts. Down from last week’s 4.4 million but still staggering.

As for the ECB, expectations are it will expand its pandemic QE programme by up to 500 billion euros, given the lack of progress on the fiscal policy front. France posting its worst decline in first-quarter gross domestic product since World War Two shows the sign of things to come on the economic front.

German monthly retail sales declined in March at their fastest since 2007. We await April unemployment figures in Germany and headline inflation figures for the bloc – the last will be severely impacted by the oil price crash.

But equity markets seem to have disconnected themselves from negative earnings – European and UK shares are opening around 1% higher. Royal Dutch Shell’s first dividend cut in 80 years is stealing the show today.

Another eye-catching headline -- Societe Generale sets aside 820 million euros in the first quarter as provisions. Caixabank, BBVA and Lloyds also reported steep losses and provisions.

In other news, Volkswagen will have to delay resumption of production in its Tennessee plant. The European Commission approved a 5 billion-euro loan guarantee to Renault.

And Reckitt Benckiser enjoyed record quarterly sales growth as customers stocked up on Lysol disinfectants, Mucinex cough syrup and Dettol soap in coronavirus lockdowns.

Yesterday's Wall Street trade was marked by big gains for Google, Tesla, Qualcomm and Microsoft. Twitter and McDonald's will report results today while Amazon and Gilead provide updates.

Emerging equities marched 1% higher, even though an explosion in COVID-19 cases in countries such as Brazil will pressure growth. Chinese stocks and the yuan shrugged off twin surveys showing a collapse in export orders in April.

Other emerging currencies also strengthened, with the Indonesian rupiah up nearly 3%. Higher oil prices lifted the rouble even as data showed Russian manufacturing at a record low in April.

In other EM news, Paris Club official creditors and a large group of private-sector creditors have agreed to collaborate on a debt relief initiative for the poorest countries. S&P Global has cut South Africa’s ratings deeper into junk.

— A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own —

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