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March 2020 – Markets in Brief

By 2nd March 2020March 6th, 2020No Comments

By the end of February, Coronavirus’ impact on the world stock markets was clear for everyone to see. A market was doing well if it had only recorded a single digit fall in the month. Estimates suggest the outbreak will cost airlines up to $30bn (£23.5bn). Car sales in China were reported to be down 92%, and Europe’s most fragile economies are becoming more vulnerable by the day.

Let us look at all the news in more detail…

UK

There were the usual tales of doom and gloom from the retail sector as department store Beales closed 12 of its 23 stores and tried to sell the rest, and Shoezone said that 100 shops could close. Shoppers are – according to City AM – deserting the high street for retail parks and shopping outlets.

Away from the high street, though, are we seeing a post-election ‘bounce’? Halifax reported that UK house prices were up 4.1% in January (on an annual basis) which was close to a two-year high.

And what of the wider UK economy? Figures for the last quarter of 2019 showed zero growth in those three months, with the economy growing by 1.4% for 2019 as a whole. Wages in the UK were back above their pre-economic crisis levels when adjusted for inflation, and there are now very nearly 33m people in work with – according to the UK Household Finance Index – a record number of people feeling confident about their economic future.

Like all the major world economies, the FTSE-100 index of leading shares fell sharply in February. It ended January at 7,286 and fell 10% in February to close at 6,581. The pound was down by 3% against the dollar, and finished February trading at $1.2820.

Europe

New German manufacturing orders in December were down 2.1% on the previous month and – more worryingly – down 8.7% on December 2018.

There was very slight growth in the German economy in the last quarter of the year – although when it was rounded to one decimal place, the government’s statistics office recorded ‘growth’ of 0.0%. GDP was up just 0.4% on the last three months of the previous year.

Unsurprisingly, both major European stock markets were down in the month, with the German DAX index down 8% to 11,890 and the French index falling 9% to 5,310. The Greek stock market fared much worse, falling by 21% to 720, showing how vulnerable Europe’s weaker economies could be to a prolonged economic downturn.

US

The US economy got off to a good start as figures for January showed that 225,000 jobs had been created in the month. This meant that the record-breaking streak of job creation entered its 11th consecutive year with the number of jobs created well ahead of the forecast 164,000.

A strong sign of the new economy is the Apple watch. In 2019, Apple shipped an estimated 30.7 million watches – up 36% from the previous year – which comfortably outsold the entire Swiss watch industry.

Like all the other major world economies, the US was hit by Coronavirus. Business activity in the US service sector declined in January for the first time since 2013 and new orders received by private sector firms also fell for the first time since 2009. The Dow Jones inevitably fell in the month: having opened February at 28,256, it closed the month down 10% at 25,409.

Far East

The Coronavirus outbreak meant that Chinese manufacturing hit a record low in February. Regular readers will be familiar with the ‘Purchasing Managers’ Index’, which is used as a measure of both economic activity and a guide to future prospects. Any figure above 50 on a country’s PMI indicates that the economy is expanding: a figure below 50 indicates a contraction.

In February, China’s PMI fell from 50 to 35.7 – which means that the Coronavirus outbreak is having a bigger impact on Chinese manufacturing than the 2008 financial crisis.

There was bad news for the Japanese economy too, which shrank at its fastest rate since 2014. The combined effects of a rise in sales tax, a major typhoon and weak global demand meant that Japanese GDP fell by 6.3% in the last three months of 2019 – much more than had been expected.

Despite all this, China’s Shanghai Composite Index was down by a relatively modest 3% in February, closing the month at 2,880. The Hong Kong market did even better – although clearly ‘better’ is a relative term this month – and was down 1% to 26,130. The biggest fall was in Japan where the Nikkei Dow fell 9% to 21,143 while the South Korean market dropped 6% to 1,987.

Emerging Markets

The three major stock markets which we cover in this section of the report charted a depressingly similar course to all the other major world markets in February. The Indian stock market was down 6%, closing the month at 38,297: Brazil’s stock market dropped 8% to end February at 104,172 and the Russian index was down by 9% to finish a miserable month at 2,785.

And that’s it for another month, we’ll be back with more updates in April.