InvestNow News – 19th June – ANZ Investments – Weekly Snapshot
Equity markets retreated from their recent highs last week, with US and European stock markets ending the week lower. The decline was highlighted by Thursday’s deep sell-off that saw the Dow Jones Industrial Average fall nearly 7%, its biggest daily decline since mid-March. For the week, the Dow and the S&P 500 fell around 5%, while in Europe, the Euro Stoxx fell by nearly 6%.
In New Zealand, losses were a little smaller, with the NZX 50 falling around 2.5%.
After a quiet period, bond yields fell sharply over the week with the US 10-year government bond yield falling around 20 basis points to 0.70%, while in New Zealand, the 10-year equivalent fell to 0.82%.
What’s happening in markets
Equity markets gave up early gains in the week to finish lower after the US Federal Reserve painted a difficult outlook for the economy at its June meeting. Releasing its first economic projections since the COVID-19 (coronavirus) outbreak, the central bank cut its 2020 GDP forecast to -6.5%, raised its median forecast for 2020 unemployment to 9.3% and reiterated that inflation would likely remain below 2% until 2023.
Additionally, the Fed is projected to keep the fed funds rate at its current level (0% to 0.25%) through 2022.
Elsewhere, market sentiment was also dampened by data that showed coronavirus cases in nearly 20 states across America were trending upwards, raising concerns that the worst is far from over. Of particular concern is Arizona, where reports that hospital capacity is nearing 90%. And in Texas – the country’s second most populous state – the hospitalisation rate hit its highest level since the outbreak, while in Texas’ largest city, Houston, ICU capacity hit 88%, according to data from The Washington Post.
In economic data, UK GDP plunged by 20.4% in April, the largest monthly drop on record. All sectors of the economy showed contractions, with big losses in the services and air transport sectors.