4 May 2020

Global equity markets finished Friday lower, erasing gains made earlier in the week to finish at or around closing levels. For the week, the three major US indices fell less than 0.5%, while in Europe, the FTSE finished up around 0.2%.

It was much the same down under with the NZX 50 and the ASX 200 both finishing the week up less than 0.3%.

What’s happening in markets

It was a busy week on the economic data calendar with growth data in the US and Europe showing economies contracted in the first quarter of the year.

In the US, the first reading of Q1 GDP showed the economy shrank by 4.8%, the steepest decline since Q4 2008. There was a significant decline in consumer spending, which fell 7.6% as Americans cut spending on items such as cars, travel and clothing. Additionally, healthcare spending also fell as many put off or had elective surgeries cancelled as hospitals became overrun with coronavirus patients.

Meanwhile, in Europe, eurozone GDP fell 3.8%, the worst reading since records began in the mid-1990s. The fall wiped out three years of economic growth.

Along with the growth data, both the Federal Reserve and European Central Bank met, leaving policy rates unchanged. However, Fed Chair Jay Powell and ECB President Christine Lagarde both warned of further economic pain:

“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” – Powell

“Euro area facing a recession of unprecedented magnitude and speed in peacetime,”– Lagarde

Elsewhere, in New Zealand, the ANZ Business Outlook survey fell three points in April to -67%, with particularly bad readings in the retail and construction sector.

Across the Tasman, inflation in Australia rose to 2.2% in the first quarter, the highest reading since 2014.

More >