Mark Lister, 14 April 2020

The S&P 500 in the US rallied a stunning 12.1%, which is the strongest weekly gain since 1974. Before that, we need to go all the way back to 1938 to find a better week for US shares. Based on closing prices, the S&P 500 has now rallied 24.7% from the lows a few weeks ago, putting it 17.6% down from the all-time closing high from February. Markets were buoyed by further announcements from the Federal Reserve regarding support packages for small businesses, as well as more detail around the types of bonds it intends to buy (which now includes junk, as well as investment-grade bonds).

UK and European shares were also strong, rising 7.9% and 7.4% respectively, while the ASX 200 in Australia increased 6.3%. The NZX 50 was much more subdued, increasing only marginally last week. The local market has held up better than most through the volatility, and it also had to digest a massive capital raising from Auckland Airport. The NZX 50 is 17.2% above its lows and is 17.5% down from its record highs (almost on par with the US market). The top NZX 50 movers last week were Sky City (+21.5%), Oceania Healthcare (+21.2%) and Restaurant Brands (+16.4%), while Vista Group (-17.2%), Kathmandu (-16.9%) and Fisher & Paykel Healthcare (-11.6%) fared worst.

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It will be another holiday-shortened week, with the path of COVID-19 cases again likely to be a focal point. Investors will continue to monitor weekly jobless claims in the US, with 16.8m unemployment filings having occurred during the last three weeks. The global reporting season will also be closely watched. Numerous companies are due to report, including some leading financials (such as Goldman Sachs, JP Morgan and Wells Fargo), as well as heavyweights Johnson & Johnson and United Health.

Investors will also eye the latest monthly activity indicators from China on Friday, as well as the March quarter GDP report for China (which is unlikely to make for enjoyable reading). China economic growth is set to break records (for all the wrong reasons) as the country will be the first of the world’s major economies to report March quarter economic growth, on Friday at 2:00pm NZ time. There are a wide range of estimates for just how bad it will look, but there is unanimous agreement that economic output will fall substantially. Industrial production, retail sales and fixed asset investment are due for release at the same time, and these might make for better reading. As these activity indicators will cover the month of March, we might see an improvement from February levels.

In Australia, confidence readings and the labour force report will be of interest. The consumer confidence readings due Wednesday and labour force report for March due Thursday, with forecasts suggesting a decline in employment of 15,000 and an increase in the unemployment rate to 5.4% (from 5.1% in February).

On the domestic front the latest housing market report and a migration update will be the major releases. The February housing market report from the Real Estate Institute was a strong one, with Auckland looking particularly buoyant as sales volumes increased 41.6% from a year earlier. However, the COVID-19 outbreak and the associated shutdowns will have seen activity levels fall off a cliff, with volumes expected to be well down as a result. It remains to be seen how the housing market will perform coming out of the pandemic. Interest rates are very low, which is supportive, and those who are in a position to buy will still want to.

Oil set to have a better week. OPEC+ agreed to production cuts of 10m barrels per day through May and June, then tapering this off through to April 2022 in the hope demand will rebound over this period. Oil remains down more than 60% in 2020.