Daily market review

United States

Equities retreated Friday after a remarkable three-day rally amid skepticism the market has bottomed, and as COVID-19 cases continue to accelerate. The Dow industrials fell 4.1 percent, the S&P 500 lost 3.4 percent, and the NASDAQ was down 3.8 percent.

Energy, especially oil supermajors, industrials, especially airlines and aerospace & defense, and chemicals were among the worst performers. Oil prices fell on reports Russia and Saudi Arabia are not exploring ways to limit supply. Defensive shares held up best, especially real estate and utilities.

In economic news, the Bank of Canada cut its policy rate by 50 basis points to 0.25 percent, which Governor Stephen Poloz called its lower bound, and Poloz pledged to continue buying assets to support the functioning of financial markets. In US data, consumer sentiment fell sharply in March, ending the crisis month at 89.1 which is down 6.8 points from mid-month and down 11.9 points from February.

Among companies in focus, sportswear company Lululemon Athletica fell 6 percent after an earnings beat and withdrawing its guidance, while builder KB Home lost 5.1 percent after topping expectations and also withdrawing guidance.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.81 to US$24.85, while gold rose US$3.00 to US$1,652.30. The US dollar fell against most major currencies. The US Treasury 30-year bond yield fell 18 basis points to 1.25 percent while the 10-year note yield was down 16 basis points to 0.69 percent.


Equities fell back Friday after a steep three-day rally amid disappointment EU leaders failed to deliver an anticipated package of stimulus measures, and after news that UK Prime Minister Boris Johnson had tested positive as the infections surged in the UK and elsewhere. The Europe-wide STOXX 600 fell 3.3 percent, the German DAX was off 3.7 percent, the French CAC lost 4.2 percent, and the UK FTSE-100 dropped 5.3 percent. The FTSE-100 suffered as sterling rose, which hurt export-oriented companies that dominate the index.

Weakness centered in the same sectors that rebounded this week, especially travel & leisure, banks, carmakers, and energy. Outperformers included health care, utilities, retail, insurance and real estate while laggards were autos, travel & leisure, banks, oil & gas, construction, technology, industrials, and basic resources.

Notable losers included Volkswagen, off 5.7 percent after the firm warned of layoffs and other cost-cutting measures. Carnival, the UK cruise company, was off 21 percent as the investors reckoned with the company's financial situation. British Petroleum fell 5.5 percent.

Asia Pacific

Major Asian markets posted mixed results Friday, with gains across the week also varying sharply. After heavy falls Thursday, Japan's Nikkei and Topix indices bounced back strongly Friday, closing up 3.9 percent and 4.3 percent respectively. This took their weekly gains to 17.1 percent and 13.7 percent respectively, with major global stimulus measures announced over the course of the week appearing to be the main factor supporting sentiment. Hong Kong's Hang Seng index and the Shanghai Composite index recorded more moderate increases, closing up 0.6 percent and 0.3 percent on the day, and finishing the week up 2.0 percent and 1.0 percent respectively. Australia's All Ordinaries index fell 5.1 percent Friday, closing the week with a gain of 0.4 percent, as authorities announced further travel restrictions and indicated that tighter curbs on social and business activity will soon be imposed.

The Reserve Bank of India held an unscheduled meeting Friday and cut its main policy rate by 75 basis points from 5.15 percent to 4.4 percent, its lowest level since 2010. This meeting was scheduled to take place next week but officials decided to bring it forward in response to the global coronavirus pandemic. The Indian government earlier this week announced a three-week national lockdown as part of its efforts to contain the outbreak and also announced a fiscal stimulus package worth $22 billion.

RBI officials cited the need to mitigate the economic impact of the pandemic, to revive growth, and preserve financial stability. They warned that the potential impact of the pandemic on the Indian economy could be severe but for now is highly uncertain and for that reason declined to provide specific growth and inflation forecast in today's statement. They stressed, however, that today's rate cuts and earlier measures are part of a "war effort" and that they will do "whatever is necessary to shield the domestic economy from the pandemic". They advise that "all instruments - conventional and unconventional - are on the table". These comments clearly indicate that further measures will be used in coming weeks and months if the impact of the pandemic continues to build.

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