Published on: April 17, 2020

Even though it has been a short week, it’s still good to get to Friday.  So, let’s celebrate together with a copy of this week’s News, Views and Truths.

Global markets have had an aggregated flat week this week; aggregated due to the fact that we have seen wild swings to both the upside and the down.  Today sees one of the positive swings, with news overnight from the US of A.

Gilead Sciences issued a report that one of the company’s drugs has shown promising results in treating COVID-19 patients. Subsequently, the company’s shares surged 12% after trading, following a previous 2.6% rise to finish Thursday’s session at $76.54. Healthcare media site Stat reported that, in a late-stage clinical study at the University of Chicago, nearly all 125 COVID-19 patients treated with Gilead’s Remdesivir drug had been discharged after a week of treatment. Stat reported that 113 of these patients had suffered a severe form of the disease and unfortunately two had died.

The University of Chicago results, however, are only a small part of a larger study group that includes 2,400 patients with a severe form of COVID-19 and 1,600 further individuals with a moderate form. Gilead expects to start releasing results this month, following on from analysis published in the New England Journal of Medicine, claiming most COVID-19 patients given Remdesivir showed clinical improvement.

On this news, Asian markets rallied strongly, with the Hang Seng ending the session up 1.56%, the Japanese Nikkei 225 up 3.15% and the South Korean KOSPI up 3.09%.  The FTSE 100 opened up 2.60% followed by European Bourses.  The US futures are pointing to a positive start with the Dow Jones looking to open up 2.93%.

And this has been the theme of recent weeks, driven by the hope of market participants that an end to the global pandemic is in sight.  But unfortunately, futures cannot be built upon hope alone and although we are waking up to positive market movements based upon the initial success of drugs trials, ignore hard facts at your peril.

China has today reported a 6.8% drop in gross domestic product (GDP) for the first quarter of 2020 compared with the same period last year.  This is the first economic contraction for the country, once dubbed the world’s growth engine, since at least 1992, when Beijing started releasing quarterly GDP figures. Other estimates suggest that it is the first negative quarter China has had since 1976.

China also reported a slew of other key economic data, which looks equally grim. Retail sales, which declined by 20.5% on-year for January and February, decreased by 15.8% in March from a year ago. Fixed-asset investment outside rural households, which reflects construction activity, as well as industrial output (in itself, an important indicator for measuring economic performance), extended their losing streak from the first two months, to drop 16.1% and 1.1% in March from the previous year, according to China’s National Bureau of Statistics. 

Furthermore, the Chinese government have announced that the total number of COVID-19 deaths within the city of Wuhan has been revised upwards by 1,209 – an increase of 50%. 

This is most likely the sign of things to come as the economic impact of the virus hits the West.  Already, the expectation is for earnings to decline on average by 10% in this quarter alone.  Many companies are refusing the provide earnings guidance, with Volkswagen adding their name to the list in recent days.  This makes stock analysis in the short term very testing indeed and questions, for me at least, the merits of the recent market bounce.

There is no doubt that the market will recover eventually, but I fear that those believing that the worst is over may be in for a disappointment.

And in the light of these strangest of times, I am seeking to provide a degree of normality to the proceedings.  Clients of Three Counties will be familiar with our usual client events, held either at our offices on Lambton Park Estate or other venues across the North East.  Well, if the mountain will not come to Muhammad, then Muhammad must go to the mountain.

Staring the week commencing 27th April, I will be hosting an online market update, in the same style as the ones I have delivered at our client events.  All you need is a PC, laptop, tablet or even mobile phone to join and listen to my usual rantings about the market, our portfolios and my thoughts moving forward.

Invites will be going out next week, but as an early bird special, you can register your interest using the button below and instructions will be sent to you directly. 

Remember, this is not just for Three Counties clients; if you have anyone who you think may be interested in hearing our thoughts for 20 minutes or so, send them the link and they can listen in.  However, we only have 100 spaces available and it is first come, first served, so don’t delay and get your name down.  I will have plenty to say!

And with that positive ending, our usual playlist based on the theme of “Songs When You Were 16”.  Have the best weekend that you can and I shall see you all week.

And don’t forget to sign up for the event!

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