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The FTSE 100 is called to open 29 points lower at 5451. U.S. equity futures declined and a rally in Asian stocks faded as traders mulled a grim milestone in the coronavirus outbreak which showed continued signs of damage on economies and companies. Crude oil pared Thursday’s 22% jump, which came after President Donald Trump said Russia and Saudi Arabia would cut production. Stocks sank in Australia and Hong Kong, while South Korean shares fluctuated. Early gains in Japan gave way to losses, while S&P 500 futures fell about 1%. The new coronavirus has now infected 1 million people across the world, just four months after it first surfaced. The yen fluctuated and the euro retreated
The coronavirus (Covid-19) pandemic that began in China and spread rapidly around the globe has caused major disruption to businesses and economies worldwide. The UK government has responded to Covid-19 with measures aimed at delaying its spread and mitigating damage to the economy with a substantial stimulus package.
In this week’s Diary, news from financial markets and investors, an update from India in lockdown and guidance on home haircutting.
With a recession expected in the US and Europe, many investors are now questioning what will happen to company dividend payments, which some may rely upon to provide an income.
Find out more about our discretionary portfolio service (DPS)
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Global stock markets reached new all-time highs in early February before suffering a sharp and broad based sell-off as it became clear that Covid-19 had not been contained within China and would likely reach most countries to varying degrees. The economic impact – mainly the result of public health countermeasures rather than sickness or death – is unknown in magnitude or duration as there are no precedents in the current globalised supply chain world. The virus is expected to peak within the next month or so, though this is a quickly evolving situation.
Global shares returned 3% in December and 9% over the final quarter although this was largely eroded by an 8% rise in sterling to $1.33 for UK-based investors. While the decisive Conservative election victory helped the FTSE 100 gain 196 points last month to 7,542, the total return of 3% (including dividends) lagged trade-related rallies in the US, Japan and Asia (9%) and the eurozone (5%).
Global growth continues to slow with a widening gap between advanced and emerging economies. The OECD recently downgraded its 2019 global GDP forecast to 2.9% (1.5% advanced/4.5% emerging) but contracting global trade and the repercussions of the US/China tariff dispute mean there are still downside risks. Although negative real interest rates and robust consumer spending should avert recession, the lack of new fiscal stimulus suggests a period of stagnation for many advanced economies.
Central banks are easing monetary policy once again. Bond investors see this as pre-emptive action ahead of a global economic slowdown, perhaps even recession, whereas equity investors anticipate this will fuel a pick-up in corporate profitability by boosting GDP growth. Time will tell, but for now bond yields are at new lows – the German and Swiss governments can borrow at a negative interest rate for up to 50 years, and the UK 10-year gilt ended the month at 0.6%.
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