Global equity markets finished sharply lower over the week after the World Health Organization declared the coronavirus (“COVID-19”) a global pandemic. The declines pushed the major indexes well into bear market territory with the onset being the fastest in history with the Dow suffering its worst daily decline since 1987. The Cboe Volatility Index (VIX) reached its highest level since the financial crisis of 2008, and “circuit breakers” designed to halt trading when the S&P 500 falls by more than 7% were deployed on Monday and Thursday for the first time since 1997.
The number of COVID-19 cases climbed sharply over the week, with up to 132,500 people having been diagnosed with the virus in 123 countries around the world, according to the World Health Organisation. The total number of deaths has reached in excess of 5,000.
Earlier in the week Italy entered a country-wide lockdown. Other countries are responding to the crisis by enforcing travel bans, suspending flights, imposing self-quarantines, banning mass gatherings, sporting events, closing schools and borders in a fight to contain the spread of the virus.
The number of new cases in China has fallen sharply over the week and was below 50 for five consecutive days. Reassuringly, all temporary isolation hospitals in Wuhan have now been closed while the national total for daily recoveries in China is over 1,000.
On Friday, U.S. President Trump imposed a travel ban on 26 European nations as part of a contingency plan to tackle the crisis. The president also declared a national emergency, releasing $50bn in federal funds.
The Federal Reserve injected additional liquidity into the financial system over the week, while the European Central Bank expanded its bond-buying program, and the Bank of Canada and England lowered interest rates to support their respective economies.
On Monday oil prices collapsed by as much as 30%, the most since the Gulf War in 1991. Saudi Arabia had wanted to lead Opec and Russia in making deeper cuts to oil production to support crude prices in response to collapsing global demand because of the coronavirus outbreak, which has disrupted global economic activity. But when Russia objected the Saudi’s responded by raising production and offering its crude at steep discounts causing prices to collapse.
Moscow wasn’t prepared to agree to the ultimatum offered by the Saudi’s and has also been keen to test the US shale industry, believing that cutting output would only hand a lifeline to a sector whose growth has turned the US into the world’s largest oil producer.
Saudi Arabia may have hoped that the enormity of the price fall would force Russia to return to the negotiating table, but Moscow is holding firm for now. Hopes for an oil price recovery in the short-term are now pinned on the coronavirus outbreak being contained faster than expected.
Market Moves of the Week:
Friday saw the JSE end its worst week in more than 21 years, with the bourse dropping 13,4% as a surge in the number and spread of coronavirus cases pushed global markets to decade lows. The coronavirus spread to South Africa at the start of March 2020, as of 14th March, there were a total of 38 confirmed cases (and more cases are awaiting confirmation), and zero deaths.
President Cyril Ramaphosa called for an urgent cabinet meeting on Sunday. The meeting will explore ways of intensifying the country’s response to this outbreak.
Sasol’s share price recovered on Friday, jumping 36.36% to R50.78. The company said on Thursday that it would accelerate its assets disposal programme and consider a rights issue after its share price tumbled every day from Monday to Thursday. It ended the week down 68.21%.
The rand ended the week at 16.28 per dollar, reversing earlier losses in the week on the back of the stimulus from the Japanese, European and U.S. central banks.
Chart of the Week
Statista.com: The chart illustrates the cumulative confirmed COVID-19 cases in selected countries from first day with 100+ cases. It is hoped that Germany, the U.S. and France could still swing into the trajectory South Korea took. Currently, the country has the fourth most cases after China, Italy and Iran. South Korea hit 100 cases on February 20 and managed to leave the steep upward trajectory around 14 days later using widespread free testing and mobile technology for public information to slow the spread of the virus.
To all those who have been affected by this unprecedented event we wish them good health and a speedy recovery. Please remember to regularly and thoroughly clean your hands with soap and water. Stay home if you feel unwell. If you have a fever, cough and difficulty breathing, seek medical attention. We all have an important role to play in containing and stopping the spread of the coronavirus!
At Strategiq Capital we have a robust Business Continuity Program to ensure the safety and security of our staff and the continuation of business operations. Some of these measures include travel restrictions, visitor protocols, increased use of alternative communication methods (e.g., video conferencing), and encouraging staff to work remotely as appropriate.
Against the rapidly changing COVID-19 outbreak backdrop, we remain focused on our clients’ well-being and maintaining business continuity.
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