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Global Markets Post Gains During Roller Coaster Week. Big Stimulus, Jobless Claims, Tight Yields, and Consumer Sentiment Show Effects of Virus Concerns.

Weekly Update – March 27, 2020

  • The major global equity markets posted strong gains during a roller coaster week. Stocks fell as investors reacted to the United States surpassing China in total number of coronavirus cases, a flood of U.S. unemployment claims and a sharp drop in consumer sentiment. Markets regrouped, however, on Congressional approval of a $2 trillion fiscal stimulus package to bolster the U.S economy; another boost came as the Federal Reserve announced open-ended quantitative easing and its balance sheet surpassed $5 trillion for the first time.
  • Liquidity-driven selling pressured yields midweek; nonetheless, investors continued to buy U.S. government debt, seeking to park money safely. Ultimately, the widely-watched ten-year U.S. Treasury yield closed at about 0.75%, down from 0.88% the prior week.
  • Gold and other commodity futures gained for the week, except for oil prices, which continued to fall on the continuing Russia–Saudi Arabia production impasse. The U.S. dollar declined against a basket of major currencies.
  • Initial jobless claims totaled 3.283 million for the week ended March 21, far surpassing the previous peak of 695,000 set in October 1982. Hardest hit were Pennsylvania, Ohio and California, but 10 states saw weekly claims exceed 100,000. Continuing claims of 1.803 million were slightly below the 1.820 million expected.
  • The University of Michigan index of consumer sentiment fell to 89.1 in March, from a February reading of 101.0. The decline marked the index’s lowest reading since October 2016 and its sharpest monthly drop since October 2008, during the nadir of the financial crisis.
  • The Chicago Fed National Activity Index rose to 0.16 in February from -0.33 in January, led by improvements in production-related indicators. The index’s three-month moving average decreased to -0.21 in February from -0.11 in January, still well below the -0.70 level historically associated with the increased likelihood of a recession.
  • The IHS Markit U.S. composite purchasing managers index (PMI) — which measures aggregate economic activity in the manufacturing and services sectors — fell from 49.6 in February to 40.5 in March, the sharpest drop since October 2009. The Markit eurozone composite PMI fell from 51.6 in February to 31.4 in March, its lowest point since the survey’s inception in 1998.

CPWM Weekly Market Monitor (2020.03.27)

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