Global equities staged a powerful recovery last week, with the S&P 500 posting three days of consecutive gains for the first time since 10-12 February.
The main driver was arguably the US Senate’s approval of a $2trn emergency fiscal package which President Trump signed into law on Friday. US equities ignored the release on Thursday of horrific US initial jobs claims data, with the number of people who filed for unemployment insurance for the first time in the week to 26th March surging to 3.3 million. To put this in context during the great financial crisis in 2008-2009 the high was “only” 666,000.
However, US and global equities closed in the red on Friday and Asian stock markets are down slightly at time of writing.
The other stand-out “trend” last week was the reversal in the Dollar. In trade-weighted terms it weakened about 4% from a multi-decade peak on Monday, with measures to boost Dollar liquidity seemingly starting to take effect. The Federal Reserve along with eight other major central banks have initiated or boosted Dollar swap lines and the Federal Reserve, who has said that QE was unlimited, is buying securities, including corporate bonds, to the tune of $125bn a day. Whether these measures to address Dollar-liquidity and supply issues prove sufficient and see the Dollar continue to weaken, particularly into year end, remains an open question.
As a result of the Dollar’s reversal, most major currencies made significant gains both against the Dollar and in trade-weighted terms. The GBP/USD cross in particular, which had been languishing near 1.14 early in the week rose to as high as 1.25 on Friday although it has since weakened to 1.235 at time of writing. In trade weighted-terms, Sterling appreciated 4% last week, twice as fast as the Euro. The Australian and Kiwi Dollars rose about 4.4% and 3%, respectively.
