Frankfurt For the time being, grit your teeth and survive the darkening situation. For the second half of the year, however, the stock market experts hope that the economy will revive if there are successes in curbing the Covid 19 virus and the restrictions on public life are relaxed again.
Investors on the stock markets meanwhile seem to be turning into a kind of wait-and-see attitude, after which the stocks are still down by a good 30 percent after a crash since mid-February and an intermediate recovery. Last week, the leading indices in the western world fell between one and two percent.
After the huge turmoil on the financial markets in the first quarter of 2020, the situation there should remain uneasy for now, my strategists. Robert Greil, chief strategist at Bank Merck Finck says: “In view of the open core question of how quickly global economic activity will start up again, the second quarter will be extremely difficult both economically and in terms of stock exchange technology.”
Due to the persistently high level of uncertainty, he expects the markets to remain highly nervous despite glimpses of infection rates. In the next few weeks, “fears will still prevail on the capital markets,” says Michael Bissinger from DZ Bank.
The central banks and governments tried to limit the corona damage that occurred with interest rate cuts and liquidity commitments. Nevertheless, according to the analyst, various sectors such as the aerospace and tourism industries, but also the automotive industry, will suffer severely.
He estimates that corporate earnings in Europe will decrease by ten to 20 percent in 2020. Many smaller companies could face bigger problems, which should have a negative impact on the unemployment rate.
Strategists recognize potential for catching up with stocks
But in the second half of the year strategists and analysts expect the political measures taken to take effect, the virus to be contained and the economy to turn around again. Greil von Merck Finck emphasizes: “With the increasingly bleak short-term economic prospects, it is becoming increasingly important that the global economy will recover significantly as soon as possible in the second half of the year.”
Such an economic sigh of relief should also inspire the stock markets more strongly again, adds Bissinger from DZ Bank – especially since the liquidity environment for the financial markets remains friendly due to “extensive stimuli” by the central banks.
DZ Bank analysts expect major indices to recover by around 20 percent by the end of the year after the stock price crash. They have lowered their index forecasts. But at the end of 2020, they see the leading German index Dax at 11,500 points, the leading euro zone index Euro Stoxx 50 at 3,200 points and the most important US index S&P 500 at 3,000 points.
So it could be “one of the best investment opportunities for equity investors” for decades, Bissinger emphasizes. Other strategists find that the stock exchanges in the Sars epidemic were weak as long as the number of infections rose about 17 years ago. When the number of new infections then decreased, the share prices recovered.
Economic downturn in Europe and the US in the second quarter
However, economic data is likely to deteriorate significantly in the second quarter. This suggests extremely weak leading indicators in Europe such as the purchasing manager indices. “Our data indicate a slump in the euro economic output of almost ten percent,” said Chris Williamson, chief economist at the market research institute Markit.
For the United States, where the pandemic appears to be worsening more than in Europe, analysts expect the economy to collapse even more: analysts at the US bank Morgan Stanley believe that a 38 percent slump in US economic output in the second quarter is possible – that is more than it has been since the post-war year 1946.
Unemployment in the USA feared
The situation on the US labor market already deteriorated in March, as the official labor market report on Friday showed. Accordingly, many more jobs have been cut in the USA than expected. Last month, 701,000 non-agricultural jobs were cut instead of the expected 100,000 hobs.
“The labor market was already affected by the corona pandemic and the lockdown of the national economy in March,” comments Ralf Umlauf, Helaba economist. It is the first and very significant monthly job loss since 2010. According to experts, the worst is still ahead, as the effects of the pandemic in March cannot yet be fully recognized.
The day before, an extreme, surprisingly high number of first-time jobless claims for the United States had been announced. In the week the value was 6.65 million new unemployed, again higher than the previous record level of 3.28 million in the previous week. 3.5 million new applicants were expected.
The labor market situation in the US describes circulation at Helaba as “catastrophic”. Because of different survey times, the job losses in the official job market report were still reported as moderate, he says. But over the course of the year, he expects record unemployment in the USA: The unemployment rate is likely to “skyrocket to a double-digit level” from the current 4.4 percent in April.
Against this backdrop, investors and traders are eagerly awaiting the economic data to be released in the coming week. Orders for German industry are scheduled for February on Monday. Experts expect a drop of two percent here.
The significantly weaker demand from China, which had shut down its economy earlier than other countries due to the corona virus, is making itself felt here, says Commerzbank economist Ralph Solveen. However, the crisis will probably only take full effect in the March figures.
Industrial production for Germany follows in February, which is said to have decreased slightly. At the end of the week, the University of Michigan announced its preliminary consumer confidence for the United States in April. Here, too, analysts expect a significant decline.
Speculation about funding cuts in the Opec + countries
On the oil market, investors speculated on an impending agreement between the major producing countries of the “OPEC +” group, which, in addition to the members of the export cartel, include other producing countries such as Russia. You expect further production cuts. The price of a barrel of North Sea oil of the Brent variety rose by more than 14 percent on Friday to just under $ 34.
According to speculation, throttling by ten million barrels (barrel of 159 liters) per day is under discussion. If the cut were even more pronounced, states outside the alliance would also have to make their contribution.
US President Donald Trump said Thursday that the two clinched exporters Saudi Arabia and Russia have agreed on a 10 to 15 million barrel cut a day. This triggered a record price jump in oil: The price for crude oil from the North Sea rose briefly by around 25 percent and that for US crude oil by around 20 percent.
Saudi Arabia alone is currently pumping a record twelve million barrels a day. Restrictions to contain the pandemic have reduced global crude oil demand by around a third or 30 million barrels a day within a few weeks.
More: The stock indices have recently moved significantly from their lows. But such interim recoveries are not yet a sign of an all-clear – a comment.