In a timely reminder that stocks can go down as well as up US markets underwent their worst one day fall since March yesterday, as concerns over a second wave of infections, and Fed chair Jay Powell’s bleak portrayal of a US economic recovery, sparked a wave of selling, as global markets look to post their first negative week since early May.

Asia markets took their cues from yesterday’s sell off in Europe and the US, with oil prices also falling sharply over the same concerns that a second wave would mean that it would take much longer for the current supply overhang to be worked off.

After the declines of the last three days, markets here in Europe have also opened lower, with the main focus on this morning’s dreadful UK GDP numbers which showed that the UK economy contracted a record -20.4% in April, following on from the -5.8% contraction in March.

On a rolling three-month basis, that equates to a -10.4% contraction in GDP with the services sector getting off fairly lightly with an April decline of -19%, equating to a rolling three-month decline of -9.9%.

Unsurprisingly manufacturing and industrial production output also saw record falls of -24.3% and -20.3% respectively, with the economy effectively shut for the whole month.

As with anything, while these falls in output were more than expected, they shouldn’t have been a surprise to most people. It should also be noted that given the uniqueness in trying to measure an economic shutdown these numbers are likely to be revised heavily in either direction, as a more detailed picture comes in.

On the plus side this is probably as bad as it can get, with May likely to see some sort of improvement if the recent rebound in PMI indicators is any sort of guide.

It’s also been a rollercoaster week for European stocks with the FTSE100 briefly hitting 6,500 earlier this week. This morning we’ve seen the index slide to its lowest levels since the 22nd May, slipping briefly below the 6,000 level, as uncertainty about the outlook has once again prompted heightened levels of volatility.

This morning’s early gainers are the usual suspects of airlines and travel sector which have been at the forefront of this week’s losses, with IAG, EasyJet and Carnival all higher on the day.

IAG, Ryanair and EasyJet confirmed this morning that they are taking legal action against the UK government in an attempt to overturn the 14-day quarantine rules that came in at the beginning of this week.

On the companies front Games Workshop Group latest trading update showed a better than expected recovery since re-opening. Sales and pre-tax profit for the year are now expected to come in at £270m at best and no worse than £85m. Of its stores, 306 are now open with the rest of the 532 expected to slowly re-open as local restrictions are eased.

International information and events group Informa released its latest trading update this morning, expressing optimism that the return of major events in China may well happen next month, albeit with various safeguards in place. The first such event would be the China Beauty Expo in Shanghai. The subscriptions business has helped the business ride out the shutdown of its events business, while its US business will unlikely see a return much before September.

Pub chain Mitchell and Butlers announced this morning that it had reached a new agreement with its banks until December 2021 for committed unsecured liquidity facilities of £250m. This includes an extension to its £150m existing facility plus another £100m.

During the shutdown losses have stabilised at £15m, including rent, though cash burn remains high due to having to pay suppliers. This should stabilise once pubs reopen.

The pound has had a disappointing week slipping back from its highest levels in three months, against the US dollar, as concerns about the progress in EU trade talks re-emerged over rising concerns over a no deal scenario, as the 30th June extension deadline gets ever closer. On the plus side both sides have committed to hold intensive discussions every week from June 29th until the end of July in an attempt to break the deadlock.

The US dollar managed to reverse its recent run of losses yesterday, with a strong rebound after three weeks of declines. The strength of yesterday’s rebound suggests that we could see further gains in the days ahead, as money flows back into the greenback as uncertainty rises over a second wave of infections.

US markets look set to rebound modestly after their precipitous falls yesterday, as we look back on a week that has reminded investors that a v-shaped recovery isn’t the done deal some people seemed to think it was a few days ago.

In news that is likely to be surprising to most people, bankrupt car rental chain Hertz has proposed a $1bn sale of new shares, despite having $18bn of debt, secured against its rental fleet. The shares have surged in the past few days as an army of retail investors have piled in on an expectation that the company can overcome its cash flow problems.


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