April 2020 Market Wrap

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In the last month, billions of people were under confinement measures in 187 countries and territories. April marked the largest effort in government responses in the post-war era to reduce the damage caused by economic shutdown. Central banks have cut policy rates to their effective lower bounds and/or increased broad QE programs with unlimited commitment in the US, and at least €750bn in the Euro area and £200bn in the UK. These comprehensive actions aim to alleviate liquidity pressures in the financial system and support the flow of credit, restoring some positive sentiment to the markets.

The oil market remained volatile despite a record agreement to reduce oil output. West Texas Intermediate (WTI) oil futures for imminent delivery went negative in April to a historical low. While oil prices quickly rebounded into positive territory, they remain at suppressed levels, down roughly 80% relative to a year ago. The potential oil-led price deflation may erode the monetary easing benefit to the economy for a while.

Despite April’s market rebound, a lot will depend on the extent to which economies can successfully reopen. As COVID-19 continues to spread globally, considerable uncertainty remains over the trajectory of global growth over the coming quarters.

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