On Thursday, positive market sentiment prevails, and very weak data from the economies seem to be largely discounted by investors. As a result, futures in the United States seem to be climbing up, and in Germany, the DAX index is trying to close the gap in the downward trend that emerged in March.
Optimism may also be related to the potential treatment of a new coronavirus disease with a drug from the US company Gilead Sciences. The wave of stock purchases seems to continue even despite recent data showing a record fall in GDP in France and Spain. For three months of 2020, the French economy contracted by 5.8% on a quarterly basis compared to market expectations of a 3.5% decline. This was the highest rate of decline in history, influenced by the Covid-19 epidemic, which froze the economy. In turn, the Spanish economy contracted by 5.2 percent on a quarterly basis, with a market consensus of 4.4 percent. This was the biggest collapse since data collection began. In annual terms, GDP fell by 4.1%, which is worse than the expected 3.2% decline.
The U.S. economy contracted by 4.8 percent in the first quarter of 2020, ending the longest period of expansion in the country's history. This was the sharpest rate of GDP decline since the last quarter of 2008, much worse than the market consensus of a 4% contraction. Household consumption fell the most since the fourth quarter of 1980, and corporate investment fell for the fourth time in a row.
In response to the disastrous data, the US Fed reiterated its position that it will do everything it can to support the economy. To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions, the statement said.
Today, the European Central Bank could provide new measures to counter the economic impact of the epidemic. Its decision will be announced at 1:45 p.m. and the press conference will start at 2:30 p.m. However, the latest ECB macroeconomic projections will not be available until June. It is, therefore, possible to have a scenario in which the ECB will ensure today that it does everything necessary to counteract the impact of the virus on the economy, and new measures will appear with the projections.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
