21 May 2020
- In the US, the weekly initial jobless claims figure was almost 3m, bringing the total to 36m since the lockdown. While the rise in unemployment is slowing, the US economy has still shed more jobs in the last 2 months than it made in the previous 10 years
- Fed Chair Jay Powell noted that economic recovery may take time to gather momentum. While in the UK Bank of England Governor, Andrew Bailey, noted there would be scarring in UK economy from the crisis.
- Compounding this headwind to sentiment, US-China trade tensions came to the fore once again. Most notably, one of the largest US public sector pension funds has been directed by the White House not to invest in Chinese assets. China in turn is warning the US not to engage in financial skirmishes.
- Against this backdrop, risk assets have enjoyed a rollercoaster week. Having registered losses of three to four percent, they are now almost flat since last week’s update. Volatility has picked up slightly with the VIX ending at 35 (vs 27 last week)
- With risk assets falling, safe havens have rallied. The USD has strengthened and yields on government bonds have fallen. The US 10-year note has sunk to 61bps, the UK to 21bps, and Germany further into negative territory at -54bps
- Oil prices have been mostly flat, but rallied on Thursday lifting the price of Brent to $30