Global stocks closed relatively flat for the week although that masked daily movements of 2-3% in either direction. Volatility remains elevated particularly at the individual company share price level, with two day moves of 15-20% not unusual.
Nevertheless, the trend has been upwards over the last month or so, with investors focusing on the improving data in COVID-19 contraction rates. Many countries have begun to slowly reverse some of their lockdown measures, although the UK seems a bit further away from this than some of our European cousins, at least until we can increase our testing capability.
An interesting case in Germany, which has been quite successful in getting to grip with the disease. Small shops and larger stores u to 800 square metres have been able to open for the past week, but in many cities, there have been disappointingly few shoppers. Even when lockdown restrictions are eased, many individuals remain nervous of catching the disease. Equally, office workers may crave a return to their previous workplace, but many will have to navigate a busy public transport network in order to do so. As lockdown measures hopefully ease in the months ahead, there will continue to be tension between individuals’ desire to get back to normality and their caution in doing so.
The company results reporting season is upon us again. So far, around 15% of quoted US and European companies have posted quarterly figure. In the States, roughly two thirds have beaten analysts’ estimates, although that is lower than in recent years. Taken in aggregate, revenues are up by 1%, but earnings are down by 24%. This latter figure is distorted by the huge provisions that banks have taken against potential future bad debts.
In Europe, just over half of companies reporting have beaten estimates. Average revenue growth has declined by 5, while earnings are running 11% lower. Bear in mind, however, that March was the first month of being severely affected by coronavirus for many companies. A notable but hardly surprising feature is that many are withdrawing guidance for the rest of the year. Over the next two weeks we will hear from many more sectors about the effects of lockdown on their businesses and get a better sense of how hard the impact has been so far.