Pre-Market Review IMF Warns of Recession

Wall Street racked up more gains yesterday. Investors chose the improving health picture over the worsening economic picture to focus on. At the same time, the IMF is already signalling a global recession that could hit sooner than later.

Yet again, we saw stock markets rally slightly more positive than expected data around the health aspects of Coronavirus. There were growing signs that hotspots such as New York were starting to see the number of hospital admissions full as well as the number of deaths. This could be a good sign that the US is winning the battle against COVID-19.

However, what the movement in markets fails to show is just how much the economic impact after the virus has gone will affect global markets. The fight against Coronavirus is not only a health-related one, but it is a financial-related one.

Global recession ahead

Yesterday the IMF warned that the global economy could be in store for one of its worst recessions. They stated that there had never been a recession approaching with such ferocity. The gloomy warning followed predictions on GDP. It showed the US contracting by 6% and the UK by 6.5% in 2020.

The fact that the pandemic spread so quickly meant countries had virtually no time to prepare their economies for the lockdown. However, it’s not only the preparation time. Nobody had any experience in just what sort of pain this would bring.

Earnings took centre stage yesterday, and they will do so for the rest of this week and into next week. Earnings from JPMorgan and Wells Fargo underscored the expected economic damage that lies ahead. Both banks reported a steep contraction in earnings on the loan loss provisions. They warned they might need to stock away more money to offset anticipated loan defaults and customers.

The rally on Wall Street saw the FAANG stocks gaining more than 3%.

Today sees economic data for March out which will be the highlight of the day. This is the first time that data switches from February to March and gives us a data set that was affected by the pandemic. US Retail sales is going to be a reading that could well paint a mixed picture, as hoarding and panic buying could well boost the data in some areas, but lockdown measures will see some severely depressed.