MarketWatch for the week of March 2nd
Written by Steven Klos
Summary
Markets endured a volatile week as COVID-19 fears continue to spread uncertainty about a global economic slowdown. U.S. equities finished higher this week fuelled by sharp rallies on Monday and Wednesday, however, Canadian equities ended lower amid central-bank policymakers slashing interest rates in an attempt to stabilize financial markets. The Dow Jones and S&P500 closed with gains of 1.32% and 0.61%, respectively, while the TSX suffered a loss of 0.94%. On the bright side, Canada’s employment report exceeded expectations adding 30,300 new jobs in February. Statistics Canada says that the majority of these jobs came from Quebec, which posted its third consecutive month of job gains.
Rate Cuts
The Federal Reserve was the first to cut rates this week, lowering the U.S. interest rate by 50 basis points to just below 1.25%. Soon after, the Bank of Canada, Royal Bank of Australia, and others followed suit; the European Central Bank and Bank of England are expected to make a decision shortly. The 10-year Government of Canada yield declined sharply this week reaching all-time lows as investors seek protection in safe assets and continue to expect more central-bank easing.
Global Dependance on Quarantined Areas
As governments and health care officials take steps to prevent the spread of COVID-19 and treat those who are infected, manufacturers in many industries also struggle to manage the outbreak’s impact on global supply chains. Many companies are facing a supply chain crisis that stems from the concentration of their sourcing strategies. The world’s 1000 largest companies or their suppliers currently own more than 12,000 facilities, factories, warehouses, and other operations that reside in COVID-19 quarantine areas. Many factories are operating at far below capacity due to labour force shortages, forcing lower production, output and revenue forecasts. Supply-chain managers are beginning to reduce their reliance on single companies for items they purchase directly to avoid further postponements.
Affected Sectors:
Automotive, Industrial, Heavy Machinery
China: 2,730 (Quarantine Facilities)
Italy: 452
South Korea: 308
Consumer Goods
China: 1,139 (Quarantine Facilities)
Italy: 210
South Korea: 3
High Tech, Semiconductors, Consumer Electronics
China: 3,238 (Quarantine Facilities)
Italy: 252
South Korea: 4
Life Science, Health Care, Medical Devices
China: 1,562 (Quarantine Facilities)
Italy: 230
South Korea: 4
Other
China: 1,778 (Quarantine Facilities)
Italy: 175
South Korea: 3
Data Sourced From Resilinc, Bloomberg and Thomson Reuters
