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March Market Commentary

By March 3, 2020No Comments


Not the election of Donald Trump, not the US/China trade dispute. Not even Brexit. We cannot recall a single issue having so completely dominated a month’s news, or threatened to have such serious consequences, as the outbreak of Coronavirus in China.

In February, the virus’ impact on the world stock markets was clear for everyone to see. Although markets held up reasonably well for most of the month, there were dramatic falls in the last week of the month and by Friday 28th, a market was doing well if it had only recorded a single digit fall in the month.

The impact of the virus on business around the world became more and more apparent as the month progressed. It began with China becoming ‘increasingly isolated’ on the world stage as the virus took hold. Sony and Amazon pulled out of the Mobile World Congress in Barcelona and, with 6,000 visitors due to arrive from China, one of the world’s biggest tech shows was quickly cancelled.

By the middle of the month, Qantas and Air France were warning of a significant impact on their revenues, with initial estimates suggesting that the virus would cost airlines $30bn (£23.5bn). You suspect that figure may end up being rather higher…

Car sales in China were reported to be down 92% and, as we’ll see in the Far Eastern section, manufacturing in China slowed dramatically. As the virus spread to Italy, 12 towns in the north of the country were ‘locked down’ and there are real fears that the virus could have a significant impact on one of Europe’s most vulnerable economies (and its banking system).

As the end of the month approached, gold reached a seven-year high at just under $1,700 (£1,325) an ounce and, inevitably, stock markets started to fall, with the last week of the month seeing almost £200bn wiped off the value of shares in the UK’s FTSE-100 index. Various reports said that the virus would do as much damage as the 2008 financial crash and was on track ‘to cause a global recession’.

And if Coronavirus doesn’t get you it appears that climate change will. Economists at JP Morgan sent a report to clients warning of ‘catastrophic outcomes’ if action is not taken on climate change. Human life ‘as we know it’ could be threatened, said the economists, perhaps confirming Thomas Carlyle’s definition of economics as ‘the dismal science’.

Let us look at all the news in more detail…


The big news in the UK was the resignation of Chancellor Sajid Javid as Boris Johnson re-shuffled his Cabinet. He was replaced by 39-year-old Rishi Sunak, formerly Chief Secretary to the Treasury and the MP for Richmond in North Yorkshire. Despite the change in personnel, 11th March remained the date of this Government’s first Budget, and at this stage you wouldn’t rule out the possibility of further measures in an Autumn Statement as the new Chancellor assesses the impact of Coronavirus on the economy.

He will inevitably face plenty of calls for help from the beleaguered UK high street as he prepares his Budget. There was some evidence that ‘Veganuary’ gave the restaurant/pub sector a boost with sales growth of 1.9% as the mild weather encouraged consumers to eat out.

But there were the usual tales of doom and gloom from the retail sector, as department store Beales closed 12 of its 23 stores and tried to sell the rest, and Shoezone said that 100 shops could close. Shoppers are, according to City AM, deserting the high street for retail parks and shopping outlets. Not that the trend has done any good for shopping centre owner Intu, which has a £5bn debt pile and saw emergency funding talks with a Hong Kong-based investor break down.

High street sales had bounced back in January, but with warning that cities will shut down as part of a ‘virus battle plan’, could it be that Coronavirus finishes the work that Amazon started? The next few months will be anxious ones for both UK retailers and their landlords.

Away from the high street, are we seeing a post-election ‘bounce’? Halifax reported that UK house prices were up 4.1% in January (on an annual basis) which was close to a two-year high. And Ipsos MORI reported that optimism had surged in the country following the election and Brexit: it still trails pessimism, but it’s catching up!

Owners of most cars may be feeling slightly less optimistic after the Government brought forward a ban on selling new petrol, diesel or hybrid vehicles to 2035 in line with its commitment to be carbon neutral by 2050.

The Government also reaffirmed its commitment to the HS2 project and said it had held ‘preliminary discussions’ with China over its state-owned railway firm helping to build HS2, with the Chinese company saying it could build the line in five years at a much lower cost than the original figures. Following the Huawei/5G controversy there will be plenty of sceptics…

What of the wider UK economy? Figures for the last quarter of 2019 showed zero growth in those three months, with the economy growing by 1.4% for 2019 as a whole. Wages in the UK were back above their pre-economic crisis levels when adjusted for inflation, and there are now very nearly 33m people in work with, according to the UK Household Finance Index, a record number of people feeling confident about their economic future.

The hospitality industry, though, was feeling a lot less confident as the Government announced that there would be no visas for ‘low-skilled workers’ wanting to come to the UK. Kate Nicholls, chief executive of their trade association, branded the move as ‘disastrous’, with the industry largely relying on EU immigration.

Several business groups were also reaching for the word ‘disastrous’ as the Court of Appeal ended the month by ruling that plans for a third runway at Heathrow were illegal, as ministers had insufficiently considered the government’s climate change commitments. As we will see below, there were a couple of countries who took a slightly different view of airport expansion…

Like all the major world economies, the FTSE-100 index of leading shares fell sharply in February. It ended January at 7,286 and fell 10% in February to close at 6,581. The pound was down by 3% against the dollar, and finished February trading at $1.2820.

Brexit Negotiations

Compared to tackling the outbreak, the Brexit negotiations suddenly look remarkably simple. February saw little more than both sides outlining their opening positions.

Boris Johnson said there was “no need” for the UK to follow Brussels’ rules as he set out his vision of a ‘Canada style’ deal with the EU: chief EU negotiator Michel Barnier said this “wasn’t possible” due to the UK’s proximity to Europe. As it has always been, the EU remains worried about the possibility of a low-tax, low-regulation competitor on its doorstep.

Meanwhile, the Government was also pursuing other trade deals, with Foreign Secretary Dominic Raab saying that he was aiming for an early free trade deal with Australia, and the UK is preparing to ‘drive a hard bargain’ in trade talks with the US.

Do not expect rapid progress: French President Emmanuel Macron has already said that negotiations will be “tense” and is doubtful that a deal can be reached by 31st December, with fishing rights likely to prove a major difficulty.

Let’s see what progress is made this month before the negotiations break up for the Easter holidays.


We have commented previously on the slowdown in German manufacturing, and figures released in February confirmed the bad news. New manufacturing orders in December were down 2.1% on the previous month and, more worryingly, down 8.7% on December 2018.

There was very slight growth in the German economy in the last quarter of the year, although when it was rounded to one decimal place the government’s statistics office recorded ‘growth’ of 0.0%. GDP was up just 0.4% on the last three months of the previous year.

The first Tesla factory to be built in Europe was announced with much fanfare, the company planning to build a €4bn (£3.44bn) car and battery plant just outside Berlin. However, Tesla was ordered to temporarily halt preparations for the factory in February, after environmentalists, worried about local wildlife and the water supplies, won a court injunction.

The budget for the European Union was also at a standstill. With negotiations between the member states ‘complicated’ by Brexit, there was a stand-off between the ‘frugal four’ and the other states. Those countries, Austria, Denmark, Sweden and the Netherlands, said they would not accept a budget exceeding 1% of the bloc’s GDP. “We don’t need Britain to show disunity,” said Emmanuel Macron.

Quite who will represent Ireland at future EU meetings remains unclear, as the general election on Saturday 8th February produced a near tie for all three major parties, including Sinn Fein. Negotiations over forming a new government continued into March, with current Taoiseach Leo Varadkar apparently ready to go into opposition.

There was, though, some good news to end the month. Despite the slowdown in manufacturing and the threat of Coronavirus, Germany’s ‘business climate index’, reflecting morale and confidence among business leaders, rose from 96.0 to 96.1, against expectations of a fall to 95.3.

Unsurprisingly, both major European stock markets were down in the month, with the German DAX index down 8% to 11,890 and the French index falling 9% to 5,310. The Greek stock market fared much worse, falling by 21% to 720, showing how vulnerable Europe’s weaker economies could be to a prolonged economic downturn.


Whatever the problems coming from China, the US economy got off to a good start as figures for January showed that 225,000 jobs had been created in the month. This meant that the record-breaking streak of job creation entered its 11th consecutive year, with the number of jobs created well ahead of the forecast 164,000.

The president was quick to tweet his delight at the number, as he was when his impeachment trial predictably collapsed. As the Democratic primaries continue, it is looking likely that Donald Trump will face either Bernie Sanders or Joe Biden in November’s Presidential election.

Meanwhile, the debate raged on over Tesla. When the company’s valuation had passed $100bn (£78bn), making it worth more than Volkswagen, the sceptics had scoffed. But by early February the company was valued at $150bn (£117bn) as the share price surged. Then the next day the shares plunged 17% as the company said that the Coronavirus would hit deliveries. As we’ve seen above, that was followed by the temporary halt to the ‘gigafactory’ in Germany, March began with shares back to $668 (£522) making the company worth just over $100bn.

Another sign of the new economy was the Apple watch. In 2019, Apple shipped an estimated 30.7 million watches, up 36% from the previous year, which comfortably outsold the entire Swiss watch industry.

But one of the more interesting stories in February came from a very old part of the economy. US dairy farmers complained that their industry was under increasing pressure as more and more consumers deserted cow’s milk for alternative milks such as oat, soya and almond. It seems inevitable that we will see the same thing happening in the UK.

Like all the other major world economies, the US was hit by Coronavirus. Business activity in the US service sector declined in January for the first time since 2013 and new orders received by private sector firms also fell for the first time since 2009. The Dow Jones inevitably fell in the month: having opened February at 28,256, it closed the month down 10% at 25,409.

Far East

The Coronavirus outbreak meant that Chinese manufacturing hit a record low in February. Regular readers will be familiar with the ‘Purchasing Managers’ Index,’ which is used as a measure of both economic activity and a guide to future prospects. Any figure above 50 on a country’s PMI indicates that the economy is expanding: a figure below 50 indicates a contraction.

In February, China’s PMI fell from 50 to 35.7, which means that the Coronavirus outbreak is having a bigger impact on Chinese manufacturing than the 2008 financial crisis, as many manufacturers closed down in order to contain the spread of the virus. Those factories that remained open appear to be struggling to find enough workers. This fall in China’s PMI was well below analysts’ expectations and with China accounting for a third of world manufacturing, it is easy to see the knock-on effect on other countries, both on their economies and their stock markets.

For the rest of the region there was electronics giant Foxconn, maker of iPhones, deciding it might be a good idea to switch part of its production away from phones and onto surgical masks. Given that drone footage showing a queue for masks in South Korea going not just round the block but round several blocks went viral, it looked like a wise decision.

Meanwhile Samsung unveiled its S20 phone, featuring a 100x zoom camera, and the Chinese ambassador to the UK condemned the ‘witch hunt’ against Huawei.

There was bad news for both HSBC, which saw its profits fall by a third – a fall which it is estimated will lead to around 35,000 job cuts – and for the Japanese economy, which shrank at its fastest rate since 2014. The combined effects of a rise in sales tax, a major typhoon and weak global demand meant that Japanese GDP fell by 6.3% in the last three months of 2019, much more than had been expected.

Inevitably though, we must leave the last word in this section to Coronavirus. Not only are Chinese companies struggling to find enough workers, it appears that they are starting to struggle for cash. ‘Coronavirus credit crunch hits millions of Chinese firms’ reported the BBC, as the Chinese Association of Small and Medium Enterprises said that 60% of its members only had enough cash to cover regular payments for ‘one to two months.’

Despite all this, China’s Shanghai Composite Index was down by a relatively modest 3% in February, closing the month at 2,880. The Hong Kong market did even better, although clearly ‘better’ is a relative term this month, and was down 1% to 26,130. The biggest fall was in Japan where the Nikkei Dow fell 9% to 21,143 while the South Korean market dropped 6% to 1,987.

Emerging Markets

February was marked by three nights of clashes between Hindus and Muslims in Delhi, which left 27 people dead. The original cause was the controversial new citizenship law, which Muslims fear will discriminate against them, but reports suggest that the violence has now taken on ‘communal overtones.’

Meanwhile, India, along with China, is planning a massive programme of airport construction. According to the Global Warming Policy Forum, India is planning to build up to 100 new airports in the next five years, in an attempt to revive and maintain its economic growth. However, this is less than half China’s planned 216 new airports which, according to the same article, are due to be completed by 2035.

The three major stock markets which we cover in this section of the report charted a depressingly similar course to all the other major world markets in February. The Indian stock market was down 6%, closing the month at 38,297: Brazil’s stock market dropped 8% to end February at 104,172 and the Russian index was down by 9% to finish a miserable month at 2,785.

And finally

So was there any light amid the gloom in February? Yes: a new bank branch has opened in the UK. Cue the shock and awe.

Hawes is in the Yorkshire Dales. It is the home of Wensleydale cheese. But despite this cheesy attraction, the town’s banks have steadily been closing. HSBC moved out in 2016 and Barclays closed its doors, after 150 years, last summer, blaming customers for switching to digital banks and leaving civic leaders to complain that Hawes had been abandoned. But step forward the Newcastle Building Society: it doesn’t have a branch, but it does occupy a corner of the community centre, alongside the library and the post office.

Andrew Haigh, boss of the Newcastle said,  speaking something which sounded dangerously like common sense: “I do not see a time when people won’t want to talk to other people face-to-face for their biggest financial decisions.”

Last month we brought you the news that M&S had failed to realise people eat more at Christmas and had overstocked men’s skinny jeans. February brought the less-than-surprising news that the company has appointed a new menswear buying director. We wonder if the interview consisted of just one question: ‘What is the connection between the words, Christmas, cake and waistband?’

Time to leave the high street and head off into space. Virgin Galactic is going to release more tickets for flights as demand increases. You can now book your ticket for just a $1,000 (£780) deposit. But a word of caution: the ‘biggest explosion in space since the Big Bang’ has just been detected by scientists.

According to the Astrophysical Journal, the explosion has left a giant dent, five times bigger than anything recorded before, in the Ophiuchus galaxy cluster. The good news is that this ‘supermassive’ black hole is a trifling 390 million light years from Earth. So you’ve plenty of time to save up for the trip and boldly go where you haven’t gone before.