In the week that reported Covid-19 cases hit 2.5m, oil plunged to its lowest level since 1999 and the UK recorded its hottest April since 1659, markets endured another battering.
With musings from UK scientists leading the search for a Covid-19 vaccine stating there may never be one, the US markets were on course for their roughest Monday in decades.
Markets rely on good news and certainty, and with bad news and uncertainty seeming to be the dish of the day currently in most developed economies, it is small wonder investors have been voting with their feet.
In the UK, investors have taken umbrage at continued drops in FTSE companies, with £9bn being moved out of UK funds during March, according to data from Morningstar.
The data showed UK funds saw their largest ever monthly net outflow in March 2020, with £8.7bn withdrawn during “one of the quickest swings into a bear market” in history.
Fixed income funds led the outflows, with a net £5.5bn withdrawn as bond prices tumbled when the central bank’s interest rate cuts and increased spending were not enough to abate market concerns.
Equity funds saw a relatively small outflow of £769m despite equity markets falling dramatically due to the crisis.
With Brent Crude plunging on market opening on Monday 20 to $14.47 (£11.62) a barrel in early trading, marking its lowest price tag since 1999, traders were understandably worried.
Then it bounced back mid-morning to about $15 a barrel and a slight sigh of relief could be heard. Until the benchmark futures prices for West Texas Intermediate dropped to negative $37.63 a barrel, that is.
Essentially this means producers could end up paying others to buy oil as they are running out of storage. It was reminiscent of when Morrisons in the Leeds Merrion Centre offered to pay students 8p for every tin of beans they bought with bread. Beans cost 8p at the time (this was in 1995).
All this current economic activity indicates is the only certainty is there is no certainty.
Even so-called government guarantees over supporting self-employed and furloughed staff are cold comfort for many thousands of people who continue to fall through the cracks with no certainty of a safety net.
As reported on FTAdviser, within the first 30 minutes of the government’s furlough scheme going live on Monday 20, more than 67,000 claims were made – indicating the scale of financial pain that companies of all sizes, and their employees, are likely to be feeling in the next few months.
Add to this news reports that unemployment in the US – which has recorded its worst month for jobless claims in decades – and the UK may exceed that of the Great Depression nearly 100 years ago, and it is clear that people are currently living with much uncertainty.
This sense of financial foreboding could not have been helped by the Financial Conduct Authority warning that many insurance claims from small to medium-sized enterprises might not end up being paid.
However, the Association of British Insurers swiftly acted on the regulator’s announcement with a promise of their own – that their members will meet all valid claims and within a fair timetable: some certainty at last.
simoney.kyriakou@ft.com
