The FTSE 100 and other major European indices took a break from recent gains on Monday as the market digested a slowdown in the number of new coronavirus deaths.
The FTSE 100 was broadly flat in early trade on Monday with London’s leading index trading in a tight range around 5,800 for most of the morning.
The number of people who sadly died with coronavirus fell in the world’s largest economies over the weekend as the United States recorded 1,629 deaths on Sunday, considerably lower than the 2,000+ deaths that were reported last week.
Many European countries have also reported a fall in the number of new cases and deaths. The slowdown in new cases has given countries such as Germany and Spain the confidence to outline plans to start reopening their economies.
However, some analysts are still cautioning over the impact of coronavirus on the global economy and adjusting their investment exposure accordingly.
“We have increased our preference to be overweight government bonds, reflecting our view central banks will continue to act to maintain easy monetary conditions, and at the same time allow fiscal space to be created without higher yields,” said Michael Grady, head of investment strategy and chief economist at Aviva Investors.
“Our modest underweight equity allocation reflects our concern that economic weakness will translate into historically weak corporate earnings in 2020, which we do not think markets are fully discounting at this time.”
Other investors, such as Bridgewater Associates’ Ray Dalio, have said they are avoiding bonds in favour of buying opportunities they see in equities. Ray Dalio has also said ‘cash is trash’ – a view that would suggest now is the time to making investments.
US earnings season started last week with major US banks reporting lower profits and warning on the outlook. However, many of the banks’ shares rose, providing support for the argument the negative impact on the coronavirus on corporate earnings is largely priced in.
