Market Recap 27th April

Negative US oil prices!? Yep, you heard it right. The coronavirus has been the cause of the deepest fall in demand for the past 25 years. The downturn of major economies as consumer confidence lays low, in combination with the minimisation of travel, has wiped out oil demand. Nonetheless, oil producers have continuously supplied excess oil, causing an imbalance. 

“Petrol retailers should not use the falling oil price to increase profits and should instead pass on the full benefit to struggling motorists” – Australian Competition and Consumer Commission 

Transport back to Australia, this opens the doors for petrol firms to manipulate the reduction in oil prices to further benefit their profit margin. RAC Western Australia’s manager of vehicles and fuels, said fuel companies should be able to cut margins on fuel immediately. Coming from an 18 year old still on their L’s, I’ve heard how the drop in petrol prices have been nothing but W’s for wallets recently. 

The International Monetary Fund is “extending an economic lifeline”, by making $50 billion avalible through its emergency financing facilities for low income and emerging market countries. The poorest members of the IMF can access 0% interest for up to $10 billion in loaned funds through the Rapid Credit Facility. The IMF pulls an uno reverse card dressed as the Catastrophe Containment and Relief Trust (CCRT), which provides eligible countries with up-front grants for relief on IMF debt. Hopefully, the IMF’s continual support will lessen the blow of its predictions last week for global economic growth.

In other news, it’s 10s all around this week with the RBA predicting falls of 10 per cent for both national output and unemployment rate over the first half of the year. These dramatic falls liken the current economic contraction to the Great Depression of the 1930s. Meanwhile, the RBA reports purchases of around $47 billion of government bonds as part of its quantitative easing policies in an attempt to stimulate investments and consumption. But all in all, we are urged to remain optimistic – strong rebounds of 6-7 per cent in GDP growth have been forecast for 2021. 

The catchline for this week’s stock market news was the one thing on investors’ minds:  Thank God It’s Friday! After experiencing a four-day decline during the week, the S&P/ASX 200 rose 25.5 points to close at 5242.6 on Friday afternoon. The continuous falls during the week reflect increased scepticism in the equity market as investors are kept in the dark about company earning profiles. However, the bounce back on Friday can be largely attributed to gains in the energy and mining sectors, with Oil Search and CSL rising 4.4 percent and 2.3 percent respectively. 

Screen Shot 2020-04-26 at 8.27.08 pm
Sourced from

Turning to the education sector, despite the government announcement of an $18 billion funding agreement to help keep universities afloat during the year, the educational institutions risk deflating under financial pressure. The enormous loss in international student intake threatens to shake the economy to its core by blowing university revenue by up to $19 billion over 3 years. The projected erosion of $30-60 billion from the national economy has caused leading universities to start shedding casual staff, with UNSW coaxing employees to accept a pay cut to avoid losing their jobs.