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Coronavirus and the markets: Twice-weekly update [VIDEO]

Twice-weekly market video update

In complex times like these, it is important to not be overwhelmed by the abundance of information and to select and interpret the news we consume. To help with this, we have decided to offer twice-weekly video updates, every Monday and Thursday, to our audience with the key takeaways from the market news. This is an initiative that combines the daily work of our investment advisers with our market insights to cut through the often chaotic news cycle and understand what actually impacts our investors.

Thursday 28 May

  • Reopening plans are lifting the mood in markets but the 750 billion euro stimulus package unveiled by the European Union is now likely to take center stage as it attempts to shore up an economy flirting with the worst-case scenario foreseen by its central bank. It is also a radical vision that could herald unprecedented integration between member states and will be essential in helping countries attract foreign investors after the pandemic. Now, the process of getting the sign off from member states will begin. Austria has said it wants talks on the size and shape of the plan while the move will provide a serious test for the safest asset the EU has to offer: German bonds.
  • The U.S. House passed a bill authorizing sanctions against Chinese officials responsible for human rights abuses against Muslim minorities. The vote came on the same day the Trump administration said Hong Kong is no longer politically autonomous from China, a move that could revoke the city’s special trading status with the U.S. China said Hong Kong is an internal affair and will take “necessary countermeasures in response.”
  • Angela Merkel, speaking before the U.S. bill passed, said the EU has a “great strategic interest” in maintaining cooperation with China and she’ll prioritize their relationship when Germany takes over the six-month rotating EU presidency on July 1.
  • German inflation continues to slow. Flash CPI data for May are expected to show price growth slid to 0.7% from 0.8%, according to consensus. Bloomberg Economics sees a deeper dip to 0.4%, but cautions that data collection was impaired by the virus mess. In Spain, prices are seen falling at a quickening clip, with BE forecasting -0.8%. June should see Spain inflation edging closer to zero.
  • The BOE is ready to do more to revive growth. Cutting interest rates into “unprecedented territory” is one option, Governor Andrew Bailey wrote in a Guardian op-ed. As for the Fed, it said the U.S. business outlook remains “highly uncertain and most contacts were pessimistic about the potential pace of recovery.” St. Louis’s James Bullard said April was likely the worst of it, though, and New York’s John Williams agreed we’re close to the low point.
  • U.S. deaths from the coronavirus reached 100,000, the highest tally in the world. In a sign of resurgence risks, South Korea had the most cases in seven weeks. Japan had fewer overall fatalities in the first quarter, indicating that the virus toll wasn’t underreported in the period even with low testing. The English Premier League said only four out of 1,008 people tested positive from tests this week.
  • SoftBank is planning deep cuts within its Vision Fund investment arm. The reductions could affect about 10% of staff, people familiar said. The unit currently employs about 500 people, with the majority based in its London headquarters, alongside offices in San Francisco and Tokyo. The fund lost 1.9 trillion yen ($17.7 billion) last fiscal year after bets on WeWork and Uber soured.
  • U.S. initial jobless claims are expected to stay high by historical standards — but will be less awful than in recent weeks. Consensus sees new filings totaling 2.1 million for the week ended May 23 while Bloomberg Economics projects 2 million, down from about 2.4 million a week earlier. The second print of first-quarter GDP will probably still show a 4.8% contraction, while durable goods orders are seen plummeting 1.1% in April. Pending home sales for the month are expected to contract 17%.

Tuesday 26 May 

  • China sought to reassure Hong Kong — and the rest of the world — by declaring the city’s judiciary will remain independent even if proposed new national security laws take effect. Still, doubts persist. After a resurgence in demonstrations over the weekend, Xie Feng, the foreign ministry’s local point man, gave few details of the package or its implementation. He also mischaracterized the aims of most protesters, claiming changes are needed to stop separatists.
  • Beijing and Washington kept tensions on the boil. China pushed back against the blacklisting of 33 of its firms by the U.S., and defended its crackdown in Xinjiang that prompted the action. The foreign ministry described the restrictions on access to American technology as interference in Chinese internal affairs. It urged the U.S. to withdraw the measure, but didn’t announce any retaliatory steps.
  • The ECB may take further action. Key policy maker Francois Villeroy de Galhau told a Paris conference there is room to innovate and act “rapidly and powerfully,” signaling it could boost its emergency bond-buying program. He also signaled that he’d like to see limits on the current 750 billion-euro plan loosened even more.
  • Britain’s outdoor markets and car showrooms can reopen from June 1 as long as they meet guidelines to protect shoppers and workers, and other retail outlets selling shoes, clothes and toys among other things can open from June 15. Pubs, clubs and restaurants will stay dark until at least July. Dominic Cummings defended his trip that flouted lockdown rules, and Boris Johnson declined to pass judgement.
  • Virus update: the WHO temporarily halted tests on hydroxychloroquine in its Covid-19 drug trials pending more data because of safety concerns. Dubai will reopen its economy and ease lockdown travel from May 27.Singapore prepared to unveil a fourth stimulus package after saying the economy may shrink by as much as 7% this year, steeper than a previous estimate projecting a contraction of no more than 4%
  • Sanofi is selling a stake in Regeneron valued at about $13 billion, in a deal that will give it more firepower to invest in treatments for cancer. Regeneron has agreed to repurchase $5 billion of stock, and the rest will be sold through a public offering of about 12.8 million shares that’s worth more than $7 billion based on Friday’s closing price, making it the largest public equity offering in the heath-care industry on record. There will be no change to their partnership.
  • Germany agreed on a 9 billion-euro bailout for virus-hit airline Lufthansa, sending shares up 7.5%. It’ll take an initial 20%, which could rise to a blocking minority of 25% plus one share in the event of a hostile takeover. Finance Minister Olaf Scholz said Germany’s investment would be temporary, but stressed that the timing of an exit would depend on the pace of Lufthansa’s recovery. The plan requires EU approval and will almost certainly be challenged by rival carriers such as Ryanair.

Friday 22 May

  • China kicked off its annual meeting of the NPC by nixing the most eagerly awaited data point: a GDP forecast. Premier Li Keqiang blamed the pandemic and trade friction for clouding the outlook, though he vowed to implement phase one of the U.S. deal. Beijing aims to create over 9 million urban jobs and cap unemployment in cities around 6%. The 2020 budget deficit will exceed 3.6% of GDP, with defense spending up 6.6%, and the CPI target is 3.5%.
  • Li could have added the potential for renewed turmoil in Hong Kong as a threat to growth. In the same address, Li said a new law cracking down on dissent would allow the governments in Hong Kong and Macau to “fulfill their constitutional responsibilities,” and Beijing will push ahead with a plan to integrate Hong Kong with others in southern China, a step many locals won’t welcome. Concerns over Hong Kong’s future dragged the Hang Seng more than 5% lower, leading declines across the board in Asian and European equity markets.
  • Britain posted a record budget deficit in April as the government unleashed an unprecedented package to deal with the pandemic. The budget deficit stood at 62.1 billion pounds last month, equal to the total borrowing in the whole of the previous fiscal year.
  • Burberry may disclose deepening woes due to its reliance on Chinese tourists when it reports today. Alibaba watchers will look for more signs of recovery after China eased its lockdowns. Analysts expect to see an acceleration of online sales, and will listen for fresh details on the company’s $28 billion investment in cloud computing. Deere may see operating margins hit by lower cotton sales and higher supply-chain costs, Bloomberg Intelligence said.
  • With all the recent speculation about negative rates in the U.K., it’s notable that the latest BOE data indicate the lowering of the policy rate to 0.1% in March from 0.75% has had only a muted impact on new loan costs. If policy makers do take a plunge below zero they’ll want to ensure the cut is fully passed on. To do that, the BOE might offer extremely cheap funding to lenders, making its Term Funding Scheme more generous.

Monday 18 May 

  • Fed Chairman Jerome Powell warned the recovery could stretch through the end of 2021. “Assuming there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year,” he said in an interview conducted Wednesday that aired Sunday on CBS. “For the economy to fully recover people will have to be fully confident, and that may have to await the arrival of a vaccine.”
  • Boris Johnson, writing in the Mail on Sunday, warned that Britain may not be free of the virus for some time to come, though the Sun reported the PM wants to get back to near-normality by July. Chancellor Rishi Sunak fields questions from lawmakers today on how the nation will fund the steps needed to jump start the economy. BOE Chief Economist Andy Haldane told the Telegraph the bank is discussing options including negative interest rates.
  • Spanish PM Pedro Sanchez will ask Congress to extend the nation’s state of emergency for another month, while Italy is taking a “calculated risk” with an accelerated easing of its lockdown, PM Giuseppe Conte said. California is now 75% open, and Apple has opened about 100 of its retail outlets. Global infections exceed 4.7 million, while fatalities topped 315,000.
  • SoftBank Group posted its worst-ever earnings in 39 years with its Vision Fund losing 1.9 trillion yen ($17.7 billion) after writing down investments including in WeWork and Uber. Shares rose after the company earlier announced a $4.7 billion buyback. Alibaba co-founder Jack Ma will leave its board. Separately, SoftBank is in talks to sell a significant portion of its T-Mobile US stake to Deutsche Telekom, the WSJ reported.
  • Japan’s economy plunged into recession in the first quarter, and the worst is yet to come. GDP shrank by an annualized 3.4% as household spending and business investment shriveled and supply chains were hit by overseas disruptions. The result was a tad better than the 4.5% contraction that was forecast, but consensus sees a further 21.5% decline in the current period.
  • Global oil output cuts are deep and fast. OPEC+ is well on the way to slashing 9.7 million barrels a day just two weeks into its new deal, according to industry watchers, and Petro-Logistics said exports are down by 15%. In the U.S., production has dropped by 1.5 million barrels a day since mid-March, with at least half a million of those reductions coming in the Bakken. Canada has trimmed by almost 700,000 barrels.
  • In 13F filings, Warren Buffett is getting out of Goldman Sachs. Berkshire Hathaway sold off 84% of its longtime stake in the bank in the first quarter. The company also slashed its investment in JPMorgan, and exited its bets on Travelers Cos. and Phillips 66. It boosted one banking bet, increasing its stake in PNC Financial.

Thursday 14 May 

  • The BOE may be poised to boost its asset buying. Governor Andrew Bailey said it’s “pretty clear” investors expect its QE program to be expanded, and policy makers have kept the option open to build on the 200 billion-pound program undertaken in March as they cushion the pandemic’s economic toll.
  • Italy doubled down on its stimulus efforts, approving a much-delayed 55 billion-euro package aimed at boosting liquidity for businesses and aiding to families. The plan includes emergency income measures, extra funding for firms and tax cuts worth some 4 billion euros. Grants for small and medium-sized companies will also be available. Bloomberg Economics said the fiscal spending will still be 65 billion euros short of plugging the income gap.
  • The pandemic will erase four years of world growth and may push 130 million into poverty by 2030, the UN said. The report forecast a 3.2% drop in global growth this year. Trump accused infectious disease expert Anthony Fauci of playing “all sides of the equation” in warning that reopening too soon could spark virus flare ups. “To me it’s not an acceptable answer, especially when it comes to schools,” the president said. Infection rates eased nationwide but accelerated to 3.3% in Texas.
  • Fiat Chrysler and PSA will scrap 1.1 billion euros of dividends each agreed to pay as part of their merger agreement. A special 5.5 billion euro dividend Fiat Chrysler had promised investors wasn’t mentioned in a joint statement yesterday. The deal is on track to close before the end of the first quarter.
  • Goldman sees the U.S. labor market getting a lot worse than previously thought, but the economic recovery will also be more robust. Economists David Mericle and Ronnie Walker said the jobless rate will peak at 25%, up from a previously forecast 15%, before stabilizing near 10% at year-end. After GDP shrinks 39% this quarter, the economy will expand 29% in the third quarter — a sharper V-shape than the 19% previous estimate.

Monday 11 May

  • Boris Johnson announced the “first careful steps” to restart the U.K. economy. There will be no immediate end to the lockdown, but restrictions on movement will be eased from Wednesday, starting with unlimited outdoor time for some sports and freedom to drive to parks and beaches. The PM said he’d tighten the rules in key areas, and those who flout social distancing guidelines face fines starting at 100 poundsSome schools and shops can reopen in June.He’s already getting pushback from politicians and labor unions seeking more clarity on safety.
  • The PBOC pledged “more powerful” policies to counter the virus impact in China, with more focus on growth and jobs. In its quarterly monetary policy report, the bank didn’t reiterate an earlier vow to “avoid excess liquidity flooding the economy.” It did repeat that prudent monetary policy will be more flexible and appropriate, and said it will keep liquidity at a reasonably ample level.
  • VP Mike Pence is self-isolating away from the White House after an aide tested positive. The pace of new cases in the U.S. slowed to 1.8%, while new infections and deaths fell in Germany, France and Spain. China sealed off a city in the northeast after cases spiked. Hong Kong police arrested at least 10 and fired “pepper balls” to disperse pro-democracy demonstrators who defied social distancing rules. South Korea saw a jump in cases linked to reopened night clubs.
  • Argentina is said to be preparing to extend the deadline to its debt offer to May 22 and will publish the extension in its official Gazette today. Alberto Fernandez will accept counter offers from creditors until today after bondholders didn’t approve terms that included taking significant losses on interest and allowing a three-year grace period before any payments are made.
  • Chart of the Day: A key money maker for French investment banks has blown up when they need it most. BNP Paribas, Societe Generale and Natixis all saw revenue from equities trading wiped out in the first quarter by heavy losses on complex derivatives, an area of traditional strength. The result is a 1.4 billion-euro slump in equities revenue just as they rush to set aside billions to provision for an expected wave of defaults.

Thursday 7 May

  • Liberty Global and Telefonica agreed to combine their U.K. businesses 02 and Virgin Media, creating a company with an enterprise value of 31 billion pounds. The deal, negotiated since December, will bring cost savings of 6.2 billion pounds. Telefonica will get an initial payment of about 2.5 billion pounds from John Malone’s Liberty Global and another 5.7 billion pounds in future recapitalizations, and they will have equal stakes in the venture.
  • Lufthansa’s 10 billion-euro bailout is being delayed by German lawmakers arguing against the government taking a direct 25% stake in the carrier and having veto power. Airline representatives are also seeking a smaller stake while the finance and economy ministries defended the original plan. Talks may continue into next week as differences get ironed out.
  • BOE policy makers said they are ready to do more to support the slumping economy, which they see shrinking 14% this year, including a 25% drop this quarter. The central bank left rates unchanged. It refrained from boosting its bond-buying program, though two officials voted for an immediate 100 billion-pound increase in purchases. The pound rallied. Norges Bank is expected to stand pat and the Czech National Bank will probably cut rates.
  • Britain could introduce border checks and the initial relaxation of the lockdown is likely to be limited. Spain’s parliament voted to extend its state of emergency to May 23 and Denmark is considering opening malls and restaurants from Monday. As debate mounts, the WHO is considering a mission to seek the source of Covid-19 in China. The agency said deliberately infecting healthy volunteers may speed vaccine studies.
  • Benjamin Netanyahu can form a government despite the corruption charges against him, Israel’s highest court ruled. The controversial decision clears a major obstacle to installing the nation’s first permanent government since December 2018, even as the PM’s criminal trial looms in late May. Netanyahu and rival Benny Gantz set a May 13 date for swearing in the coalition.
  • China’s exports rose 3.5% in dollar terms last month, defying expectations for an 11% tumble. Imports dropped a worse-than-expected 14.2%. While the jump in exports reflects pent-up demand, it could ratchet up trade tensions with the U.S. Trump said he can report next week on whether he’s satisfied with China fulfilling phase one of the trade deal.
  • Larry Fink has a stark message: Things are likely to get worse. Mass bankruptcies, empty planes, cautious consumers and an increase in the U.S. corporate tax rate to as high as 29% were part of a vision the BlackRock CEO sketched out on a call this week. Fink has been advising President Trump and BlackRock is playing a key role in the Fed’s efforts to stabilize markets, helping the central bank buy billions of dollars in assets.
  • Yesterday, U.S. stocks fell for the first time in three days as investors digested mixed corporate earnings and worsening economic data. The dollar strengthened the most in about three weeks and Treasury yields increased.The S&P 500 and Dow Jones Industrial Average indexes closed lower, while information technology and consumer discretionary sectors kept the Nasdaq Composite in the green as investors continued to bet Apple Inc. and Microsoft Corp. will perform well in the stay-at-home world. The Stoxx Europe 600 Index slumped. Yields on 10-year Treasuries rose the most in a week with the U.S. increasing the amount of debt it plans to issue in quarterly refunding auctions to a record high of $96 billion to provide government funding as the economy heads into a recession. Bonds declined in the euro region as investors fretted over Tuesday’s German court ruling criticizing the European Central Bank’s easing measures. The euro weakened amid a slew of bleak economic forecasts by the European Union, heading toward its lowest close since mid-March, back when markets were roiled by demand for the U.S. currency. West Texas oil retreated after a rally that had doubled prices in the past five days.

Monday 4 May 

  • Warren Buffett got out of airline stocks in April, four years after piling in — and booking losses in the process. “The world has changed for the airlines,” he said at Berkshire Hathaway’s annual meeting, which was streamed online. He also said he hoped he’d convinced his followers to “bet on America.” Berkshire was sitting on a record $137 billion pile of cash at the end of the first quarter.
  • Roche received emergency-use authorization from the FDA for its new test determining if someone has been exposed to Covid-19. The drugmaker said it has already started making shipments and tens of millions of the antibody test will be available in the U.S. and much of Europe this month. Gilead will get its antiviral drug remdesivir to patients as soon as this week, its CEO told CBS.
  • Britain will unveil back-to-work plans within days. France said easing dates may differ by region and advised against booking summer travel. Italy had the fewest daily fatalities in almost two months. Donald Trump wants Americans back to work.
  • Rolls-Royce may shed up to 15% of its payroll, implying about 8,000 job cuts. Talks with labor unions continue. Airbus has no immediate need for state support, a French official said. Norwegian Air agreed with bondholders to swap debt for equity, taking a step closer to state loan guarantees. Prada’s sales in China, South Korea and Taiwan rose by “double digits” after stores reopened.
  • North Korean troops fired at their South Korean counterparts in the DMZ that divides the two nations for the first time in years. North Korea shot “several times” at a South Korean guard post, prompting retaliatory fire. The nations held talks after the incident, and the shooting was “accidental,” according to Pompeo.
  • The ECB’s plan to flood euro-area banks with cash will drag three-month Euribor down today, moves in interest-rate futures indicate. Funding costs may dip as low as minus 0.4%, according to Commerzbank’s fixed-rate strategy chief Christoph Rieger. “It’s money for nothing,” he said. “I had thought the June TLTRO would be huge before today’s changes, and the changes add weight to this view.”

Thursday 30 April [Watch the video]

  • A crash of the euro-area economy is underway. First-quarter GDP prints may show the region is heading for its biggest slump since World War II. Bloomberg Economics expects a 4.8% contraction, deeper than consensus for -3.7%, with the biggest hit recorded by Italy, and a much sharper decline in the current period. Later today the ECB may stand pat on policy, but BE expects the size of the Pandemic Emergency Purchase Programme to be increased by 250 billion euros.
  • The Fed vowed to keep policy extremely loose, warning the pandemic “poses considerable risks to the economic outlook over the medium term.” The FOMC kept rates near zero as expected while leaving its guidance vague. Jerome Powell predicted the next jobs report will show unemployment in double digits, and second-quarter growth will fall at an unprecedented rate.
  • Donald Trump is organizing a Manhattan Project-style effort to develop a vaccine and have 100 million doses ready by year-end. Operation Warp Speed will unite pharmaceutical companies, government agencies and the military in an aim to cut the development time by as much as eight months. Under the arrangement, taxpayers and not drug companies will shoulder much of the financial risk of failure.
  • Gilead buoyed hopes with positive data from a trial for its Covid-19 treatment. Infectious-disease expert Anthony Fauci called the result for remdesivir “quite good news,” and Trump said he’d ask the FDA to expedite approvals. The agency will announce emergency use authorization imminently, the NYT said. CEO Daniel O’Day said more than 50,000 courses of the drug are ready to ship. A Chinese trial published in The Lancet medical journal was less positive.
  • Virus update: Britain will send home testing kits to 100,000 random people to gauge the current spread. Hospitalizations in France continued to decline, and a top WHO official praised Sweden’s “strong strategic approach” to fighting the outbreak by relying on citizens to be informed and make decisions. New cases in the U.S. rose 2.7%, slower than the 3% average over the prior week.
  • Norway joined global efforts to curb oil supply for the first time in 18 years, announcing it will trim production by 250,000 barrels a day in June and 134,000 barrels in the second half. U.S. output will fall by 2 million barrels a day in May versus March due to shuttered wells, Mercuria Energy said. The White House may announce as soon as today a plan to offer loans to oil firms possibly in exchange for financial stakes, people familiar said.
  • Microsoft’s sales and profit both rose, buoyed by cloud. Revenue of $35.02 billion topped estimates. Facebook’s revenue rose 18% and it said business was steady in the first few weeks of AprilTesla had its first quarterly profit to begin a year, though it burned through $895 million in cash. SoftBank Group added $1.4 billion to estimated losses in the fiscal year ended March, bringing the total to 900 billion yen ($8.4 billion), after more WeWork writedowns.
  • The flood of Americans filing for unemployment continues, if at a less horrific rate. Initial jobless claims probably dropped to 3.5 million last week, economists predict, from 4.43 million in the prior period. That would bring the six-week total to about 30 million people. More broadly, the pandemic may hurt up to 57 million workers in the U.S. once furloughs and reduced hours and pay are included, according to McKinsey.
  • China’s first official economic gauge for April showed factory activity slowedThe official manufacturing PMI fell to 50.8 from 52, missing consensus, while non-manufacturing rose to 53.2, a solid beat. The economy is at a dangerous stage, said Bloomberg Economics. The supply side is up to speed and expanding, but demand is flagging overseas. With weak external demand threatening to snuff out the nascent recovery, more policy support is in store.
  • U.S. stocks rallied to a seven-week high on better-than-estimated revenue for Google’s parent company and hopes for a coronavirus treatment. Oil surged. S&P 500 Index gained 2.7% in a broad advance, with four stocks up for one that fell after Gilead Sciences Inc. said its experimental drug helped -19 patients recover faster. The Nasdaq Composite Index rose to within % of erasing losses for the year, led by Alphabet Inc. after it reported an ad-slowdown that wasn’t as bad as expected. The dollar weakened. Stoxx Europe advanced.

Monday 27 April

  • More nations in Europe are making plans to partially reopen their economies as infections and deaths decline, with Italy starting to allow families to visit each other and France aiming to ease its lockdown on May 11. Pressure is building on Boris Johnson to follow suit, as he returns to work today. Dominic Raab rejected that idea Sunday, telling Sky News the outbreak is still at a “delicate and dangerous” stage. So are the EU-U.K. trade talks, the Guardian reported.
  • The death toll from coronavirus may be almost 60% higher than reported in official counts, according to an FT analysis of rising mortality from all causes across 14 nations since the outbreak began. Bill Gates is funding production of the seven most promising ideas for a vaccine as he refocuses his philanthropy on fighting the outbreak. “If everything went perfectly, we’d be in scale manufacturing within a year,” Gates told CNN. “It could be as long as two years.”
  • New infections in the U.S. rose by 3.3% yesterday, below the average daily rise of 3.6% over the previous week. Fatalities in New York were the lowest since late March. Hot spots in Europe also showed improvement, with deaths in Spain, Italy and France the lowest in more than a month. In a sign of Asia’s hyper vigilance, Taiwan is also mulling easing restrictions — but only after it’s now seen zero local transmissions for two weeks.
  • Airliner woes: Lufthansa doesn’t see travel demand returning to pre-crisis levels until 2023, CEO Carsten Spohr said. The carrier is burning through 1 million euros an hour, as it’s flying 1% of its usual passenger load. Spohr sees his fleet shrinking by 100 aircraft, leaving it with about 10,000 surplus workers. Richard Branson is weighing a bigger infusion to save Virgin Atlantic than he earlier pledged, people familiar said.
  • Saudi Arabia started its oil production cuts a little early. The kingdom is reducing output from 12 million barrels a day and will probably be pumping at its target level of 8.5 million before May, an official said. It joins Kuwait, Algeria and Nigeria in turning down the taps ahead of the May 1 start date for new OPEC+ cuts. In the U.S., drillers idled more rigs last week, taking fleet activity to the lowest since July 2016, Baker Hughes said.
  • The best-case scenario for the euro area this year is an 8% contraction in GDP, according to Bloomberg Economics. A second wave of infections prompting tighter controls could result in a 10% decline. There’s also the possibility governments fail to act strongly enough in a timely manner, scarring the economy for longer and risking turning a public health crisis into a sovereign debt crisis.
  • Last Friday, the S&P 500 gained 1.4%, but still finished down 1.3% in a week that brought fresh evidence of deep damage to the American economy. Treasury yields fell and the dollar strengthened on the week.

Friday 24 April

  • The EU neared a deal on rebuilding, with regional leaders endorsing a short-term 540 billion-euro plan. But they failed to make much progress on a longer-term program as member states were split on how to spread the financial strains. The idea of a European “bad bank” to bundle and sell bad loans is three years old and hasn’t been advanced “for good reasons,” Bundesbank board member Joachim Wuermeling told Handelsblatt.
  • The U.S. House passed and sent to Donald Trump the $484 billion aid package for small businesses, hospitals and virus testing. Next steps may include a government lending program for oil firms seeking federal aid. Further measures may include “alternative structures with banks” for those not credit-worthy, the Treasury secretary said.
  • A summary of a Chinese trial of Gilead’s Covid-19 drug remdesivir appeared to show it was a failure. The company and a scientist working on the test said the synopsis didn’t fairly represent the actual results. The WHO said it accidentally posted the results on a website that helps track therapies for the disease. The summary was removed, but details of the post were reported by the FT. Shares closed 4.3% lower.
  • Boris Johnson plans to return to Downing Street as early as Monday after recovering from the virus, The Telegraph reported. Spain had its greatest number of new cases and fatalities in almost a week, while Italy saw recoveries from Covid-19 overtake new infections for the first time. Cases in the U.S. rose at the slowest pace in three weeks.
  • Corporate roundup: Boeing is poised to cut 787 Dreamliner output by about half and announce workforce reductions when it reports first-quarter earnings next week, people familiar said. Intel slid in late trading after pulling its full-year sales forecast and predicting second-quarter profit will miss estimates. Netflix sold $500 million of bonds at a 3.625% yield, among the lowest ever seen in the U.S. high-yield bond market and in line with prices typically offered on investment-grade bonds. The 470 million euro portion priced at 3%.
  • Public companies deemed critical to U.S. national security will be required to offer an equity stake to the government when they seek virus-related financial relief. For private companies, Steven Mnuchin “may, in his discretion, accept senior debt instruments” or other financial interests, the Treasury Department said. The requirements are similar to those for airlines seeking payroll aid from the package passed by Congress.
  • China’s GDP growth will slow to 1.8% in 2020, according to a new Bloomberg survey of economists. That’s down from a forecast of 3.7% in March. The PBOC injected $7.9 billion into the banking system via the targeted medium-term facility, rolling over some of the funds that came due. The one-year funding was offered at 2.95%, down from 3.15% at the last operation in January.
  • Consumer prices in Japan languished in March. The core CPI rose 0.4%, slowing from 0.6% in February, as spending weakened. The BOJ may abandon its 80 trillion yen ($742 billion) annual purchase target for JGBs and replace it with a mandate to buy an unlimited amount, Nikkei reported. Also on the agenda for Monday’s policy meeting: Doubling buying targets for CP and corporate bonds.
  • Economists expect the ECB to boost its emergency bond buying in coming months, a Bloomberg survey showed. One in four respondents expects the ECB to increase the size of its pandemic purchase program, also known as PEPP, as early as Thursday, when the Governing Council holds a scheduled policy meeting. Most see it happening by September, with the median estimate projecting a top-up of 500 billion euros.
  • Yesterday, U.S. stocks closed mostly lower after a report said that a leading experimental coronavirus drug performed poorly in a test. Crude oil climbed back above $16 a barrel. The S&P 500 finished in the red after whipsawing investors between gains and losses in the last few hours of trading. Elsewhere, the dollar was little changed against most major peers. Gold managed its first back-to-back gain in over a week as investors weighed the prospects of another wave of stimulus in virus-hit economies.

Thursday 23 April

  • The ECB will accept some junk-rated debt as collateral for loans to banks, in a move that aims to shield the euro area’s most vulnerable economies as they face the risk of credit downgrades. The central bank will take bonds as long as they were rated at least BBB- as of April 7. There’s concern some government and corporate debt may be downgraded due to the fiscal costs of fighting the pandemic.
  • EU leaders meet again today to discuss the 2 trillion-euro economic revival plan. While agreement is growing around the edges, squabbling over details will probably be rife, officials said. They don’t expect to set any deadlines.
  • Oil extended its recovery overnight, partly fueled by President Trump authorizing the Navy to destroy any Iranian gunboats that harass American ships. Energy producers led the advance in Asia, continuing a trend seen on Wall Street. US and European futures were steady. Treasuries edged higher and the dollar retreated.
  • Donald Trump signed an executive order temporarily curbing the issuance of new green cards to immigrants in what he described as a bid to limit competition for jobs as the U.S. prepares to reopen the economy. The president also reversed course somewhat, saying he “disagreed strongly” with the governor of Georgia’s plan to end the local lockdown. “It’s just too soon.”
  • Spain’s parliament backed the PM’s request to extend a state of emergency to May 9, while Italy and France posted the most new cases in the last few days. The British government will survey 20,000 households to track the spread of the virus. New York saw its lowest tally of new fatalities since early April. The NYSE may reopen in May in phases, CNN reported.
  • Roiled oil worked out well for some, but maybe not legally in some cases. Regulators in the U.S. and U.K. are probing whether traders profited from inside information related to Russia’s stance during its heated negotiations with OPEC last month, people familiar said. The parties that made the bets employ people with ties to the Kremlin, according to one person.
  • The US labour market is collapsing. Another 4.5 million Americans probably filed jobless claims last week, consensus shows, some improvement from the previous 5.25 million figure. The whisper number is just over 5 million, and Bloomberg Economics is even more pessimistic with an estimate of 5.5 million. Either way, last week’s data would have been worse if not for the Good Friday holiday, so the unemployment rate is still headed higher.
  • As bad as today’s flash PMI data for April are likely to be, the worst is yet to come, according to Bloomberg Economics. “The euro-area PMI for April may provide limited additional information on the economic damage” resulting from widespread lockdowns, said Jamie Rush, chief European economist. The DI “struggles to capture the extent of output losses, especially at the extremes.”
  • Yesterday, U.S. stocks halted a two-day slide as investors digested the latest round of corporate earnings and optimism about the eventual reopening of the economy increased. Oil rose from historic lows. The S&P 500 Index rebounded from the worst sell-off in three weeks amid quarterly results that sparked speculation a recovery will be sooner than expected. The Stoxx Europe 600 Index increased broadly in the wake of Tuesday’s slump. Treasuries fell along with European bonds and the dollar strengthened.

Wednesday 22 April

  • Brent futures dropped 16% to the lowest since June 1999 amid persistent concerns about the glut. WTI also extended losses after U.S. regulators delayed a decision on output cuts. Texas Railroad Commissioner Ryan Sitton reiterated his call for a 20% reduction in the state’s output, conditional on other states and nations making similar moves, and Iraq said it was open to further cuts if its OPEC+ partners agree, and producers comply.
  • The Senate passed a $484 billion deal that will restock an exhausted small business aid program and provide more funds for virus testing and hospitals. The House is set to vote on the measure tomorrow, and Donald Trump said he’d sign it. It includes $320 billion for the PPP meant to help small businesses keep workers employed. Steven Mnuchin said it would probably be the last tranche, though the White House could “recalibrate” if needed.
  • The deal comes as new infections in the U.S. rose by the most in almost three weeks, although White House health adviser Deborah Birx said most major metropolitan areas were seeing improvements. Trump said the 60-day immigration pause may exclude health and food workers. France saw the number of patients in ICUs fall to the lowest in three weeks, while new deaths declined. Recoveries in Italy almost surpassed new cases for the first time.
  • ECB policy makers will hold a call this evening to discuss whether to accept junk-rated debt as collateral from lenders, people familiar said. The move may be intended to preempt concerns some sovereign and corporate bonds will soon be downgraded due to fiscal burdens related to the pandemic. Mexico’s central bank unexpectedly cut rates by 50 bps to 6%, citing among other things the sharp drop in oil prices.
  • Turkey’s central bank will weigh the lira’s slide against the slumping economy in deciding policy today. Consensus sees authorities trimming the key rate by 50 bps to 9.25%, but Governor Murat Uysal has tended to out-do expectations since taking the job last July, so the cut could be bigger. Turkey’s rates are already among the world’s lowest when adjusted for inflation.
  • Britain will likely sell 270 billion pounds of gilts this fiscal year to meet soaring spending needs related to the outbreak, according to a Bloomberg survey of nine primary dealers. At that rate, issuance volume would set a new record. Still, the market has support from the BOE’s QE program, so yields will likely remain capped.
  • Yesterday, U.S. stocks tumbled the most in almost three weeks and Treasury bonds rallied as turmoil in the crude oil futures market triggered a fresh bout of risk aversion. The S&P 500 fell 3.07%, with equity investors shrugging off a deal reached by the White House and congressional leaders on fresh spending to combat the impact of the coronavirus pandemic. The historic rout in crude rattled markets for a second day, with the June contract plunging almost 70% at one point after May contracts that expired Tuesday sank below zero for the first time in history. The benchmark 10-year Treasury yield dropped below 0.55%. The dollar climbed against most major currencies, with the won and ruble tumbling and the yen edging up.

Tuesday 21 April

  • WTI went negative for the first time as many storage tanks reached capacity. The May futures contract, which expires today, settled at minus $37.63 a barrel in New York. June’s contract settled at $20.43, with the gap between the two contracts the biggest ever by far. “The May crude oil contract is going out not with a whimper, but a primal scream,” said Daniel Yergin at IHS Markit. The May contract popped back above one dollar in Asia.
  • While WTI’s spasms were in some ways a technicality that will be resolved once the May contract goes away, they’ll also add pressure on Texas regulators who meet today to discuss possible restrictions on output. Donald Trump sought to ease supply concerns, saying the U.S. may put as much as 75 million barrels into the national reserves and will look into stopping Saudi shipments. Goldman predicts significant production cuts in coming weeks.
  • North Korean leader Kim Jong Un was in critical condition after cardiovascular surgery, according to a U.S. official, who added that Washington is studying the nation’s line of succession. Kim’s absence last week from events commemorating his grandfather’s birthday had already raised eyebrows. A report from Seoul-based NK Daily said Kim is mostly recovered from surgery.
  • Trump said he’ll sign an executive order temporarily suspending immigration as a step to contain the virus. He said he did so “in light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens.” Mitch McConnell set a Senate vote on the latest rescue package for today, though snags remain over how to distribute assistance to states and what agency should oversee testing.
  • Virgin Australia became Asia’s first airline casualty of the coronavirus, calling in administrators after requests for state help failed. Deloitte will take control of Australia’s No. 2 airline, which has more than A$5 billion ($3.2 billion) in debt and hasn’t made a profit for seven years. Virgin Australia had already furloughed 80% of its 10,000 workforce as travel restrictions deprived the airline of almost all income.
  • The resumption of talks on Britain’s relationship with the EU post-Brexit is giving pound traders one more thing to worry about. Analysts expect a roller-coaster ride, with Rabobank predicting a 4% plunge to $1.19 before a year-end rebound to $1.26 if a deal gets done. RBC’s Adam Cole sees sterling falling about 3% to 90 pence per euro by mid-year before it edges back up to 92 pence by year-end.
  • Yesterday, U.S. stocks fell from a six-week high, with investors on edge as oil futures plunged to unprecedented levels and a spate of corporate earnings on tap. The S&P 500 halted a two-day gain and the Dow Jones Industrial Average fell more than 2%. Chevron and Exxon led losses in the blue-chip index as West Texas oil futures expiring Tuesday turned negative for the first time, primarily because the end of the May contract forces physical receipt at a time when storage capacity is low. June prices fell below $22 a barrel. The Stoxx Europe 600 Index edged higher. European bonds dropped as Treasuries advanced.

Monday 20 April [Watch the video]

  • WTI opened the week by sagging to the lowest since 1999, falling about 16% to $15 a barrel, as the demand outlook remained grim. Near-term prices traded at big discounts to later-dated contracts concerning storage space is running low. The drop was exaggerated by tomorrow’s expiration of the contract for May delivery. Brent’s decline was more muted. U.S. oil explorers shut 13% of their drilling fleet last week, bringing the five-week reduction in American oilfield activity to 36%.
  • There were some positive signs in the coronavirus fight over the weekend. The U.S. hot spot of New York appeared to be “on the other side” of the outbreak, its governor said, after deaths and the number of hospitalizations fell. Spain, France and the U.K. reported the fewest fatalities in weeks, while Sweden claimed to be “on a sort of plateau.” Germany reopens its economy on a limited basis today. Global cases topped 2.4 million, with more than 166,000 deaths.
  • European countries’ lockdown exit strategies are developing at different speeds. Germany is allowing smaller stores to reopen and France will unveil within two weeks a plan to lift restrictions, but persistently high levels of cases in Milan are complicating Italy’s plans to restart the country’s economy and Spain’s measures could be extended well into May. Sweden says its controversial approach — with schools and restaurants left open — is starting to pay off, with stabilizing cases and deaths.
  • Boris Johnson’s team issued a furious defense of his handling of the crisis after reports in the FT and Sunday Times criticized his response as slow and inadequate. He’s got other fights simmering, too. Officials begin a week of discussions today over the post-Brexit U.K.-EU relationship. Britain’s opposition to extending the transition has hardened even as officials cited little progress beyond identifying key areas of disagreement.
  • ECB officials have held early talks with the European Commission’s department for financial stability and capital markets on setting up a eurozone bad bank that would take billions of euros in debt off lenders’ balance sheets, the FT said. The bad bank would take over non-performing loans left over from the 2008 financial crisis as well as the expected wave of toxic debt triggered by the pandemic’s economic fallout. On that, France’s economy may shrink 10% this year, the PM said.
  • Donald Trump kept pressure on China for its role in the outbreak. “If they were knowingly responsible, yeah, then there should be consequences,” he said. White House task force member Dr. Deborah Birx told ABC Beijing has a “moral obligation” to be transparent. The U.S. will temporarily postpone some tariffs for 90 days, though this won’t apply to anti-dumping or countervailing duties. As such, it won’t affect duties on China, steel, or enforcement actions Trump took against Airbus.
  • Chinese banks lowered borrowing costs and the government promised to sell another 1 trillion yuan ($141.3 billion) in bonds to pay for stimulus after Friday’s abysmal GDP data underscored the pandemic’s impact. The one-year loan prime rate was trimmed to 3.85% from 4.05%. The additional bonds will be sold by the end of May, with the money mostly going to infrastructure.
  • The outbreak has roiled the global gold market as lockdowns shut or slowed metal producers and curbed travel at a time when demand for bullion surged. Amid the volatility, prices in key hubs are diverging. The London gold market will have to allow delivery outside of the city if more strict travel limits kick in, the head of the London Bullion Market Association said.

Friday 17 April [Watch the video]

  • The pandemic ravaged China’s economy. First-quarter GDP plunged 6.8% year on year, the first contraction in decades. Consensus was for a 6% decline. The economy showed some strength in March, with factory output falling less than anticipated, though retail sales plunged more than forecast. Beijing said it hasn’t seen massive job losses but will step up policy support.
  • President Trump unveiled guidelines for gradually allowing states to lift social distancing in as soon as four weeks. Putting most of the onus on governors, the recommendations lay out a three-phase process to return to work and public life but allow for reimposing measures if infections flare up. The president said he expects fatalities, which are nearing 32,000, to be fewer than the most optimistic projections. “We’re opening up our country. We have to do that.”
  • Trump’s announcement came after the hard-hit state of New York extended its lockdown to May 15. The U.K. added three weeks to its restrictions as total infections there topped 100,000. Singapore reported its highest daily increase for a second day. Gilead Sciences rose after positive trial results for its experimental drug remdesivir.
  • Good news for the likes of Deutsche Bank, BNP Paribas and SocGen: The ECB is giving investment banks temporary capital relief on trading activities and will allow lower capital requirements when assessing how much money banks have set aside for market risks. The decision will be reviewed after six months.
  • Emmanuel Macron said richer members of the EU need to do more to pay for economic rebuilding if the 27-nation bloc is to survive. It needs to see “financial transfers and solidarity” if it’s going to “hold on” through the outbreak crisis, Macron told the FT. Spain will pay tens of thousands of the lowest-income households a “minimum living wage” starting in May, a campaign-trail promise that has now been accelerated.
  • Saudi Arabia and Russia signaled they may be open to further output cuts after the latest deal failed to halt crude’s retreat. “Both our nations are strongly committed to implement the agreed target cuts over the next two years and will continue to closely monitor the oil market,” they said. Dallas Fed chief Robert Kaplan said the existing agreement won’t do much to drain oversupply, and paying drillers to stand down might make sense.
  • Mixed signs for the U.S. labor market: Boeing will resume aircraft assembly in the Puget Sound area, recalling 27,000 employees.The decision covers programs that don’t include the 737. In finance, Cantor Fitzgerald will shrink its workforce, breaking with Wall Street institutions that vowed not to lay anyone off during the pandemic. Howard Lutnick’s firm plans to cut hundreds of jobs across divisions, people familiar said.
  • Trump said he expects the economy to “boom” once it’s re-opened. That prediction isn’t consistent with the way investors are pricing in prolonged deflation, but there are some believers. Firms including Allianz Global Investors and PGIM Fixed Income are wagering on a modest rebound in price pressures by purchasing TIPS and inflation swaps. As they see it, the stimulus is bound to revive inflation and growth.
  • Yesterday, in a very volatile session, the S&P 500 climbed and the Nasdaq 100 wiped out its losses for 2020. Traders also assessed a fresh batch of corporate earnings, with Morgan Stanley posting a 24% jump in trading revenue, while casting doubt on whether those gains can continue. Treasuries and the dollar rose. Oil closed under $20 a barrel for a second day.

Thursday 16 April [Watch the video]

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  • Donald Trump will unveil guidelines to ease stay-at-home rules today as he said the virus showed signs of plateauing in some regions. Recent data suggest the U.S. has “passed the peak” on new cases, and these developments “have put us in a very strong position.” He earlier held a marathon series of calls with dozens of business leaders. Executives pressed him to dramatically increase testing to restore public confidence, the WSJ reported.
  • The White House may pay U.S. oil producers to leave crude in the ground to help alleviate a glut that has caused prices to plummet and pushed some drillers into bankruptcy. The Energy Department has drafted a plan to compensate companies for sitting on as much as 365 million barrels worth of oil reserves and counting it as part of the U.S. government’s emergency stockpile, senior administration officials said.
  • Virus update: Germany will allow some smaller shops to reopen next week and schools to gradually restart in early May. Italy saw its lowest tally of new cases in four and half weeks, while fatalities in France rose to a record. In New York, Governor Andrew Cuomo ordered people to start wearing masks in public while at the same time saying the rate of new infections has become manageable. Global cases topped 2 million.
  • France proposed a new fund to aid recovery in the euro area, Handelsblatt reported. Instead of joint bonds with common liability, the region could adopt “new financial instruments” tied to partial liability based on members’ GDP, Finance Minister Bruno Le Maire said. Separately, firms that get equity injections from EU members won’t be allowed to pay dividends, buy back shares or pay bonuses, the FT reported.
  • Benjamin Netanyahu and rival Benny Gantz failed to reach a power-sharing deal by a midnight deadline, making it likely Israel will hold a fourth round of back-to-back elections this summer. It wasn’t a huge surprise given increasing tensions in the talks that led to a splintering of Gantz’s political bloc. Israeli media reported the discussions collapsed over last-minute demands by the PM related to his legal woes.
  • Moon Jae-in got his reward for deftly handling the pandemic: control of parliament. South Koreans turned out in the largest numbers in 28 years to give the president’s Democratic Party of Korea at least 155 of the 300 seats, according to exit polling. The progressive block’s first majority in 12 years heralds more focus on reducing income inequality and tighter rules on housing development.
  • BlackRock’s cost controls and investment plans will be a focus when it reports results. Revenue is forecast to rise 5%, while EPS could sag by 3%. Managed assets pressured by the stock slump may fall by 9% versus the fourth quarter but will still be up about 4% on year. Morgan Stanley probably benefited from wealth management, but the focus will be on the outlook for margins and volume amid market volatility. Fixed-income trading may lag peers.
  • The latest tally of initial jobless claims in the U.S. will probably push the four-week total above 22 million, essentially wiping out all the job gains since the last recession. Consensus sees 5.5 million filings, a figure that’s off the charts historically but an improvement over last week’s 6.6 million. However, the whisper number has climbed to 6.8 million. Many expect the jobless rate to reach 20% this month — and keep rising.
  • Yesterday stocks slumped, while Treasuries surged as bleak retail, manufacturing and homebuilding data from the world’s largest economy added to concern over a severe global recession. The S&P 500 Index sank from a one-month high, with all of its major groups dropping. Financial shares slid as Goldman Sachs Group Inc.’s investment portfolio took a hit from the coronavirus pandemic, while Bank of America Corp. and Citigroup Inc. followed rivals in setting aside billions for loan losses. Oil plunged to the lowest in two decades amid a record collapse in U.S. fuel demand. Treasuries surged with the dollar.

Wednesday 15 April [Watch the video]

  • Donald Trump temporarily cut off funding to the WHO, accusing it of taking China’s claims about the virus “at face value” and failing to share information promptly. Democrats called it a desperate attempt to deflect blame. The U.S. contributed almost $900 million to the organization’s operations in its current two-year funding cycle.
  • Despite Trump’s pledge to let governors decide, federal health officials are drafting plans to end social-distancing measures and reopen businesses, the Washington Post reported. The document describes a phased program that splits the country into regions based on risk levels. Low-risk areas could open first, no earlier than May 1.
  • Talk of easing restrictions was spurred by signs of leveling off. Italy recorded its lowest tally of new infections in a month, while Spain and Germany also saw fewer new cases. The U.S. had slower increases in hot spots such as New York, but numbers soared out west, suggesting rural areas lag in the outbreak arc. Global infections approached 2 million, while deaths exceeded 126,000.
  • China cut interest rates and injected $14 billion into the financial system. The PBOC lowered the rate on its one-year medium-term lending facility to 2.95% from 3.15% ahead of a maturity due Friday. Data Thursday are expected to show the economy contracted by 6% in the first quarter versus a year earlier.
  • Oklahoma will join Texas in mulling oil output cuts. The state set a meeting for May 11 and Continental’s Harold Hamm predicted it will result in new curbs. This after Texas regulators heard testimony yesterday, with Pioneer Natural among those favoring forced reductions and opponents including Marathon Oil suggesting drillers are looking for ways to get out of contracts. Diamondback threatened to halt all Texas drilling if restrictions go ahead.
  • Beware moral hazard. That was the message from Howard Marks, who questioned why the Fed was buying non-investment grade debt and helping firms that had weak fundamentals even before the pandemic struck. “Markets work best when participants have a healthy fear of loss,” the Oaktree Capital co-founder wrote to clients. “It shouldn’t be the role of the Fed or the government to eradicate it.”
  • U.S. airlines reached a preliminary pact with the Treasury Department to access billions of dollars in aid. American Airlines will receive $5.8 billion in support and loans and Southwest will get $3.2 billion, United, Delta, JetBlue, Frontier, Allegiant and Skywest are also participating in the program. Airline shares rose in after-hours trading.
  • JP Morgan’s jump in trading revenue bodes well for Bank of America, Citigroup and Goldman, which report today. Credit is the pivotal risk for BofA, which may benefit from CEO Brian Moynihan’s strategy of responsible growth. Lower credit inventories should help Goldman. Investors will also focus on when M&A might pick up again. Consensus has Goldman’s revenue falling 16% and adjusted EPS dropping 47%.
  • As they cope with a supply glut and languishing prices, oil companies are driving a rush for coronavirus bank funding in Europe, helping to push deal volumes in the region toward 100 billion euros. Energy borrowers including BP and Shell have tapped banks for 25 billion euros of new loans or drawdowns since early March, and Total is now seeking a deal as large as 10 billion euros.
  • Yesterday night, the S&P 500 jumped to a one-month high while giant technology companies pushed the Nasdaq 100 through its 50, 100 and 200-day moving averages. Johnson & Johnson surged after posting stronger sales and boosting its quarterly dividend. Meanwhile, JPMorgan Chase & Co. and Wells Fargo & Co.slumped as their profits were hit by major provisions. Treasuries rose, the U.S. dollar retreated against its major peers and oil tumbled.

 

Tuesday 14 April

  • The oil price war of 2020 ended after marathon talks, though how much the new agreement between producers will do to solve the problems facing the market remains to be seen. The deal that’s been struck will take around 10% of oil out of the market. Trump claimed the cut would be nearly double the agreed upon figure, albeit without providing any details. Saudi Aramco, meanwhile, still cut all its May prices in a clear indication of its intent to keep its barrels competitive.
  • Texas regulators meet today to decide if the U.S. will join OPEC+ in ordering oil output cuts. The idea faces resistance from those who favor market forces over federal intervention, according to KPMG’s Regina Mayor. “It’s a very small minority that wants to take action so it’s hard to imagine the commissioners” will do it, she said. “It’d not only be un-American but unimaginably un-Texan.” Norway signaled it’s ready to act soon.
  • Earnings season will get into gear this week, starting with U.S. banks JPMorgan Chase & Co. and Wells Fargo today and with plenty of European names to follow. It’s quite possible the worst news is already priced in but there will be plenty of focus on pay reductions for executives as well as on how much dividends and buybacks will be cut.
  • France extended its lockdown to May 11, although the number of intensive-care patients dropped for a fifth day to the lowest since April 3, indicating the nation is in a “high plateau” phase of the outbreak. The U.K. also plans to extend its lockdown this week, as the daily rate of deaths is expected to climb. “We’re not past the peak,” Dominic Raab said. Italy reported fewer new cases, though fatalities rose. Global cases exceed 1.9 million.
  • China’s March exports declined 3.5% in yuan terms, a smaller drop than the consensus call for a 12.8% contraction. Factories never got back to full capacity after the pandemic struck at the start of the Lunar New Year holiday. Imports rose 2.4%. Now, even as the domestic virus situation improves, lockdowns in overseas markets threaten demand for China’s goods and supplies of raw materials and intermediate components.
  • Donald Trump said he’s close to having a plan to reopen the economy and hopes to do so “ahead of schedule.” There’s some question whose call it is. Governors on both the East and West Coasts announced regional alliances to coordinate reopening businesses and schools, pledging to be driven by science and public health considerations. Trump insisted he alone has the authority to decide. He also said he won’t fire health adviser Dr. Anthony Fauci.
  • The New York Fed will reduce the frequency of some repo operations during this monthly period “in light of more stable repo market conditions.” Starting on May 4, it will do an overnight repo each morning, but no longer offer one in the afternoon. It will also now offer a three-month repo once every two weeks, rather than once a week. JPMorgan strategists said bid/offer spreads in daily operations have “narrowed substantially.”
  • Advanced economies will shrink about 35% this quarter, four times as much as the previous record set during the 2008 financial crisis, according to Goldman Sachs. New infections appear to be peaking globally, but “the improvement is probably a direct consequence of social distancing and the plunge in economic activity, and could reverse quickly” if lockdowns end, economist Jan Hatzius wrote. EM economies will need more help from rich nations, and Europe needs to do more on the policy front. 

Friday 10 April [Watch the video]

  • The Fed added sweeping steps to provide up to $2.3 trillion in additional aid. A Municipal Liquidity Facility will offer up to $500 billion in lending to states and cities. SMEs will be helped by the purchase of up to $600 billion in loans. The Fed also expanded two facilities to support as much as $850 billion in credit. It will begin buying some junk-rated corporate bonds.Jerome Powell said the pandemic’s course will dictate any rebound, but most people expect a recovery in the second half.
  • Powell said the Fed is committed to using all its powers “forcefully, pro-actively, and aggressively” to help the U.S. recover, even as he laid out the boundaries to that authority. The central bank’s main attention now is on its lending programs and on making sure credit is flowing, not on traditional monetary policy, and it faces no dollar limits on its action, he added.
  • Saudi Arabia and Russia ended the oil price war, agreeing to cut output to 8.5 million barrels a day each in May and June as part of an OPEC+ deal to trim by 10 million barrels a day for two months. Smaller curbs will last longer, delegates said. The alliance will also seek cuts of up to 5 million barrels a day from G-20 countries, whose energy ministers will talk on Friday. Futures slumped as investors saw the proposal as insufficient to offset the estimated 35-million-barrel drop in demand.
  • Another dizzying jobless print. Initial unemployment filings last week were 6.6 million, slightly less than the previous week’s upwardly revised 6.87 million but higher than consensus for 5.5 million. That brings the three-week total to about 16.8 million. Canada lost twice as many jobs as anticipated.
  • Senate Democrats blocked Mitch McConnell’s attempt to quickly pass a $250 billion boost in aid to small businesses, likely delaying any action until party leaders can find a compromise. Monday may be the next chance to approve more aid without objection, but lawmakers aren’t scheduled to return to Washington until the week of April 20. Chuck Schumer and Nancy Pelosi are seeking to double the GOP’s aid proposal, including more funds for hospitals and local governments.
  • Angela Merkel joined with Spain, Italy and the U.K. in upholding stringent restrictions on public life, though she said the slowing spread gives grounds for “cautious hope.” U.K. deaths rose by 881 and Italy added 4,204 cases and 610 fatalities.Boris Johnson was moved out of intensive care into a general ward.
  • In the U.S., health expert Anthony Fauci said he believes “we are going to see a downturn,” with projections shifting to 60,000 fatalities from as many as 200,000 previously forecast. New York state reported only 200 net new hospitalizations over 24 hours, the fewest of the crisis. New Jersey expects its outbreak to peak in two to three days. The global tally now stands at almost 1.6 million infected, more than 93,000 dead and nearly 350,000 recovered.
  • EU finance ministers agreed on a 540 billion-euro stimulus package, putting to rest concerns the bloc would fail to unify behind a common strategy. The cornerstone will be employing the European Stability Mechanism, the euro area’s bailout fund, to offer credit lines of up to 240 billion euros. European leaders now need to approve the plan; a meeting could happen next week.
  • The worst is yet to come. The IMF sees the world economy falling into its deepest hole since the Great Depression this year, with emerging markets and low-income nations at particularly high risk. The fund is doubling access to its emergency financing to meet expected demand of about $100 billion, Managing Director Kristalina Georgieva said, adding a partial recovery in 2021 is possible if the pandemic fades this year. The IMF will release official forecasts on Tuesday.
  • Trump’s top economic adviser said the U.S. should allow companies to deduct the entire cost of capital spending as the administration looks for ways to jump-start the economy. “Plant, equipment, intellectual property, structures, renovations — in other words, if we had 100% immediate expensing, we should literally pay the moving costs of American companies from China back to the U.S.,” Larry Kudlow told Fox Business. Some of those costs are already deductible.

Thursday 9 April [Watch the video]

  • Russia said it’s ready to cut output to help stabilise the oil market, sending crude higher. Algeria confirmed that those attending today’s OPEC+ virtual meeting will discuss a “massive” supply reduction of 10 million barrels a day. This came as the Russian energy ministry said Moscow is ready to reduce output by 1.6 million b/d, or about 15%, as part of a deal that includes producers in the coalition and beyond.
  • Saudi Arabia’s sovereign-wealth fund took stakes worth about $1 billion in European oil majors Equinor, Royal Dutch Shell, Total and Eni in recent weeks, the WSJ reported. Shell ADRs rose in extended trading.
  • Boris Johnson’s condition is improving and he’s been sitting up in bed after responding to treatment for Covid-19. The number of new cases in Italy and Spain rose, and fatalities hit new highs in Britain and Belgium. Singapore will issue warnings to those caught gathering in public, as infections spiked. The economic toll from the pandemic threatens to drive more than half a billion people into poverty unless countries take action to cushion the blow, according to an Oxfam report.
  • Christine Lagarde renewed her plea for a strong fiscal response to the pandemic, urging governments to get over differences as they prepare for a second round of talks today. The ECB chief’s comments, in an op-ed published in newspapers across Europe, came after finance ministers failed to agree on a 500 billion-euro relief package. She said governments must support each other, pointing out that economic and financial linkages mean that no country can avoid damage just because it happens somewhere else in the bloc.
  • The WHO urged Washington and Beijing to work together under “honest leadership” or risk turning the pandemic into a bigger crisis.
  • The Fed viewed the economy as “having deteriorated sharply,” requiring a “forceful” response, minutes from last month’s emergency meeting showed. Some FOMC members thought a 50 basis point cut would be sufficient, rather than the 100 bps reduction that was taken. Initial jobless claims today are expected to show further erosion in the labour market, with filings seen at 5.5 million, the second-most ever after last week’s record 6.6 million. Credit Suisse and UBS proposed paying out dividends for 2019 in two instalments as the outbreak roils markets and businesses, responding to pressure from the financial markets regulator. UBS also said it expects to report first-quarter earnings of around $1.5 billion, adding that its capital and leverage ratios are in line with previous targets.
  • Joe Biden wants the next U.S. stimulus package to include a full federal subsidy for the private health insurance premiums of workers who lose their jobs during the pandemic. Addressing Bernie Sanders’ supporters as the presumptive Democratic nominee he said, “I see you, I hear you, and I understand the urgency of what it is we have to get done in this country. I hope you will join us.” He leads Trump 49% to 41% in a head-to-head matchup, a Quinnipiac poll found.
  • Yesterday, U.S. stocks climbed back into bullish territory on optimism for another round of stimulus and an eventual move toward reopening the economy. Oil surged amid expectations for production cuts. The benchmark S&P 500 Index jumped 3.4%, sending the gauge more than 20% over its March 23 low, which tradition says signals a bull market. Real estate, energy and utilities led the gains in all 11 market sectors. The Dow Jones Industrial and Nasdaq Composite indexes also rose to almost four-week highs.
  • The Stoxx Europe 600 Index ended little changed after euro-area finance chiefs failed to agree on a $540 billion economic package to respond to the pandemic. Italian bonds took a hit and the euro headed for its seventh drop in eight days against the dollar as the officials struggled to reconcile visions for how to recover from the virus.

 

Wednesday 8 April [Watch the video]

  • The White House is working on plans to reopen the economy with an expanded virus testing program. It would likely start in small cities not heavily hit, while hot spots like New York would stay shut. Donald Trump said the economy will be open much sooner rather than later. He also may put a “hold” on U.S. funding for the WHO after the agency “blew it” by failing to sound the alarm sooner.
  • Boris Johnson was still being monitored in a critical care unit. The PM remained in stable condition and is receiving oxygen, though he hasn’t been diagnosed with pneumonia.
  • EU finance ministers failed to agree on a strategy and a new call is now scheduled for tomorrow. The EU’s top scientist, Mauro Ferrari, resigned as president of the European Research Council after his proposal to set up a program to fight Covid-19 was rejected. Italy had its fewest new infections since March 13 and China ended the 76-day Wuhan lockdown. Hong Kong and Singapore, further along in the pandemic battle than the U.S., are tightening measures to restrict gatherings to prevent a potential resurgence in new infections.
  • Britain’s response to the virus is falling short. With fatalities expected to peak next week, the NHS doesn’t have enough ventilators. As many as 8,000 more may be required, according to Health Secretary Matt Hancock. On the business front, just 1% of firms in a British Chambers of Commerce survey accessed Chancellor Rishi Sunak’s Coronavirus Business Interruption Loan Scheme. About 8% said their efforts to tap the fund failed.
  • Treasury Secretary Steven Mnuchin asked Congress to swiftly commit an additional $250 billion to replenish the new $349 billion small-business loan program that is being overwhelmed by surging demand. Majority Leader Mitch McConnell said the Senate may act as soon as tomorrow to approve the additional funds. Trump said $70 billion in guaranteed loans have been processed, “which is far greater than we would have ever thought.”
  • Australia’s parliament is expected to pass a record A$130 billion ($80 billion) jobs-rescue plan today. The government will pay wage subsidies of A$1,500 every two weeks per employee to help struggling businesses keep people in their jobs. Meantime, New Zealand’s central bank is “very open” to boosting the size and scope of its asset purchases under its QE policy, Assistant Governor Christian Hawkesby said.
  • The EIA slashed its oil output forecast by almost 10%, saying the U.S. will likely pump an average of 11.8 million barrels a day in 2020, down from 13 million now. The 2021 estimate was cut to just over 11 million. That may help persuade OPEC and Russia to follow suit. The cartel is considering reducing output by 10 million b/d through the end of the year, a delegate said. It sees demand sliding by 11.9 million b/d in the second quarter.
  • Yesterday the S&P 500 Index fell 0.2% after surging as much as 3.5%. The benchmark briefly met the time-honored definition for the start of a bull market after climbing 20% from its March 23 low. The Stoxx Europe 600 Index advanced after the rate of new infections slowed in France and in Italy.

Tuesday 6 April [Watch the video]

  • Boris Johnson is in intensive care. Foreign Secretary Dominic Raab is temporarily running the government as Britain enters a critical period, with scientists predicting the outbreak will peak in the next seven to 10 days. The pound edged lower on the news and steadied in Asia.
  • Donald Trump said he’ll decide whether to cut U.S. oil output if OPEC makes the request, though market forces may already be prompting reductions. “I think it’s happening automatically,” the president said. The cartel invited seven additional nations including Norway and Brazil to attend Thursday’s meeting in Vienna, where Russia and Saudi are expected to pledge production cuts. Canada and the U.S. aren’t on the list.
  • Deaths from the coronavirus showed signs of plateauing in the hard-hit state of New York, even as fatalities in the U.S. topped 10,000. More signs that the crisis may be easing in Europe emerged as well. Italy, France, Germany and Spain reported lower numbers of new cases, the Netherlands had the smallest increase in deaths in a week and the U.K.’s slowed for a second day. Denmark joined Austria in announcing a gradual relaxation of steps imposed to reduce exposure. The number of deaths in the U.S. is still expected to peak on April 16, though the cumulative number of Americans likely to die from Covid-19 was revised downward to 82,000, from an estimate of 94,000 less than a week ago. But its apex, 3,130 Americans will die per day, up from the previous estimate of 2,644.
  • EU finance ministers meet today to review measures worth more than half a trillion euros to ease the outbreak’s economic impact. Steps with broad support include having the ESM offer credit lines worth up to around 2% of output. Whether the funds should be conditional will be debated. A plan to offer loans to nations with rising unemployment also has support, while a French idea to create an emergency fund worth 3% of GDP may see resistance. Shinzo Abe unveils Japan’s $990 billion package in a few hours.
  • The IMF may launch a new program to address a global dollar shortage, backing up the Fed’s campaign to keep the greenback flowing. Managing Director Kristalina Georgieva is preparing to offer short-term dollar loans to countries that lack enough Treasuries to participate in the Fed’s swap program. The initiative has U.S. support and may be unveiled within weeks, people familiar said.
  • Samsung Electronics beat consensus in the first quarter after the pandemic spurred demand for chip orders from datacenters that connect millions of people around the world who are stuck at home. Operating profit of 6.4 trillion won ($5.2 billion) topped the 6.18 trillion won average estimate, and sales rose to 55 trillion won.
  • Yesterday, stocks surged the most in almost two weeks after the reported death tolls in some of the world’s coronavirus hot spots showed signs of easing. The benchmark S&P 500 Index surged late in the trading session to finish up 7%, closing at the highest level since March 13.

Monday 6 April [Watch the video]

  • Boris Johnson was hospitalised for tests and is expected to remain overnight after failing to shake off a high fever 10 days since the onset of coronavirus symptoms. The PM remains in charge of the government. Queen Elizabeth, in a rare TV address, urged Britons to make the same kind of sacrifices and show the same kind of resolve as during World War II. Sterling fell in Asia trading.
  • Saudi Arabia, Russia and others are racing to negotiate a deal on oil output cuts, but talks face significant obstacles: A meeting of OPEC+ and beyond is now set for Thursday. Donald Trump said he was hopeful he won’t have to use tariffs to protect domestic producers. Oil diplomats are trying to arrange a meeting of G20 energy ministers for Friday.
  • Europe’s worst-hit countries reported declines in pandemic deaths, with the latest data from Spain, Italy and France suggesting orders to force residents to stay home are having an effect. Health Secretary Matt Hancock told the BBC Britain may tighten its lockdown if some continue to defy the orders. Sweden is bracing for thousands of deaths, and Japan may declare a national emergency from tomorrow.
  • BOE Governor Andrew Bailey rejected the idea of using monetary financing to ease the economic downturn as the bank’s mandate stops short of such action. The ECB’s Isabel Schnabel backed the idea of issuing coronabonds. Italy is preparing steps to boost liquidity, including guarantees of 90% on 200 billion euros of loans, Finance Minister Roberto Gualtieri told Rai TG1. The U.K. is working on bailout plans for strategically important firms, the Telegraph reported.
  • Trump warned on Saturday the fallout from the pandemic is about to get a lot worse in the US, and a “very horrendous” phase looms. A day later the president cited a decline in new fatalities in New York as a possible good sign. “We hope we’re seeing a leveling off.” Surgeon General Jerome Adams told Fox Americans need to brace for the “hardest, saddest” week of their lives. “This is going to be our Pearl Harbor moment, our 9/11 moment.”
  • Gilead is donating 1.5 million doses of its experimental anti-coronavirus drug remdesivir, which could treat 140,000 patients. The drug will be offered for compassionate use, expanded access and clinical trials, and will treat patients with severe symptoms. It’s also boosting its supply of remdesivir to more than 1 million by year-end. India banned exports of hydroxychloroquine, the malaria drug Trump as touted as a “game changer” in treating Covid-19.
  • Rolls-Royce will scrap profit targets, suspend its dividend for the first time since going public in 1987 and announce new credit facilities of more than 1 billion pounds, the FT reported. The company may make the announcement as early as today. It said last month it would “significantly reduce” all but essential activities at its U.K. civil aerospace facilities due to the outbreak.

Friday 3 April [Watch the video]

  • Donald Trump’s tweets on possible coordinated oil output cuts of up to 15 million barrels/day drew disbelief and scepticism. WTI fell in Asia after yesterday’s rally. “It’s too little, too late,” said Citi’s head of commodities research, Ed Morse. Goldman analysts concurred. If there’s no agreement, “the price is going to go down significantly and force them to happen,” Morse added. The president meets with oil execs today.
  • As cases in the U.S. continue to climb, Trump issued an order to speed up production of ventilators after state officials raised alarms over inadequate supplies. Separately, the White House may urge those in the hardest hit areas to cover their faces in public. VP Mike Pence said more than 100,000 Americans are being tested daily. S&P affirmed the US’s AA+ sovereign rating. Apple will keep U.S. stores closed until early May.
  • Walmart put the sale of a majority stake in Asda on hold, people familiar said. The retailer told the leadership of the U.K. unit to focus on running the business after the specter of lockdowns spurred rampant stockpiling that lifted U.K. grocery sales to a record in March. There’s no timetable for talks with bidders to restart.
  • Junk is back in favor. Investors poured a record amount of cash into U.S. high-yield funds this week as the market recovered from its worst slump in more than a decade. The funds added $7.09 billion in the week ended Wednesday, according to data from Refinitiv Lipper. This reversed a trend that had seen almost $20 billion withdrawn from those same funds over the last six sessions, including $2 billion last week.
  • U.S. regulators want to see if other rescue policies ease liquidity shortfalls before they help mortgage servicing firms.Some want to know how many consumers seek forbearance that servicers have been encouraged to offer. As many as 30% of Americans with home loans may stop paying if the economy stays shut through the summer or beyond, according to Moody’s Mark Zandi.
  • Those record 6.65 million U.S. jobless claims weren’t spread evenly through the economy. Among states with a labor force over 1 million, Pennsylvania, Nevada and Michigan saw around 10% of their workers file. Bigger states fared slightly better, with California at 5.7%, Texas at 3.1% and Florida at 2.9%. Today brings March payrolls data, with consensus calling for a drop of 100,000. The whisper number currently sees a decline of 222,000.
  • Yesterday, the S&P 500 advanced for the first time in three days, with Chevron Corp and Exxon Mobil Corp. among the top gainers. Shares rebounded after falling 6% over the past two days. Consumer discretionary stocks weighed on the benchmark after jobless claims doubled from last week to 6.6 million. West Texas crude gained 22% after Trump said he expects the two countries to cut output following a conversation with Crown Prince Mohammed Bin Salman on Thursday. But oil came off its highs after officials from both sides watered down expectations. The commodity is still down around 60% for the year.

Thursday 2 April [No video]

  • Hints of an oil peace. Donald Trump voiced optimism that Russia and Saudi will end their oil spat soon, saying “I think they’ll come up with something.” The president will meet with top industry execs Friday as Texas regulators prepare to discuss output cuts on April 14. Vladimir Putin toned down his defiance, acknowledging to colleagues that the slump in prices is “very significant, serious, deep.” Moscow should work with other suppliers to calm the situation, he said.
  • The WHO is mulling whether to recommend a broader use of masks even among those who aren’t ill after the global death toll from the pandemic doubled in a week. Florida and Pennsylvania ordered residents to stay home. Italy and Germany extended their lockdowns and the U.K. said it would ‘significantly’ increase testing. Between March 16 and March 31, 950,000 Britons successfully applied for universal credit benefits, up from about 100,000 in a normal two-week period.
  • U.S. intelligence’s conclusion that China under-reported its infections is an attempt to divert attention from surging deaths in the U.S. and other Western nations, Global Times’s Editor-in-Chief Hu Xijin said. The WHO also weighed in, saying it’s not a good time to be “profiling certain parts of the world as non-transparent.”
  • Wall Street banks will be taking on more leverage. The Fed eased the so-called leverage ratio for a year, allowing financial institutions to absorb some of the stress in Treasury markets. Firms won’t have to add their Treasuries and reserves into the basket of assets they must maintain as part of capital requirements.
  • Sticking with the central bank, the Fed’s new lending program for small and medium-sized U.S. companies is “another couple” of weeks away, Boston President Eric Rosengren said. “It’s a complicated facility to appropriately scope,” he told Bloomberg TV. It’s “still in the design phase” and it’s important to ensure that banks understand how it will work. He expects unemployment to hit at least 10% by the end of this quarter.
  • Data today will probably show the U.S. labor market is even more tattered than it was last week. Initial jobless claims are seen rising to 3.7 million, breaking the record of 3.28 million set last Thursday, according to consensus. February’s trade deficit may have narrowed to $40.0 billion from $45.3 billion, while factory orders are seen rising 0.2% after January’s 0.5% decline.
  • Yesterday on markets, the S&P 500 dropped the most in two weeks, with sentiment souring after U.S. officials gave sobering assessments of the pandemic’s potential impact. President Donald Trump warned of a “painful” upcoming period for the country, while New York Governor Andrew Cuomo said a model showed the Covid-19 outbreak may not peak in the state until the end of April. Italy also said Wednesday it would extend its lockdown.
  • Banks suffered on speculation the largest will be forced to cut dividends after European lenders including HSBC Holdings Plc and Standard Chartered Plc halted payouts and share buybacks. The region’s Stoxx 600 index sank, even after the European Union unveiled plans to save jobs during the crisis. The euro extended its drop as manufacturing data from the single-currency region painted a bleak picture, with Italy’s purchasing managers’ index posting a record drop.
  • Elsewhere, West Texas oil fluctuated around $20 a barrel after Trump’s pledge to meet with feuding producers Saudi Arabia and Russia to support the market failed to bolster prices substantially. The dollar rose with Treasuries.

Wednesday 1 April [Watch the video]

Tuesday 31 March [Watch the video]

  • In a good sign for oil, Donald Trump and Vladimir Putin agreed to hold discussions with energy officials from their countries to stabilize prices. The U.S. president doesn’t want to see the American energy sector “wiped out” after Russia and Saudi Arabia “both went crazy,” and prices should rise. Pioneer Natural Resources and Parsley Energy asked Texas regulators to call an emergency meeting no later than April 13 and consider output cuts.
  • Last night China’s shares advanced with the yuan, while Japan was the lone regional holdout as the yen sank with the end of the fiscal year spurring positioning adjustments. Gold dropped.
  • Light at the end of the tunnel. China showed that economies can lurch back into action if citizens comply with stay-at-home policies long enough to smother the coronavirus outbreak. Its official PMIs rebounded in March from record lows, with the manufacturing gauge rising to 52.0 from 35.7, and the index for services and construction registering 52.3.
  • Not everything in China is back to normal. Authorities in some places have resorted to distributing vouchers or urging firms to give people paid time off in an effort to spur spending now that the lockdowns are over. But the nation’s oil refiners are expected to boost processing rates to over 12 million barrels a day this week, the most since before the outbreak, as factory activity picks up.
  • The hardest hit pockets of Europe may be near a peak in their fight with the pandemic as Italy reported the slowest rate of new infections in almost two weeks and Spain saw fewer deaths. Countries that took measures two to three weeks ago will probably show signs of stabilization soon, the WHO said. In the U.S., Virginia, Maryland, Washington and Tennessee were the latest to issue stay-at-home orders. Cases topped 784,000, with more than 37,000 dead.
  • Trump considered a national stay-at-home order but ruled against it because some parts of the country “are frankly not in trouble at all.” He said he’ll continue discussions, but he’s “pretty unlikely” to take such a step. A fourth stimulus package will include more state aid and financial help for mortgage markets and the travel industries. BlackRock CEO Larry Fink said the pandemic will prompt executives to re-evaluate “just-in-time” supply chains and dependence on air travel.
  • More than half of the U.K.’s food comes from domestic suppliers, which helps lessen the impact of any potential disruption to international shipping. Even so, the country relies on the EU for over a quarter of what it does import. Britons worried about food security, or perhaps looking for ways to keep busy while stuck at home, are buying big volumes of fruit and vegetable seeds.
  • Yesterday, U.S. stocks rallied as investors saw glimmers of optimism in efforts to deliver rapid testing for the new coronavirus. The dollar rose. The S&P 500 Index climbed for the fourth time in five days, rising 17% over the last week, with health-care shares among the biggest gainers. The Nasdaq 100 advanced nearly 4%, leading the rebound among benchmarks from Friday’s losses. Abbott Laboratories surged after unveiling a five-minute Covid-19 test and Johnson & Johnson announced a vaccine candidate for the virus. Crude fell more than 5% even after Trump spoke with Russia’s Vladimir Putin about falling oil prices. The 10-year Treasury yield rose, while the dollar was on course to snap a four-session losing streak. Gold dipped.
  • Elsewhere, Australian stocks surged by a record thanks to the new stimulus measures. Emerging-market currencies including South Africa’s rand and Mexico’s peso tumbled amid concern about debt downgrades.

Monday 30 March [Watch the video]

  • Donald Trump extended a national warning for Americans to distance themselves from one another until April 30 and said the White House expects U.S. deaths from the outbreak to peak in about two weeks. The decision to retreat from the idea of rescinding the warning from April 12 came after disease expert Anthony Fauci said U.S. deaths could top 200,000 in the worst-case scenario. The president opted not to impose a quarantine for the area around New York.
  • Crude slid to its lowest in 17 years in Asia after Saudi Arabia and Russia dug in their heels in their price war days before an existing output pact expires. OPEC nations aren’t supporting a request from the group’s president for emergency consultations, a delegate said, and OPEC isn’t due to meet again until June. Plains All American Pipeline asked suppliers to scale back production, as tanks are overflowing. Goldman said oil demand fell an estimated 26 million barrels a day during the week.
  • Moscow and several cities in Nigeria went into lockdown. Total cases globally exceed 722,000. But there are a couple of bright spots: the FDA gave Abbott Labs emergency clearance for a small, portable test that can tell if someone is infected in as little as five minutes. And Gilead will expand access to its experimental anti-coronavirus drug remdesivir.
  • EC President Ursula von der Leyen said the bloc is “not excluding any options” in a potential recovery package. The ECB asked banks to hold off on paying dividends until at least October, a move that will free up 30 billion euros of capital. EC VP Valdis Dombrovskis applauded the move, saying now isn’t the time to force banks to raise additional equity. The U.K. will loosen bankruptcy rules to allow struggling businesses to continue trading if they can’t pay debts.
  • The U.K.’s credit rating was cut at Fitch, which cited the volume of cash the Treasury is throwing at the pandemic. Boris Johnson urged Britons to work together in a video taped from isolation after he tested positive for Covid-19. A key minister said the lockdown may continue for a “significant period.” Sterling edged lower in Asia. Elsewhere, the rand plunged to a record low after Moody’s downgraded South Africa’s rating.
  • Treasury Secretary Steven Mnuchin said he expects to have a small business loan program up and running in the coming week while workers can expect aid from the $2 trillion stimulus package, which Trump signed on Friday, in the form of direct deposits or checks in about three weeks. Congress is already discussing a fourth relief package, with Democrats seeking stronger workplace protections and more money for hard-hit states like New York.
  • China added $7 billion to its banking system and cut interest rates on loans, and Hong Kong also vowed to step up aid. Singapore eased monetary conditions by recentering its currency band downwards and reducing its slope to zero. In Japan, Shinzo Abe said he plans to submit an extra budget in about 10 days to fund fresh stimulus. Cash handouts will be larger than during the global financial crisis, the PM said.

Friday 27 March [Watch the video]

  • The U.S. overtook China as the nation with the most coronavirus infections, after new cases surged by more than 17,000. President Trump proposed a risk classification system to help businesses return to normal and tweeted he had a “very good” talk with Xi Jinping about the pandemic. Italy saw its biggest jump in the past five days, with most clustered around Milan. China will close its doors to foreign visitors from tomorrow. The U.S. House is expected to approve the $2 trillion rescue plan today.
  • Containment isn’t the only aspect of the Covid-19 response that may be stumbling, as European leaders struggle to agree on a strategy to contain the economic fallout. A video call was expected to give the green light for the creation of credit lines from the region’s bailout fund to keep borrowing costs low while governments ramp up spending. But efforts to agree on exact wording ended without success after six hours, as a group of member states including France, Italy and Spain pushed for more radical steps, such as the prospect of issuing so-called coronabonds.
  • In Asia, markets headed for the best week in two decades, with India’s assets surging after the nation’s central bank cut interest rates.
  • VW’s move to halt output on both sides of the Atlantic is costing the automaker 2 billion euros a week. Sales outside China are at a standstill, while Chinese demand has clawed back to about 50% of pre-crisis levels. Daimler is talking to banks to arrange a credit line of up to 15 billion euros. The final amount, to be announced next week, would add to an existing 11 billion-euro facility that ends in 2025.
  • Britain will pay self-employed workers cash grants of as much as 2,500 pounds a month. The three-month plan announced by Chancellor Rishi Sunak is expected to cost about 9 billion pounds. It comes after his offer last week to pay a portion of citizens’ wages for the first time was slammed for omitting millions of self-employed people. About 3.8 million will be eligible for the funds, Sunak said.
  • The Fed’s efforts to unfreeze short-term funding markets appear to be working just in the nick of time — before the end of the quarter, when the repo market sometimes goes haywire even in good times. The rate on overnight repos for March 31 is now quoted at 0.40%/0.25%, according to ICAP. That’s outside the Fed’s 0%-to-0.25% target range, but the difference is almost a rounding error. “Funding conditions continue to incrementally improve,” said BMO strategist Jon Hill.
  • Thousands of bankers have renewed job security after two more U.S banks joined Morgan Stanley and a handful of European lenders in pledging to preserve employment. Citigroup will suspend any planned job cuts, while Wells Fargo will “continue to evaluate during this fluid situation,” a spokeswoman said.
  • Europe’s farmers are struggling to find people to harvest rapidly ripening fruits and vegetables that must be hand-picked within a narrow window, as seasonal workers stay home either by choice or by bordering-closing decree. France expects to be short 200,000 laborers, while Italy is down about 100,000. Strawberries and asparagus are already being left to rot in Spain, Italy, and southern France.

Thursday 26 March [Watch the video]

  • The U.S. Senate approved the $2 trillion coronavirus relief package after moving past a last-minute dispute over expanded unemployment benefits for low-wage workers. The onus is now on the Democratic-led House to pass the bill quickly and send it to President Trump for his signature.
  • Last night, US and European equity futures fell along with commodities as investors looked past stimulus packages to the mounting human impact of the outbreak. Treasuries and the yen jumped, while Japan’s benchmarks slid as Tokyo warned of a possible lockdown amid an uptick in cases. Asian stocks were mixed, with India and Indonesia markets surging. Oil dropped with gold and most base metals.
  • ECB policy makers are said to be broadly in favor of activating the Outright Monetary Transactions program, which would allow the central bank to buy nearly unlimited quantities of a nation’s sovereign debt. The OMT, designed in 2012 after Mario Draghi vowed to do “whatever it takes” to save the euro, has never been used. Separately, Germany is considering “targeted” stimulus, Finance Minister Olaf Scholz said. The BOE will likely hold today as it assesses recent actions.
  • The EU issued guidelines warning against possible hostile takeovers of critical healthcare assets by foreign investors. The move comes after the bloc last year introduced a screening framework aimed at boosting oversight of deals for strategic assets. The scope of the screening mechanisms will be expanded to ensure medical and research businesses foundering due to the pandemic aren’t scooped up.
  • Citigroup and Truist Financial are among banks selling off hundreds of millions of leveraged loans to help unwind swap trades tied to the debt. The banks solicited buyers for around $1.3 billion in two separate auctions Tuesday, and about half of the loans for which bids were sought ultimately traded. Margin calls are increasing after the S&P/LSTA Leveraged Loan Price Index tumbled nearly 20 points to as low as 76.2 cents on the dollar.
  • St. Louis Fed head James Bullard is braced for U.S. jobless claims to “skyrocket.” After last week’s 33% spike in new filings to 281,000, this week’s figure could be as high as 3 million — quadruple the 1982 record — according to S&P Global Ratings. The consensus call is for 1.64 million. Singapore’s economy, an early bellwether for the rest of Asia, shrank by an annualized 10.6% in the first quarter.
  • The outlook for European corporate earnings has never looked more bleak. Analysts who downgraded profit forecasts for firms in the region excluding the U.K. outnumbered those who upgraded them by the biggest margin on record, according to data compiled by Citigroup.

Wednesday 25 March [Watch the video]

  • The U.S. Senate reached an agreement on the $2 trillion stimulus plan, and a text of the bill may be circulated this morning. Donald Trump wants to reopen the economy by Easter – April 12. “I would love to have it opened up and just raring to go by Easter,” he told Fox News. His top economic adviser said the White House will listen to public health officials in making any decisions. “We’re not abandoning the health professionals’ advice,” said Larry Kudlow.
  • Last night, investors were whiplashed as an initial recovery in U.S. stock futures after the stimulus agreement quickly evaporated. European contracts steadied, while Asian markets extended a rebound after the Dow capped its biggest one-day rally since the Great Depression. Tokyo’s Nikkei 225 jumped as much as 7%. The dollar slid in a sign of reduced funding stresses. Treasuries gave up gains and havens fell. Oil rallied and base metals turned (mostly) green.
  • The euro area may offer its members credit lines from its bailout fund worth up to 2% of each country’s annual output. The plan to tap the facility from the European Stability Mechanism had ‘very broad support’ from finance chiefs during a region-wide call yesterday, Portuguese Finance Minister Mario Centeno said. EU leaders are expected to endorse the proposal tomorrow. France will today unveil a multibillion-euro package to help startups weather the outbreak.
  • Trump’s latest comments put him at odds with regional authorities coping with local outbreaks. The White House ordered anyone leaving New York to self-quarantine for 14 days. Italy’s two-day trend of declining fatalities ended with yesterday’s total of 743 new deaths. Singapore closed its bars weeks after appearing to have contained the local outbreak, while New Zealand declared a national emergency for the next seven days.
  • Britain’s investment banks want regulators to relax rules on new stock offerings. Industry group AFME is leading an effort to increase the maximum discount allowed for equity sales, and to make it possible for companies to sell a greater amount of stock without shareholder approval. The proposals conflict with the corporate governance norms currently recommended.
  • The Trump administration is debating whether to defer payments of duties on imported goods from around the world for three months. The discussions prompted an industry group to urge that duties be implemented on schedule to protect small businesses from “unfairly traded goods” at a time when supply chains are already under strain.
  • BlackRock was tapped to help the New York Fed implement a raft of operations aimed at calming the markets. The firm will manage two new facilities launched Monday to provide liquidity to corporate borrowers as well as purchases of agency commercial MBS. It played a similar role in the wake of the 2008 crisis. “The firm is a perfect fit to help central banks, similar to ’08-’10,” Credit Suisse analyst Craig Siegenthaler said.
  • The cost of insuring Europe’s investment-grade firms against debt defaults soared 41 bps this month, the most since the index began in 2011. At the same time, the rolling 12-months EPS projection for the eurozone’s main bluechip companies has dropped to the lowest in almost three years. Speculators looking to take on risk may exploit the divergence by selling CDS protection.

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