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Coronavirus and the markets: Daily update [VIDEO]

Daily 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 daily video updates 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 9 April 

  • 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]

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  • 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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