Adam Vettese (eToro) | Bitcoin has extended its losses this morning, with the cryptoasset losing another 0.5% to add to yesterday’s 4.5% fall. The key resistance level of $10,000 is proving to be a difficult hurdle to overcome, with several failed attempts this month. It is now back trading close to the $9,000 mark. Bears could see this as a sign the momentum may be shifting following the two month price rally.
China has decided that it will not set a target for economic growth for 2020, due to the uncertainty caused by the Covid-19 pandemic. This was announced by Chinese Premier Li Keqiang at the opening session of the National People’s Congress, the highest legislative body of the People’s Republic of China. The country will give priority to guaranteeing the population’s living standards, with job creation goals, reducing the unemployment rate to 6% and an inflation target of 3.5%.
Once again the US has threatened Spanish oil company Repsol and other companies that pump oil in Venezuela and sell it on the international market with “devastating” sanctions. In addition to Repsol, the Italian company ENI and India’s Reliance are currently operating in Venezuela. As a reference, Repsol’s exposure to Venezuela is: 270 million dollars of capital employed (1%) and 50,000 barrels (7% of total production). This exposure has been lowered in recent years.
Yves Bonzon (Julius Baer) | If the job losses are not quickly recouped, it must be expected that individuals will use their savings to support their consumption levels within a context of reduced incomes. This is a fundamentally different situation from the 2008 crisis when households (and companies, for that matter) had increased their savings sharply to compensate for the negative wealth shock resulting from the real estate and financial crisis.
BofA Global Research | We cut our Euro area GDP forecast to -8.3% this year and +4.6% next. The recovery will be weak, permanent income losses big. Fiscal stimulus is not enough to boost consumers and capex. Deficits will still be very big, c 17% cumulatively in 2020/21. The Franco-German initiative helps sentiment earlier than growth. ECB help will remain crucial. PEPP has to double, at least.
Bankinter | Sabadell and Bankia will fall by 73.7% and 57.5%, respectively, in 2020, amongst the biggest drops in the European banking sector (a decline of 46.4% for the EuroStoxx Banks). So is a merger looming between these two Spanish lenders? The market has been speculating about this possibility for some time, even as a mechanism to dilute the state’s position in Bankia (currently at 61.8%) which it holds via the FROB.
Santander Credit Research | The Spanish government approved a fourth tranche (€20 billion) of the €100 billion worth of guarantees for corporate loans which was announced on 24th March. This is part of the economic aid package to mitigate the negative impact of the containment measures imposed due to the Covid-19 outbreak. The new tranche approved will be aimed entirely at guaranteeing loans to small and medium sized enterprises (SMEs) and the self-employed.
On Tuesday, the European Union’s economy and finance ministers (Ecofin) approved a temporary 100 billion euros fund that governments can use to finance their employment protection schemes, similar to Spain’s temporary lay-offs, amid the Covid-19 pandemic. The regulations establish a ceiling of 60 billion euros that cannot be exceeded by the three countries which have benefited most from the fund. This means that Spain could ask for a maximum of 20 billion euros from the SURE.
Irina Topa-Serry (Senior Macro Economist AXA Investment Managers) | The COVID-19 crisis is currently unfolding in emerging markets (EM). So far, they appear relatively less affected than their advanced economy neighbours such as the Eurozone or the US. But for some, it may be because they are only just entering the acceleration phase of the epidemic. For others, it may be because lockdown measures were implemented at an early enough stage, as seen in Slovakia. On a hopeful note, it may also reflect the demographic structure of some developing countries. For instance, slightly more than half of Africa’s 1.3bn population is under 19 years of age, versus just a fifth of Europe’s 740m inhabitants. At the other end of the scale, a quarter of Europeans are above 60 versus a mere 5% of Africa’s population.
According to data released yesterday by the Bank of Spain, overall government debt reached 1.224, 243 trillion euros in March. It increased by 22.473 billion euros (+1.9%) from February due to the Covid-19 crisis. So public debt is now at an all-time high and equivalent to 98.3% of 2019 GDP. All organisations highlight in their forecasts that public debt will rise above 100% and set new historical records.