Singular Bank | According to the International Monetary Fund (IMF), governments have so far adopted expansionary fiscal policy measures worth $8.5 trillion (9.8% of world GDP in 2019). These are aimed at addressing the socio-economic consequences of the Covid-19 crisis, in a context of global recession.
COVID-19 will result in a slowdown in housing transactions of -35% – up to 326.000 transactions in 2020, returning to minimal levels (2012 to 2014). Home buying decisions will be postponed by 6-12 months, and some of the demand will disappear for longer, producing a temporary imbalance between supply and demand.
Jorge Guira via The Conversation |How much US shale oil is worth saving in these straitened circumstances is key. Some estimate as many as 70% of firms will go out of business overall, with some never coming back until oil stabilises above US$50. Others may be taken over by companies prepared to wait for higher prices.
Oliver Vardakoulias via Macropolis |On March 26th, the European Council issued a joint statement stressing the objective of a ‘green transition. Since then a number of governments, business leaders, academics, MEPs, supra-national organizations, investors, and NGOs have equally called for post-emergency recovery packages (fiscal and monetary expansion to prop up our economies) to be aligned with the vision and targets of the EU Green Deal.
Yves Bonzon (Julius Baer) | On the fiscal side all countries might provide support measures that are quantitatively and qualitatively strong enough to ensure recovery when the containment ends. The way the required transfers from governments to their private sectors are financed, in essence the chosen mix of tax increases, borrowing from private savings and monetisation, will play a determining role on the recovery capacity of different countries and regions.
Philppe Waechter (Ostrum AM) The main point on the ECB meeting is the large uncertainty contained in the GDP forecasts. Last March, the ECB forecast was +0.8% for 2020. Today, Christine Lagarde said the gdp was expected to drop between -6 and -12% for 2020. That’s a huge revision reflecting uncertainty for the foreseeable future.
Royal Dutch Shell recorded losses of $24 million (22 million euros) in the first three months of 2020, compared to an attributable net profit of $6.001 billion (5.518 billion euros) a year earlier, as a result of the impact of the Great Confinement and the collapse of crude oil prices. The Board of Directors of Royal Dutch Shell has decided to cut the dividend for the first quarter of 2020 to $0.16, compared to $0.47 a year earlier.
As expected, the 4% quarterly contraction in the Spanish economy estimated by the consensus of analysts has been overtaken by reality. GDP registered a historical collapse of 5.2% in the first quarter due to the Covid-19 crisis. Until now, the biggest quarterly fall in GDP was in the first quarter of 2009 (-2.6%).
In the midst of the Q1 2020 earnings season, the financial sector is beginning to protect itself from the more than likely economic shock of the coronavirus. Meanwhile, The European Comisssion offered European banks temporary relief from capital regulations that could boost credit by up to €450 Bn this year. Brussels argued that the economic damage caused by the coronavirus crisis would justify a “selective” relaxation of the regulations introduced in the wake of the 2008 financial collapse.
Mark Shirreff Matthews (Head Research Asia, Julius Baer)| We remain Overweight on China. Of the major world economies, it will be the least impacted by the coronavirus. It is impacted nonetheless, but China’s economies of scale, and financial and technological resources, mean it can develop “new infrastructure” even more than it had previously planned to. Our recommendation for long-term investors is to be positioned in that space, and all its ancillaries, while in the short-term, “old infrastructure” (like cement and construction equipment) will also receive a boost.