Unigestión | Despite macro data coming in significantly below very low consensus expectations, equity markets have rebounded more than 25% off their lows. When stock markets rally on bad news, investors often lose a sense of reality. Currently, overly bearish sentiment, improving virus-related data, some optimism about reopening the economy and backstops from both the Fed and governments seem to be the main drivers of the brisk recovery in financial markets.
Yves Bonzon (Julius Baer) | The exceptional nature, comparable to a natural disaster, of the pandemic crisis is precipitating a profound change in the economic regime. It is still too early to speculate on the political and sociological changes that the coronavirus will have triggered. Nevertheless, it can already be seen that the only effective response to this crisis requires a degree of government intervention in the economy and markets unprecedented in the recent past.
The yearly rate of inflation dropped by seven-tenths of a percentage point in March to 0%, after a monthly decline of 0.4%. The result was very close to expectations, and was mainly thanks to the fall in energy products due to the oil price collapse. The main deviation occurred in unprocessed foods’ prices which were inflated due to the increase in fresh fish, vegetables and pulses.
On Thursday, the Treasury raised €6.535,6 billion in a new auction of long-term bonds, exceeding the €6.5 billion top of the range. Total demand was EUR 12.407,77 million, which is 1.9 times the amount finally awarded. However, costs have risen once again and even doubled the yield on the bonds.
The International Air Transport Association (IATA) estimates that losses to the passenger air transport sector will total $314 billion in 2020, due to the impact of the coronavirus crisis. Given this impact on the aviation sector and its consequences on tourism worldwide, IATA has called on governments to include the aviation industry in the aid packages for the pandemic.
Cellnex buys 100% of Portuguese company NOS’ tower operator. The transaction involves nearly 2,000 sites, with an initial investment of around 375 million euros. But Cellnex has agreed to earmark a further 175 million euros to expand the perimeter by up to 400 more towers over a period of 6 years.
China has started proceedings for a potential merger of its two largest investment firms, Citic Securities and CSC Financial. This is part of the process of opening up the economy in order to compete with the biggest global investment banks.
Banco Santander, the leading bank in Spain and the Eurozone, has warned of a slowdown in its business in North America. This is a region which accounts for 16% of group profits, thanks to the contribution from the United States (7%) and Mexico (9%). But the current pandemic led Santander Mexico to announce yesterday that it will not meet its 2020 targests, and that COVID19 will affect results at least until H1’21.
The IMF points to a recessionary situation in both developed and emerging countries, during the “Great Lockdown”, as it has named the current crisis. This did not occur in 2009 Great Recession as the emerging countries then acted as a lifeline by growing by 2.82%. Also, the international organization projects that per capita growth will contract in more than 170 countries.
Nitesh Shah (Wisdom Tree) | That will be the largest ever coordinated cut in oil production. With demand destruction forecasts ranging from 15-22mb/d in April 2020 and these measures not even coming into place until May, we are likely to see a substantial overhang in the short-term. But the deal does last until 2022, so production restraint could mop up excess supply at the back end. Clearly nobody really knows the length and amplitude of the of the COVID 19 related demand.