Union Bancaire Priveé (UBP) | Fixed-income frontier markets have seen significant growth in both importance and liquidity over the past decade. While still mainly thought of as part of global EM investments, frontier markets have “grown up” and deserve to be considered separately.
There has been a setback in the progress of a treatment to cure Covid-19. It was learned that remdesivir (Gilead’s antiviral) had not shown sufficient clinical improvement in the first clinical trial and even had important side effects. According to the company, these conclusions are associated with the trial that had to be stopped in China due to a lack of patients.
Bank of America Global Research | The size of major central bank balance sheets has been stable at 21 to 28% of GDP in the past decade just like the gold price. As central banks and governments double their balance sheets and fiscal deficits we up our 18m gold target from $2000 to $3000/oz. Still, a strong USD backdrop, falling equity market volatility, and weak jewelry demand in India and China may remain headwinds.
Julius Baer | The oil market continues to write history. The past days and weeks brought us an unprecedented demand collapse, unprecedented oil politics and the absolute novelty yesterday: negative oil prices. The US benchmark West Texas barrel sank by -305% and became negative at -37.63 $/b. Before you rush to the petrol station, negative prices are a temporary glitch reflecting stressed flows in the futures markets and stressed storage conditions somewhere in the US Midwest.
Bank of America Global Research | Oil futures have collapsed by more than 60% since the start of the year, with the WTI front month contract testing $20/bbl several times in recent weeks. The dramatic decline in prices is attributable in part to the oil price war, but the primary driver has been demand. As coronavirus fears forced governments around the world to shut down their economies, demand for refined products has been hit particularly hard.
Covid-19 cuts the US lenders’ profits by less than half. The US banking balance sheet is solid (liquidity and solvency) and valuation multiples are at record lows. However, Bankinter analysts recommend avoiding the sector as the RoE does not compensate for the risk. Furthermore, analysts highlight the following: the increase in the cost of risk reduces the sector’s profitability (RoTE) by less than half (~6.7% in Q1’20 vs. 16.6% in…
Pernille Henneberg & Catherine L Mann (Citi GPS) | How much fiscal easing is going to be needed to offset the upcoming losses to GDP from COVID-19? Our advice is for governments to go big, because it is going to be worse than you think and go now, because later may be too late. In theory, and as illustrated above, if immediate fiscal action stems the deteriorating conditions now, then a large fiscal effort should not be needed.
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 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.