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.
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.
Ostrum AM | A total of 6.6mn Americans lost their jobs last week. This raises the total of unemployed persons to 10mn since mid-March. The outlook for the next few weeks is dismal. The unemployment rate will increase very rapidly to levels unseen since the 1930s great depression. March non-farm payroll data reported only 701k job losses but the survey is conducted on the week on the 12th day of the reference month hence before the catastrophic claims numbers. April data will thus take account of job losses in the millions.
DWS | How bad could things get for corporate earnings, both in the U.S. and worldwide? In the face of a global health emergency, the short answer is that it remains hard to tell. Large parts of the world are under Covid-19 lockdown, delivering tremendous short-term shocks to the supply side and threatening to bring demand destruction on a massive scale. The disruptions will be comparable or worse than after September 11, 2001 and the onset of the financial crisis in 2008.
Peter Isackson | Recently, The Daily Devil’s Dictionary highlighted the battle that is beginning to shape up in the media and in political circles around whether a return to a real or imaginary pre-pandemic status quo is possible. Most commentators in the West understand that the status quo they refer to embraces two major concepts: a globalized, liberal, free market economy and nations with political regimes based on (or at least paying lip service to) representative democracy.
J.P.Marín Arrese | Jerome Powell raises the stakes day by day by making bolder than ever decisions. He shatters the image of shyness, prudence and circumspection he offered when taking over the Fed chairmanship. His last daring move has left markets flabbergasted. No wonder. He has pledged 2.3 trillion to buy ungraded bonds and to set up a massive lending facility for Main Street companies, thus breaking the golden rule of including only high-rated paper in the Fed balance sheet.
Jefferson Frank ( via The Conversation) | Ratings agency Fitch is forecasting a doubling in defaults in 2020 on US leveraged loans, which refers to bank loans to businesses considered more risky. The agency expects a default rate of 5% to 6% this year, compared to 3% last year. The dollar value will exceed the previous high of 2009, and for retail and energy companies, the default rate could approach 20%.
Gilles Möec (AXA IM) | Beyond Q2, we need to start thinking about the shape of the recovery – assuming no relapse in the pandemic forces more lockdowns in Q2 and Q4. There are currently many “recovery shapes” being discussed. For our part we would go for a “swoosh rebound” (the shape of the Nike logo), with positive, but fairly low GDP growth from Q3 onward.
Carsten Menke (Julius Baer) | According to news over the weekend, the full closure of some of the world’s largest gold refineries in Switzerland is about to end after two weeks. The refineries are located in the southern-most canton of Ticino, which, due to its proximity to Italy and a big number of cross-border commuters, is most strongly affected by the coronavirus. Starting on Monday, operations are resuming, but at less than half of capacity.