Eirini Tsekeridou (Julius Baer) | Oil prices have declined massively over the last weeks, as Russia and Saudi Arabia could not reach an agreement regarding output cuts. Saudi Arabia is trying to punish Russia, while Russia is seeking to hurt US oil producers due to US sanctioning of Russian companies. US shale producers, especially the highly leveraged ones, will face default as their breakeven price is about USD 50 per barrel.
The Covid-19 outbreak leds to the steepest decline in business activity ever recorded in the Eurozone: it plummeted to 31.4 in March against 51.6 in February, a record low since July 1998. Even though manufacturing PMIs fell less than expected, they could have been inflated, once again, by longer supplier delivery times due to supply chain disruptions and thus send an overly optimistic signal, Susan Soho, economist at Julis Baer, explains. Moreover, they are likely to fall further in the coming month, as lockdown measures intensify.
The Vice-President of the European Central Bank (ECB) and former Spanish Economy Minister Luis de Guindos has recently defended the implementation of a “minimum emergency income” during the coronavirus crisis. “Let us all take care of the basic needs of the most vulnerable population,” he said. On the other side of the Atlantic, the US Senate is planning to send cheques for $1,200 (1,125 euros) to citizens with an annual gross income of $75,000 (70,000 euros) or less.
Charlie Sunnucks (Jupiter AM) | China has shown that the virus can be contained if stringent government measures are put in place, and while the economic shock is considerable, it is also acute, with the shutdown centered on weeks rather than months. The key question is how long it will take for daily activity to normalize.
DWS | The S&P 500 trades about one third below its high. This means that all price gains since the start of 2017 have disappeared. In 2008/09 much more was wiped out.
“It would be a mistake to believe that anything US Congress approves will be a definitive solution for the economy, at least in the short term. As for the size that the economic aid should have, PIMCO believes that “an increase in public spending of 4% could serve to compensate for the economic damage in the short term”
Manuel Moreno Capa | In over three decades of writing about this, I find it hard to remember a piece of news like the one I read on the specialized website Citywire on March 18: UK fund manager H2O Asset Management apologized to its clients for the heavy losses suffered in its two investment funds due to the coronavirus crisis. According to Morningstar data, the two H2O funds had fallen by no less than fifty percent in four weeks (until Monday 16).
It will take until the end of 2022 for global GDP to recover to pre-coronavirus levels. The economic situation caused by this global coronavirus outbreak changes every day. However, the Research Institute of Aberdeen Standard Investments believes the world economy will avoid the end-of-cycle recession, even though the global shock will be significant.
Ranko Berich (Monex Europe) | The UK’s response to the incoming coronavirus shock has been about as aggressive as possible in terms of monetary and fiscal policy, but this has done nothing to help sterling. Idiosyncratic factors such as the UK’s monetary and fiscal response or Brexit are beside the point: this is about the US dollar, which is proving unstoppable as global financial markets stare into the abyss of crisis-like conditions.
Markus Allenspach (Julius Baer) | Step by step, the policy mix is changing around the globe. Most impressive fiscal support packages are in the making in the US with USD 1 trillion to USD 1.2 trillion, in Spain with EUR 200 billion, in France with EUR 345 billion and in Germany with guarantees of up to EUR 550 billion, tax cuts and waivers of social contributions.