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earnings wall street

World economy 12th April 2020

Corporate-Earnings Estimates For 2020 Are Likely To Be Revised Downwards. How Hard Could The S&P 500 Be Hit?

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.

coronavirus susto

World economy 11th April 2020

After The Pandemic, Will There Be A New Status Quo?

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.

Jay Powell

Markets, World economy 10th April 2020

The Federal Reserve Ventures Into Unchartered Territory

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. 

US corporate debt rose to 45% of GDP at the peak of the Great Financial Crisis

World economy 10th April 2020

Corporate Debt Is In Serious Trouble – Here’s What It Means If The Market Collapses

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%. 

nike logo shape

World economy 9th April 2020

No V, No W, No U, The Global Recovery Will Be Like The Nike Logo, A Very Long V Shape

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. 

gold refinery

World economy 8th April 2020

Gold: Swiss Refineries Are Resuming Operations

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. 

1929 wall street

World economy 8th April 2020

To Compare The Crisis Of 1929 With Today’s Would Be Unfair…If It Doesn’t Drag On

Is the current economic crisis scenario caused by COVID-19 similar or different to the Great Depression of 1929? This question is answered in this note by John Plassard, investment specialist at Mirabaud. There are major differences between the two situations. Not only in terms of their nature, but with regard to the measures being taken today by governments, central banks and financial markets. That said, if the pandemic were to spread over time, that perspective could change.

US layoffs

World economy 6th April 2020

The Global Labour Market Collapses In Just Two Weeks

Intermoney | Unemployment claims in the US are the best thermometer of the intensity of the collapse the country’s GDP will experience. More than 6.65 million people filed for unemployment benefits in the US last week. Although businesses which employ almost half of Americans should be able to apply for loans between this Friday and 30 June, this could take a long time to arrive or even not happen for many.This is a risk we should bear very much in mind in Spain.

china recovery

World economy 5th April 2020

China’s Recipes For Its Most Difficult Year: Margin And Economic Policies

CaixaBank Research | China is responding with economic policy space to deal with the coronavirus. On the one hand, measures will be taken in 1H20 to support the sectors having the greatest difficulties. On the other hand, a significant fiscal stimulus package is expected to provide investment in the 2H20. The set of measures will be beneficial, as they will facilitate a full recovery of China’s economy, although they will also increase the deficit in a country with an already high level of corporate debt (150% of GDP).

V L W recovery

World economy 4th April 2020

V, W or L: What Shape Will The Recovery Take?

Keith Wade (Schroeders) | The world economy is in the midst of a sudden stop where activity has been brought to a halt by official action to suppress the coronavirus. We have updated our forecasts and see a severe recession in global GDP this year with the downturn concentrated in the second quarter (see here). Although a rapid V-shaped recovery is our central forecast, if Covid-19 lingers there is a risk of a “double-dip” recession.