Bankinter | To avoid Covid-19 hit was not possible because it is an exogenous factor to the economy, unleashing this hyper-violent reaction as never before. We suspect this is due to the activation of the stop-losses of passive management. The failure of the central banks (mainly the ECB) and the slow and lukewarm reaction of governments have allowed the markets’ own inertia to increase.
Joachim Fels (PIMCO) | The Fed just announced a comprehensive easing package: near-zero policy rates, large-scale QE in Treasuries and MBS, lower rates on fx swaps and regulatory relief for banks. This is a close as it gets to “whatever it takes”. Still, a global recession seems to be a foregone conclusion. First and foremost, this will require a very large fiscal response to support individuals and businesses adversely affected by the crisis.
Caixabank Research | To date, technological change has been key to the economic and social development of the human race. Despite this, the technological revolution that we are currently experiencing, with artificial intelligence (AI) at the helm, is a source of not only wonder but also some misgivings. These misgivings may be due to the new nature of the technologies of the future and the disruptive effects they could have on our economy and society. At the same time, these new technologies could be key to the revival of economic growth that is faltering so much in our European environment.
Chris Colvin and Eoin McLaughlin via The Conversation | As news of the global spread of coronavirus disease (COVID-19) emerged, global financial markets reacted pessimistically and behaved in ways not seen since the 2008 financial crisis. But fully understanding the potential future economic impact of the virus which leads to this disease remains difficult – because spread of a disease on this scale is unprecedented in the modern world.
Brent crude oil is trading at $36 a barrel, down 20%, after OPEC and Russia broke off negotiations on Friday to try and cut the supply by 1.5 million barrels a day. At these levels, it completely breaks through the level indicated by the sector as break even, namely 45-55 dollars. Banco Sabadell analyses the sensitivity of the stocks they cover to variations in crude prices: Repsol, Total and ENI.
The Fed unexpectedly cut interest rates by 50 basis points to a new target range of 1.00% to 1.25% on Tuesday, March 3. But U.S. yields have been falling for some time already. According to DWS, the considerable decline in U.S. Treasury yields last year was mainly due to dwindling real yields. In fact, as much as 130 of the 160 basis points of the nominal yield decline since the beginning of 2019 are accounted for by the real component.
Ives Bonzon (Julius Baer) | When the circumstances we face become extreme, the temptation to panic is great. As Daniel Kahne-man, the great psychologist and Nobel Prize – winning economist for his work on choices and decisions, explained, the human brain is subdivided between a fast brain focused on the risks to our survival and a slow brain useful for grasping complex problems. The pandemic scenario touches us emotionally at the heart of our most precious asset, our survival. Nevertheless, more than ever, it is crucial to apprehend the situation with our slow brain.
Fernando G. Urbaneja | Economies around the world, and in Europe in particular, have been improving for less than a year, the recovery after the Great Recession peaked, to weaker growth times, including some local recessions (for example in Italy). The causes were known and repeated: trade war, Brexit, insufficient and confused fiscal policies, geopolitical uncertainties. But the “black swan” was missing, the unforeseen that becomes a necessary excuse, the scapegoat, for a trend change and even an end of cycle.
Bank of America Global Research | The theme of this year’s International Women’s Day is “I am Generation Equality”. The potential gains from gender parity are huge: full economic equality could increase global GDP by up to US$28tn, or by 31%, by 2025 – equivalent to the current GDP of the US and China combined. But progress is glacial at best.
European Views | Two months into the new decade, one of the defining trends of development finance in the 2010s is showing no signs of slowing down. “Eurobonds” – bonds issued in foreign currencies, not necessarily in Euros but often on the London Stock Exchange (LSE) and Irish Stock Exchange (ISE) – have become a prime tool for sub-Saharan African (SSA) governments looking to raise capital for infrastructure projects or servicing debts.