Nitesh Shah (Wisdom Tree) | With the coronavirus spreading around the world, the market is understandably scared that demand for crude oil will fall hard this year. Brent oil prices have fallen from a peak of US$68/barrel in the first week of January to US$56/barrel currently (24/02/2020). We believe that the backwardation in the Brent oil futures curve is generated by the fact that OPEC is ready to intervene.
Ranko Berich (Monex Europe) | Jay Powell and the Fed have taken the warning financial markets have given about coronavirus over the past weeks to heart and brought out the big guns with a 50bp intra-meeting rate cut. This is a tool that has not been used since 2008, and comes after a serious worsening in the global macroeconomic outlook due to the Covid-19 outbreak shattering previous optimistic assumptions that it would be mostly contained within Q1.
Bank Of America Global Research | We lower our Euro area growth forecast to 0.6% for 2020 (-40bp), on the back of lower foreign demand (global growth downgraded to 2.8%, from 3.1%), supply chain disruptions and at least temporarily lower domestic demand from local virus hot-spots. We keep our 2021 forecast unchanged at 1.1%, assuming a permanent loss in activity. Euro area growth is expected be close to zero in 1H20 (with negative quarters in Italy and Germany part of our base case).
Nitesh Shah, (Director, Research, WisdomTree) | “Nassim Taleb in his book on uncertainty defined “Black Swans”— extremely unpredictable events that have massive impacts on human society. One of the defining elements of Black Swans is that models can explain their existence after the fact. In September 2019 a report compiled at the request of the United Nations secretary-general said “If it is true to say ‘what’s past is prologue’, then there is a very real threat of a rapidly moving, highly lethal pandemic of a respiratory pathogen killing 50 to 80 million people and wiping out nearly 5% of the world’s economy.
Endesa board of directors includes Italian members of Enel, such as the CEO of the Italian energy company, Francesco Starace, who is vice president of the Spanish company, and who, due to this plan, did not attend the meeting of the company’s governing body convened to approve the company’s last year’s results.
Strong general falls in the airline sector on Monday due to the spread of the coronavirus in Italy. According to Morgan Stanley data, 70-100% of the European airlines profits are made in the period from April to September, so a fall in demand or flight cancellations can have a strong negative impact.
Equity markets tumbled worldwide following the wide spread of the coronavirus epidemic beyond China. European stocks dropped most since 2016, with Italy’s MIB index dropping 5.43%, while the declines were more contained in Asia. Elsewhere, implied volatility increased further (VIX 23+6 points).
Investors worldwide are trembling at the epidemic that is currently crippling China. With good reason? This is a guest commentary by Frank Sieren. The best-selling author has lived in Beijing since 1994 and reports exclusively from China for Flossbach von Storch AG.
Yesterday, ratings agency Standard & Poor’s published a report where it calculates that China’s coronavirus crisis will subtract one or two tenths off economic growth, both in the Eurozone and in the UK, in 2020. This is due to the impact on exports to China and on business investment. In Spain’s case, the figure may be excessive. This is because the impact on imports from China must also be taken into account and will work in Spain’s favour.
Christian Gattiker (Julius Baer) | Policymakers in China made a credible move in their attempt to regain control over the current situation. After injecting liquidity into financial markets, they announced the potential for a cure/vaccination available soon and later cut some tariffs on US imports. Fear-stricken markets took a sigh of relief.