Mathieu Racheter (Julius Baer) | President Trump recently urged to halt plans of the government’s main pension fund to invest in Chinese equities. While the implications for Chinese ADRs listed in the US should be fairly small, there is a risk that the administration will extend the restrictions to other US investors. We continue to view Chinese equities as a core holding and reiterate our strategic Overweight rating.
Janwillem Acket (Julius Baer) | After initial jobless claims topped 33 million since 12 March, US labour market statistics for April showed massive job losses. As was to be expected, the usually cyclically robust services were a major source for redundancies, because they particularly suffered from the lockdown measures. However, there are reasons to expect that April 2020 could mark a low as fiscal and monetary incentives, next to a relaxation of the lockdowns, are prone to start a rehiring wave again.
Anthony Pettinari (Citi GPS) | While we can’t rule out that funding for infrastructure will be included in a new package, it looks far more likely that any package that can be agreed on by the Administrationand Congress will include more money for small businesses, the unemployed, hospitals/health care, and possibly State/Local governments. The good news though is that we expect a post-election comprehensive infrastructure bill that could help propel beaten down state and local economies.
Patrik Lang, Head Equities (Julius Baer) | We have downgraded eurozone equities to Underweight given slower earnings recovery expectations, increasing political risk and unfavourable sector exposure. In our view, relative valuations do not fully reflect these negatives. On the other hand, we have upgraded US equities, which should benefit from a relatively fast post-Covid-19 recovery.
Pablo Pardo (Washington) | We don’t know yet what will happen but, for the moment, it is clear that the fact that China has apparently been able to contain the pandemic better than the US or much of the EU will considerably strengthen that country’s political appeal and capacity for influence. The loser, for the moment, is the West. The economic damage was inevitable. But the political damage, for example in the US, due to the lack of preparation and the scant attention paid to experts, could have been much less…
Markus Allenspach, Head Fixed Income Research, Julius Baer | At this stage, the corporate bond market needs support from the Federal Reserve to digest the negative news flow, such as the net tightening of lending standards for commercial and industrial loans in the senior loan officers’ survey published yesterday or the numerous cyclical data showing the depth of the contraction in the current quarter.
Iberdrola, through its US subsidiary Avangrid, has signed a long-term ‘green’ energy power purchase agreement (‘PPA’ in English) with German telecommunications giant T-Mobile. The energy will be supplied by the Otter Creek wind farm in LaSalle County, Illinois, USA. The company has corporate clients in the US such as Nike, Amazon, Apple, Google and Facebook, amongst others.
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.
Intermoney | In the case of credit, a situation is already beginning to take shape in the US that worries us quite a bit and which will end up spreading throughout the world. Namely, the forced debt sales for companies that lose their investment grade rating. Currently, this would translate into the closest thing to a sale of balances. This situation has already forced Western Asset, a fixed income manager with $460 billion under management, to apply for a waiver for a Fresno County public employee pension fund.
“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”