The ECB disappoints, Trump worries and the new Coronavirus spreads, forcing the WHO to declare a pandemic. There is enough to shake the wrists and also the markets, which in fact are experiencing a shock session. European lists close with losses of more than 10%: Frankfurt -12,24%; Paris -12,28%; Madrid -14,61%; London -10,93%; Zurich -10,95%.
Business Square experiences its worst session ever, -16,92% and lands at 14.894 points, while the spread soars to 262 basis points, after reaching even higher peaks following the words of the ECB President Christine Lagarde, at the end of the meeting which left the cost of money unchanged. "We are not here to reduce spreads, it is not our job", cut short the number one of Eurotower, who subsequently attempted an ineffective backtrack by telling CNBC: "I am fully committed to avoiding any fragmentation in a difficult moment for the eurozone: the widening of spreads linked to the coronavirus compromises the transmission of monetary policy".
Also Wall Street started sharply lower and was suspended for 15 minutes as the S&P500 hit a 7% loss. At the recovery, however, things did not go better: currently the Dow Jones is down 9%. Airlines are in free fall.
The situation on American lists had already precipitated yesterday and during the European night Donald Trump has announced the blocking of flights from the Old Continent, excluding Great Britain, specifying then that the provision concerns people and not goods. A choice not agreed with Europe ("there was no time" says the US president) and which puts the global economy at increasing risk, with the pandemic threatening not only the health and healthcare systems of the countries, but growth, well-being and the system as a whole. To aggravate the situation today came the reaction to the choices of the ECB, on which many expectations had focused. Eurotower would have disappointed the markets by leaving the cost of money unchanged and choosing to increase the Qe, the program for the purchase of securities on the market, by 120 billion by the end of the year and to introduce new TLTRO auctions by lowering the rates on existing LTTROs by 25 basis points.
After the ECB theeuro it began to retreat against the dollar and is currently down 1,5%, with the exchange rate hovering around 1,109.
Sales hit commodities. L'gold, an asset that has given shelter to investors in some sessions in recent weeks, slips by more than 3 percentage points and moves to 1579,75 dollars an ounce. It doesn't stop the run backwards of the Petroleum, with Brent losing 8,8%% and falling to 32,60 dollars a barrel.
In Piazza Affari the damage count, among the blue chips, starts from Atlantia -22,23%; Leonardo -22,15%; Post -22,03%. The banks record very heavy losses: Ubi -19,45%; Mediobanca -18,69%; Understanding -17,78%; Unicredit -17,26%; Bper -17,75%; Banco Bpm -16,70%. The European Central Bank decided today to allow euro area banks to skip certain capital and liquidity requirements in the current environment affected by the spread of the coronavirus.
“The ECB – reads a note – will authorize banks to operate temporarily below the capital levels defined by the Pillar 2 Guidance, the capital conservation buffer (CCB) and the liquidity coverage ratio (LCR)”, but expects banks to use this waiver is to continue providing credit to the economy and not to increase shareholder dividends or bonuses to managers.
It will also be possible to qualify Additional Tier 1 or Tier 2 bonds as capital, in order to comply with capital requirements, anticipating a change in the regulations expected in 2021.
Meanwhile, the EBA has postponed the stress test on European banks to next year to allow institutions to focus on their business during the epidemic.
