"Not a day goes by without the need to update, for the worse, the estimates on the progress of the epidemic and the timing of the recovery", writes this morning Bruce Kasman, economist at JP Morgan, commenting on the new downward revision of the forecasts for world GDP: -10,5% at the end of June. The markets, while supported by the shower of incentives arriving from governments and central banks, acknowledge that the recovery will be long and complicated.
LOSSES BLOWS THE NIKKEI, NEW STIMULI IN CHINA
Nikkei loses hits: -3%. Japan has basically sealed its borders. The Kospi index of Seoul is also down. The exception is Sydney (+3%), driven by the government's expansionary measures.
However, monetary and fiscal stimuli do not push Chinese stocks up: Shanghai loses 1,5%, Hong Kong's Hang Seng 1,2%. China's central bank cut its seven-day repo rate by 20 basis points to 2,20% on Friday in the largest cut in five years.
China is preparing to declare the end of the emergency and the start of the recovery. The Xinhua news agency announced that new resources will be raised with the increase in issuance of state bonds; local administrations, provinces and municipalities will also be authorized to follow the same path. But it won't be an easy process: reports reveal that the authorities of the provinces bordering Wuhan, the epicenter of the virus, refuse to open roads and bridges to facilitate access to the metropolis.
NO QUESTION, BRENT AT THE MINIMUM FOR 17 YEARS
The clearest symptom of the global recession is the crisis that has hit the oil market. Brent is down 5,8%, at 23,5 dollars, a new low in the last 17 years. At the origin of the new decline, which coincides with the launch of a missile by the Hutu rebels on the outskirts of Riyadh, is the demand crisis.
Goldman Sachs forecasts a contraction in demand this week never seen in history, a drop of 26 million barrels per day, equal to about a quarter. Storage is also in crisis, because a large part of maritime transport risks default.
Gold also loses its shots at 1.617 dollars (-0,7%): traders raise cash to face the liquidity crisis.
THE 0,65-YEAR T-BOND RETURNS XNUMX%
Yields on T-bonds collapse: the 0,65-year bond trades at 26%, with a loss of XNUMX points.
The dollar appreciates again against almost everything else: only the yen can keep up with the US currency. Euro dollar at 1,108.
TRUMP REVIEWS: AT EASTER USE STILL STILL
A negative start is looming for the European stock exchanges and for Wall Street, which yesterday mourned its first victim: Pat Brodbent, financial director of Jefferies. Donald Trump, swallowing yet another bluster, admitted that the recovery, which he promised by Easter, will have to be postponed by a few weeks (or months). John Hopkins University says the positives have risen to 142, more than in China and Italy. Globally we have reached 721 thousand. A central bank source told Bloomberg that the commitment not to exceed a deficit of 3% of GDP will not be met.
In the meantime, the signs of a slowdown in the epidemic in Italy are taking shape. According to data provided by the Civil Protection, positive subjects increased by 3.815 in our country on Sunday and reached 73.880. The number of deaths rose to 10.779, an increase of 756 cases. The healed in one day grew by 646, bringing the total to 13.030. Since the beginning of the epidemic, 97.689 people have been infected.
But the economic and financial emergency is getting worse.
PMI INDEXES AND EMPLOYMENT: THE ALARM SOUNDS
Alas, there are no doubts about the outcome of the surveys on business and consumer confidence in Europe, which will be published in the morning. A more precise measure of the disaster will also emerge from the reading of the indices on manufacturing activity due in the next few days. Data on Italy will arrive on Wednesday, in conjunction with inflation and employment.
Spotlights turned on above all on the numbers of the American labor market after the shock increase in job applications that emerged from last Friday's statistics (3,3 million jobless). Dramatic numbers like those that will emerge tomorrow from the Chinese Caixin index, this time awaited with particular attention not only by analysts of the Celestial Empire.
In fact, China, which was the first to feel the storm caused by the epidemic, seems to be already on the way to recovery. According to a study by Macquarie, coal consumption has returned to 95% of normal values, as have the level of traffic congestion and car sales, recovering after having first tested the extent and speed of the recovery. As long as there are no relapses.
ITALY GDP TOWARDS -7,5%. ARM OF IRON ITALY/BRUSSELS
Meanwhile, central banks, led by the Fed and the ECB, will continue to pump liquidity into the systems to avoid collapse. But the markets are aware that this will not be enough if an instrument is not identified within the EU that allows the EU to add resources to the budgets of individual countries, without providing for mutual mutuality between states (unacceptable for the Germans) and without the 'explicit conditionality which makes it indigestible to the countries of the South (Italy and Spain in the lead). Squaring the circle, perhaps involving the EIB, must be found within two weeks. Better if sooner, given the market situation.
The lack of solidarity, in the face of a crisis with still unknown outcomes, risks undermining the very solidity of the common currency.
Meanwhile, the shield of the ECB allows us to look with confidence at tomorrow's auction of three 5-year and 10-year BTPs for 7,75 million euros.
In particular, analysts estimate that the Italian GDP could suffer a fall of 7,5% which could only be countered by a monstrous rain of exceptional interventions.
BANK COUPONS POSTPONED TO OCTOBER. TOMORROW THE BOD OF INTESA
The corporate calendar also reflects the market upheaval. Quite a few companies have postponed the appointment with the shareholders for the approval of the accounts. Among these, for now, Daimler, Deutsche Telecom and the raw materials giant Glencore.
It should be noted that, for the first time in history, Generali will hold its budget meeting in Turin on 27 April. A novelty imposed by the coronavirus: the president Gabriele Galateri will lead the assembly, naturally by videoconference, from his home. The away Lion confirmed the coupon at 0,96 euro (yield at 7,6% at Friday's prices).
The attention of Piazza Affari today will be focused on dividends. The ECB invited European institutions on Friday not to pay coupons "at least until October 2020" and also to refrain from any buyback operations (repurchase of treasury shares) in order to ensure loans to households, small businesses and companies. Intesa Sanpaolo, which at current prices offers a yield of 12%, has already announced that the Board of Directors meeting on 31 March will examine the ECB's indications. It will not be an easy decision and a postponement will cause many problems for the member foundations of the institute, an important element of Italian welfare. The dilemma also concerns other institutions: above all, Banco Bpm (dividend yield of 6%) and Ubi (5,1%).
Unicredit would also issue an interesting coupon at current prices, 0,63 euro, which correspond to a yield of 7,59%. Jean Pierre Mustier, as president of the European Banking Federation (EBF), has asked banks to evaluate a common line on the "scrapping of dividends", conserving capital to give relief to the economy in a moment of emergency.
The market response to theagreement between Juventus and the black and white players who, Cristiano Ronaldo in the lead, have agreed to waive their salaries for March, April, May and June 2020. The players give up a total of 90 million, a large world a third of the total wages (250 million). The Juventus club, in a note published on its website, announced that, "due to the global health emergency currently underway, which is preventing sporting activity from being carried out", the four-month salaries of its athletes and by Maurizio Sarri will be reduced by virtue of the agreement reached. The role of Giorgio Chiellini was decisive, captain on and off the pitch.
