Archives of “March 2020” month

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World Health Organization: Even if we call it a pandemic, we can contain it

  
  Analysis

World Health Organization”s Tendros speaking

WHO’s Tendros/Ryan speaking:
  • Italian health system under pressure in Lombardy, Veneto
  • still very much in up cycle of this epidemic
  • 43 countries have less than 10 coronavirus cases
  • 79 countries have less than 100 coronavirus cases
  • even if we call it a pandemic, we can contain it
  • Even countries with the 1000+ cases can contain its spread
  • we can win this coronavirus battle
  • nursing homes need to take measures to reduce risks

WHO’s Tendros putting a more positive spin on the risks.

European major indices end their nightmare of a day

  
Analysis, Global Indices
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Major indices down over 7%

The European stock markets are now close for the day and the nightmare is over.  The major indices all closed over 7% lower.   For the year the declines are near the -20% level. Ouch.
The provisional closes for the major indices are showing:
  • German DAX, -7.4%
  • France’s CAC, -7.9%
  • UK’s FTSE 100, -7.3%
  • Spain’s Ibex, -8.1%
  • Italy’s FTSE MIB, -11.1%
For the trading year, the provisional changes are showing
  • German DAX, -19.8%
  • France’s CAC, -20.67%
  • UK’s FTSE 100, -20.3%
  • Spain’s Ibex, -18.9%
  • Italy’s FTSE MIB, -20.3%
In other markets as London/European traders look to exit:
  • spot gold is down $6.20 or -0.37% at $1667
  • WTI crude oil futures are down $8 or -19.43% at $33.26
In the US stock market:
  • S&P index is down -169 points or -5.7% the 2802
  • NASDAQ index is down -425 points or 4.98% at 8148
  • Dow is down -1600 points or -6.2% at 24263
In the US debt market yields remain sharply lower.
Major indices down over 7%_

IMF: Virus stimulus should be targeted for cash transfers, wage subsidies and tax relief

  
  Analysis
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Comments from IMF chief economist Gopinath

  • Governments need ‘substantial’ targeted measures to combat economic drag from virus
  • Rate cuts and monetary stimulus may instill confidence but likely effective only after business conditions normalize
  • Central banks should be ready to boost liquidity and other lending to small business
  • Governments should consider temporary loan guarantees
Is it just me or are temporary loan guarantees insane? If a business is struggling, banks are going to offload that so fast on the government and they aren’t going to take it back. It’s basically a bailout in camouflage.

White House virus stimulus plans said to still be at brainstorming stage

  
  Analysis
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CNBC Washington correspondent, Eamon Javers, tweets

The tweet thread reads:

1. With markets in turmoil this morning, where are we on virus stimulus? I’ve spoken to two senior admin officials today who say the WH is working on various ideas. But it doesn’t seem to have gone much further than the brainstorming stage.

2. A senior administration official tells me this morning virus ideas were kicked around at the WH over the weekend. But he cautions that there’s nothing on paper and it is still a long way off. “Under pressure, will they want to say they have a plan? Yes. Do they? Not really.”

It is going to take a while before this even turns into anything concrete it seems. Trump’s election bid may be hanging in the balance here and for now, the best he can do is still to play the Fed card I reckon.
This is hardly confidence inspiring if you’re an investor and looking at the market now.

Fed increases sizes of overnight, term repo operations

  
  Analysis
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The Fed just hiked the amount offered in its repo operations

The statement via the NY Fed:

“The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has updated the current monthly schedule of repurchase agreement (repo) operations.

Beginning with today’s operation and through March 12, 2020, the Desk will increase the amount offered in daily overnight repo operations from at least $100 billion to at least $150 billion. In addition, the Desk will increase the amount offered in the two-week term repo operations on Tuesday, March 10, 2020 and Thursday, March 12, 2020 from at least $20 billion to at least $45 billion.”

You can check out the other smaller details here. Not QE they said. Things will go back to normal soon enough they said. Look where are we now.

Morgan Stanley expects FOMC to cut 75bps(50 on March 18, 25 in April)

  
  Analysis
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Morgan Stanley has slashed their US 2020 GDP growth forecast to 1.5%

  • from 1.8% previously

Projections for the Fed:

  • 50 bps rate cut in March
  • 25bps in April

MS add that if recession:

  • Fed to cut to zero
  • & restart QE
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PS. I am seeing (again) the ‘central bank rate cut is ineffective therefore they won’t and we need fiscal stimulus instead’ comments.
This is, unfortunately, a very common mistake that is made.
I posted this ahead of the RBA meeting last week (before the RBA cut its cash rate) , just change around the names:
  • Some folks will argue rate cuts will be ineffective against the virus, which is the wrong argument, of course rate cuts won’t cure a virus! Sheesh. The central bank move, if it comes,  will be predicated on taking action to avert too much economic harm. Some folks will argue that a rate cut will be ineffective for this, that government stimulus (fiscal) would be better, and they have a fair point … but you have to remember a rate cut is the tool available to the central bank, they can’t provide fiscal stimulus. “The RBA should stand firm and force the government to act” is another argument. Unfortunately this is no time for dick swinging contests (its a male-dominated sphere) and the RBA will not play this game.

North Korea fired 3 projectiles, reports are none landed in Japanese territory

  
  Analysis
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In the midst of the oil and equity markets gappage down came NK firing off a missile test

  • Its now confirmed as three projectiles
  • fired into the East Sea
  • Apparently none have landed in Japan’s economic zone.
This encouraged further flows into yen, not that they needed much encouragement with flows into havens following weekend oil and coronavirus news
Keep an eye on virus news out of the US. Testing there is still largely prohibited by the WHite House. China had little luck trying to hide the outbreak, its not going to succeed in the US. Fear of an explosion in case numbers, and then the inevitable confirmation of an explosion in the numbers when the news can no longer be hidden is going to exacerbate volatility in stocks ahead.
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