Archives of “May 2020” month

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Eurozone March construction output -14.1% vs -1.5% m/m prior

  
  Analysis

Latest data released by Eurostat – 19 May 2020

  • Prior -1.5%; revised to -0.5%
  • Construction output -15.4% y/y
  • Prior -0.9%; revised to +0.2%
No surprises here as we see dismal figures in construction activity amid lockdown measures in the region in March. The release here doesn’t matter all too much since this has already been reflected in Q1 data with April to also reflect more subdued conditions.

Germany May ZEW survey current situation -93.5 vs -86.0 expected

  
Analysis, Economy

Latest data released by ZEW – 19 May 2020

  • Prior -91.5
  • Expectations 51.0 vs 30.0 expected
  • Prior 28.2
  • Eurozone expectations 46.0
  • Prior 25.2
Despite the headline reading slipping a little bit more – reflecting more subdued economic conditions – optimism is actually growing that there will be an economic turnaround in Germany and Europe from the summer onwards.
ZEW notes the significant improvement in expectations for most sectors of the economy as growth is expected to pick up pace again starting from Q4 2020.
That said, ZEW reaffirms that any return in economic output back to pre-coronavirus levels will take a long time and is only seen around 2022 at this stage.

BOJ calls for unscheduled monetary policy meeting on 22 May

  
  Analysis
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BOJ to hold an unscheduled monetary policy meeting this week

The meeting will take place at 0000 GMT on 22 May (this Friday). The BOJ says that the meeting is to discuss new measures to provide funds to financial institutions, following up on instructions by governor Kuroda from the 27 April meeting.

Their next policy meeting was supposed to be on 16 June but Kuroda had already hinted that they were looking to do something like this before that meeting here.
So, this is merely to follow up on that as they will introduce a funding scheme to aid the financial system and inject more liquidity. But the sudden call here isn’t going to be all too comforting and it’ll prompt questions on if there are any banks in trouble.

China says that US’ letter on WHO tries to mislead the public to smear China

  
  Analysis

Comments by the Chinese foreign ministry

  • The letter tries to shift the blame of the US’ own incompetence
  • Says that now is not the time to call for a coronavirus probe
  • Says carrying out review of WHO response during this time will have negative effect
In case you missed it, Trump tweeted out the letter sent to the WHO in which the US administration criticised the lack of independence from the organisation when dealing with the response of the coronavirus outbreak in China.
The fallout from the virus outbreak is building and it may not be pretty:

European bonds responding favourably to Germany, France recovery fund proposal

  
  Analysis

Well, for now at least

Italy 10-year yields

And this will also help to add a tailwind for equities/risk in the near-term as bond investors add to the optimism. The yields spread between 10-year Italian and German bonds has now narrowed to its tightest levels in five weeks to 206 bps.
This comes amid a continued fall in Italian bond yields, with 10-year yields now at 1.62%.
The hope with the recovery fund proposal by Germany and France is that it is something that is put together because it has enough support to get through. But I’m not too sure if that will necessarily be the case as Italy and Spain may need more convincing.
That said, a key change under this latest proposal is that the funds will be given as grants (instead of loans), something which Italy and Spain has been fighting for.
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