Archives of “May 2020” month

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Former German finance minister says court ruling on ECB could threaten euro’s survival

  
  Analysis

Former German finance minister, Wolfgang Schaeuble, comments

Germany
  • It is very possible the existence of the euro is now put into question
  • Because every national constitutional court can decide for itself
  • The situation makes nobody happy
  • It is difficult if the German court cannot accept the ECJ decision
  • But it is also not easy to refute the German decision
The German constitutional court ruling earlier this week is sort of like the first shot being fired in this declaration of war. If the narrative starts to grow from here, it could mean serious issues and complications being posed to the whole idea of the euro itself.
The whole of Europe is certainly getting very frustrated right now as the coronavirus crisis has certainly stretched relations within the bloc to very fine margins at the moment.
This is going to be a key risk factor to consider for the single currency in the bigger picture as we continue to navigate through these testing times.

WHO: COVID-19 is a type of coronavirus that starts in bats

  
  Analysis
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The WHO is giving a briefing on the animal origins of the virus

Virus
  • The coronavirus origin is linked to food, that is not unique
  • The Wuhan market played a role in spreading of the virus

The headline remark will surely infuriate US officials even more.

For what it’s worth, Der Spiegel is also reporting that Germany has doubts about the US’ claim that the virus came from a Chinese lab.
The report didn’t cite a source but says that the German Federal Intelligence Service was in touch with its partners from the US, UK, Canada, Australia, and New Zealand and none of them were able to confirm the claims made by US secretary of state Pompeo.

Nikkei 225 closes higher by 2.56% at 20,179.09

  
Analysis, Global Indices
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Asian stocks rally to close out the week

Nikkei 08-05

It is a solid end to the trading week for Asian equities, with the Nikkei leading the charge after US stocks posted a strong performance in overnight trading. Some optimistic tones on the US-China trade rhetoric are also helping a little with sentiment on the day.

The Hang Seng is up by 1.1% while the Shanghai Composite is up by 0.9% currently.
All of this is translating into a softer dollar and yen in the currencies space, with the aussie and kiwi benefiting from the movement so far today. AUD/USD is up by 0.5% to 0.6530.

Fed’s Harker warns of a second US recession in 2021 if too quick to reopen

  
Analysis, Economy

Philadelphia Federal Reserve Bank President Patrick Harker speech

  • could see robust growth in H2 if US economy reopens in June with smart measures to contain virus
  •  says that without effective mitigation measures, economy could severely contract again in 2021
  • US economy will underperform until virus is under control
  • Fed is considering facilities that would lend directly to colleges, non-profit hospitals
  • banks should not issue large dividends at the moment
  • sees ‘brutally painful’ second quarter
  • says factories may be able to bounce back, but damage to travel, hospitality may be long-lasting

Headlines via Reuters

Philadelphia Federal Reserve Bank President Patrick Harker speech

ICYMI: JP Morgan forecast for $100 oil within 2 years

  
Analysis, Crude

Some love for the oil bulls from JPM – this from a research note this week

  • We see oil going to $100 within two years
  • the near term, clearly, it’s very tough
  • oil price that should sit somewhere between $35 and $40 by the end of the year
  • two to three year view, we see a huge supply response, a lot of oil coming off the market, and we are very bullish on the long term viewpoint
  • “I’d expect as we go to the second half of this year, as we see demand bottom, and we see the OPEC cuts coming into play and potentially deeper cuts 

Goldman Sachs on oil – expects a strong recovery in demand

  
Analysis, Crude

Comments overnight ICYMI from Goldman’s global head of commodities research Currie

Expects a strong recovery in demand except for business travel:
  • “Before we used to have these internal meetings and things of that nature, and I think this is going to be way more Zoom-oriented, other types of substitutes”
Which has implications for airline travel:
  • “Look at the routes that the airlines are planning when they come back, they’re not going to be at the same level that they were previously.”
Moving on …
  • We believe demand will exhibit a V-shaped recovery
Oil supply could take a little longer to get back online as wells need to come back online, companies need to increase spending:
  • supply will exhibit an L-shaped recovery
Putting the two together:
  • could mean demand rises above supply as early as June 1
  • while demand returns to normal it will be from a base with less business travel
(That last remark I read as demand will not return to normal but to a lower new normal)
Comments overnight ICYMI from Goldman's global head of commodities research Currie
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