LONDON, April 14 (Reuters) – A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own.
The global death toll as well as the number of COVID-19 cases continue to climb but politicians are increasingly fearful economies will die under the lockdown remedy prescribed by healthcare experts. That’s leading some countries such as Austria, Spain and Denmark to attempt tentative reopenings. That has improved the mood on markets.
Several U.S. states too are planning for the slow reopening of their economies. British finance minister Rishi Sunak is reportedly calling for the lockdown to be eased, warning the economy could shrink by up to 30% this quarter. In developing countries lacking the resources to support private business, India and Pakistan are among those planning to partially restart activity, though India for now has extended its lockdown.
There are signs the spread of infection is slowing in many countries. And data today showed Chinese imports and exports declined by 0.9% and 6.6% respectively, less than expected. All that is boosting equities this morning – Chinese shares are up 1.4% , Europe is up 1%-1.5% and Wall Street looks set to open higher.
Emerging stocks too are up around 1% but there are pockets of trouble – the Turkish lira is grabbing the limelight for the wrong reasons – the regulator on Sunday curbed banks’ ability to conduct foreign currency swaps to just 1% of banks’ equity from 10%. It’s an effort to ease lira volatility by squeezing offshore funding. But it’s down 3% regardless after falling 1% on Monday.
The dollar index stands close to a near two-week low touched on Monday, and currencies from the Australian and Kiwi dollars as well as the pound and euro are broadly firmer. Gold has retreated from seven-year highs. Bond yields are broadly flat to higher though Italian 10-year yields rose 12 basis points after European finance ministers stopped short last Thuraday of agreeing corona-bonds to get assistance to COVID-stricken southern euro zone states.
The problem remains that as long as significant parts of the world remain afflicted, there is little chance of any meaningful pickup in demand for goods and services. All that has kept oil prices just above $30 a barrel, despite OPEC and its allies deciding on a record 9.7 million barrels per day output cut in May and June – nearly 10% of global supply.
Today focus shifts to Q1 earnings, with U.S. banks JPMorgan and Wells Fargo reporting. Their full-year guidance is likely to be bleak and expectations are low. While Covid-related market swings may have boosted banks’ Q1 trading revenues by as much as 20%, main street lending should cast a pall on the sector.
It’s even more depressing elsewhere – shares in cruise firms Carnival and Royal Caribbean plunged as much as 17% on Monday after the U.S. Centers for Disease Control and Prevention extended its “no sail order”.
Company news headlines are full of dividend adjustments (Julius Baer) cost-cutting efforts (Asset manager GAM), cancelled M&A (Poland’s Lot airline called off acquisition of Germany’s Condor; Shell pulled out of a Russian Arctic oil project), emergency fundraisings (Car parts firm Valeo, events firm Hyve).
Watch out too for asset selldowns – Japan’s Softbank for instance said will post a record $13 billion full-year loss, because of its spluttering $100 billion Vision Fund. Some analysts identify Softbank’s stake in Alibaba as a possible candidate for sale.
Emerging market investors are focusing on the lira but dollar weakness has lifted Mexico’s peso, South Africa’s rand and Russia’s rouble 0.2% to 0.4%.
Watching for market reaction after the IMF announced debt relief for 25 countries so they can focus their resources on fighting coronavirus. Also expect more news from the IMF/WB spring meetings underway in Washington.
Indonesia could well trim interest rates further after already delivering two rate cuts.
+++ MARKET DATA DIARY ++++LONDON, Apro Chicago Fed’s Evans speaks 1630 GMT Indonesia cbank meeting IMF spring meetings start China trade/exports, imports Indian WPI inflation US earnings – Wells Fargo, Johnson and Johnson, JPMorgan
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