Expectation was the order of the day yesterday, with markets buying back a fraction of their losses on the hope that governments will come to the rescue…

That proved partially the case with Rishi Sunak yesterday, who laid out £330bn of support with more to come. Those funds will go towards a list of practical measures for businesses and homeowners, but do leave those in the gig economy and in private rentals with the same concerns they had yesterday – though we wouldn’t be surprised if he was back later in the week with even more plans for support, on the basis that there’s little difference in loading up the national debt by 1/3 of a trillion pounds or 1/2 a trillion pounds, so he might as well go all in.

Transport businesses are also likely to get a separate package once the chancellor and the transport secretary have sat down.

Across the Pond; Trump is looking at a trillion dollars in aid, which sent the markets there significantly higher than their European counterparts.  The aid package would involve sending cheques out to Americans in a bid to get them spending straight away and keeping the economy turning over, rather than those with savings eking them out over weeks to come and those that don’t have them being stuck without a paddle. It’s might take a few days to get this going, but it will be a very interesting proposition. It would be ironic if it were the Americans that started the world off on a universal basic income!

Europe are mulling the idea of making joint debt issues. This has been a political hot potato for years, but the idea of investors being able to buy a bond that effectively has Germany standing behind it, but a yield that blends that of other European countries would look incredibly attractive. It would also give those countries where bond yields are spiking some access to cheaper credit. We’d normally say that getting this over the line won’t be a quick process, but this is no ordinary motivating factor.

 

The oil market has comprehensively fallen below the $30 region that it was trading around for the last week or so, with a move down to $26, which is the lowest price we’ve seen since 2003. The move lower is forecast to continue though, as Saudi and Russia are both prepared to sit this one out.

On the note of Russia; their response to coronavirus has basically been denial, but Putin has used it to his advantage… last week they banned public gatherings (including protests) and this week he has said that the vote that would change the constitution for him to remain in power for another 12 years would still go ahead! The vote isn’t until the 22nd April, so a lot can change between now and then. Economically, Russia is yet to unveil any significant stimulus packages to their economy and apparently there are only 114 cases of the virus in the country so far.

Another entity absent from the stimulus party is Christine Lagarde (currently being dubbed Christine Laggard) from the ECB. We’re yet to hear about more supportive efforts from the European Central Bank. This is actually playing into the value of the Euro, which has been pretty resilient to the steam rolling that other currencies have faced by the US dollar.

Today’s European open will be lower, according to futures markets, though we’re ‘only’ talking about 1-2% and that can all change. Investors now need to get to grips with valuing companies not on their earnings, but on their cash holdings and access to credit so they can keep the lights on, so volatility will remain high even if the outright swings don’t seem as large.

One silver lining; we can’t see government’s anywhere letting tech and other global businesses pay next to nothing in taxes going forward, as someone is going to have to pay for all of this…

Be well

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