‘Orderly’ is a relative concept in these markets, but after the ‘incredibly wild’ swings of Wednesday, Thursday only brought ‘wild’ swings and therefore it felt like there was some order restored.

Stock markets all finished higher, though the moves were constrained and we ‘only’ saw an average of a 1% lift across European and US markets – Asia has taken the ball and run with it  overnight, with the Hang Seng pushing up by 4% into their market close and Australia managed to close for the weekend up on the day but down by more than 12% on the week. If the US can stand still today, then they’re looking at a 6% loss on the week. Interestingly, if the UK stays still today the FTSE 100 will only be down by just over 1% on the week…

The same can’t be said of the Pound though! From ‘highs’ at the start of the week of 1.25, we’ve been as low as 1.14 and everywhere inbetween. The silver lining for Sterling sellers is that there won’t be any resistance on the way back up, so if all of a sudden the market decides it likes the Pound again, we’ll probably be back off to the races.

The Euro finally succumbed to the pressure of the Dollar over the last few sessions, having previously strengthened up at the beginning of this as people exited their investments and bought back the currency that they’d funded those investments in. This had started to stabilise, but the turn around now has been quite big and it might be now that markets are starting to look at th health of European banks versus their global counterparts and wondering whether they can handle their exposure to emerging markets – particularly Turkey – which are really struggling.

We took a straw poll of the office yesterday (remotely) of ‘would you want this job’ and the outcome was a resounding no for both the new chancellor and the new governor of the Bank of England! Four days into his new post, Andrew Bailey made an emergency rate cut to 0.1%, the lowest we’ve ever seen rates and would have had an incredibly busy time the whole week in making sure liquidity operations were going as well as they could. The rate cut is another step to reducing the cost of credit for corporates, but the Bank is also going to be a primary buyer for companies going to the markets, which will hopefully keep a lid on already elevated financing costs (basically, ‘if I don’t buy them, the BoE will, so I’d best offer a sensible price’)

Rishi Sunak, just five weeks into his new job has presided over the biggest peace time support package the government has ever rolled out and it looks like it’s just about to get a lot bigger! He’s looking at how to make direct payments to people who might otherwise become unemployed; the view is that they could use PAYE credits rather than debits to top up payrolls, but that will only be effective for those on PAYE. That’s a start and we’re likely to hear more about it at Boris’ daily briefing this evening, or maybe over the weekend if they still can’t agree on just how much they let themselves spend (of our money).

London still isn‘t on lockdown, though just about everybody seems to know someone that knows someone that has a cousin in Downing Street and that’s happening today at some point! Most financial institution contingencies are now in place though and it would hopefully be business as usual even if banks and market makers are working from home – at least stopping these violent moves becoming even more aggravated.

We were looking at the corporate bond market becoming a theme in 2020, before all of this kicked off. Covid has now obviously accelerated all of this and the Wall Street Journal are picking this back up in a bit more detail and Bloomberg are talking about how just in the US distressed debt has doubled to $500bn in the last two weeks, with oil producers making up the lions share of that.

Oil continues to fall and is being joined by a whole host of commodities as production and demand slumps. Copper has hit a four year low and this FT article talks about it being practically ubiquitous in every construction or manufacturing process and as such performing worse now than it did in 2008 – it sounds like an awful read, but it’s actually pretty interesting!

An interesting paradox to finish on… China’s exports have rebounded heavily in the last few weeks, after a near total standstill since before Chinese New Year. The problem now is that western ports are closing down to handle their own crises. The WSJ has the detail.

TGI Friday.

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