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LGT Navigator: No relief

March 23, 2020

The manifold countermeasures of the central banks and the billions in aid promises of many governments do not seem to have really contained the nervousness of investors so far, or give stock markets a chance to bottom out. While European equities followed the positive trend from Asia on Friday, the New York stock indices closed deep in red again, and the picture in Asia is mixed today. For Europe's equity exchanges, the futures signal a negative start into the week.

No relief in corona crisis

On Friday, US stock markets failed to join the recovery trend on European and Asian stock markets, ending one of the worst weeks in the history of Wall Street. The Dow Jones Industrial closed on Friday with a minus of -4.55%, its lowest level since November 2016. Last week, the leading index lost -17% lower overall, the largest weekly loss since 2008. The market-wide S&P 500 also closed with a negative weekly balance of -15%. US equities have thus already fallen by more than -30% from their mid-February high. However, the pandemic in the US appears to have only just begun and it remains to be seen whether the largest economy will find an adequate remedy for the crisis. In Asia, the stock markets opened the new trading week mostly in negative territory. While the Nikkei 225 Index in Tokyo rose by around +2% - a catch-up effect because the Tokyo Stock Exchange remained closed on Friday - most indices, especially those of the Chinese stock markets, suffered further heavy losses. In Hong Kong, the Hang Seng Index starts the new week with a slump of around -4%. The Shanghai and Shenzhen stock exchanges lost a good -2%.

We are currently registering 339 234 cases of coronavirus infections worldwide, with 14 703 confirmed deaths. The situation remains alarming, especially in Italy and Spain. In Italy, the number of deaths continues to rise sharply and currently stands at 5 476, while Spain reported around 1 700 deaths from COVID-19.

One trillion US dollars or more

Investors are eagerly awaiting the US economic stimulus package against the corona pandemic. A decision could already be made today on Capitol Hill in Washington. According to the US Secretary of the Treasury Steven Mnuchin, there is a fundamental agreement between Republicans and Democrats. It is not yet clear how high the economic stimulus package will be, however, it should amount to at least USD 1 trillion (around EUR 900bn). Private households are to receive direct payments of over USD 1 200 and USD 500 per child, and special loans are to be granted to ease the burden on small and medium-sized enterprises in particular. Some USD 110bn of the aid package is also to flow into the health care system.

ECB President Lagarde: “Extremely serious economic shock”

The European Central Bank (ECB) would act decisively and do everything within its mandate that is necessary to support the euro economy. In the German newspaper “Handelsblatt”, ECB President Christine Lagarde wrote that a large part of the economy was temporarily paralysed, threatening the existence of companies and jobs. It is an “extremely serious economic shock that requires an ambitious, coordinated and immediate policy response on all fronts”. The ECB will ensure that all sectors of the economy benefit from the recent measures taken by the central bank, such as more favourable financing conditions. This should enable the euro-area economy to cope with the shock.

Norway's central bank also relaxes interest rates to record low

The Norwegian central bank (Norges Bank) also lowered its key interest rate again on Friday from +1.0% to +0.25%, which means that the interest rate level has reached a new record low in light of the Corona crisis. The Norges Bank had already lowered its key rate on March 13th. The central bank also stated that it could not rule out a further rate cut. The Norwegian krone has depreciated significantly since the beginning of the year, but this is also due to the collapse in oil prices.

Brussels offers London longer Brexit negotiation period

EU Commission President Ursula von der Leyen signalled to the British government the possibility of prolonging the brexit negotiations because of the Corona crisis. British Prime Minister Boris Johnson, after leaving the EU on 31st January, set himself a deadline of the end of 2020 to negotiate a treaty on future relations with the EU. According to von der Leyen, the EU Commission was ready to negotiate.

 

 

Economic Indicators March 23

MEZ Country Indicator Last
08:00 DE Producer Prices (y/y) +0.8%
15:00 US Existing Home Sales (m/m) -1.3%
15:00 US Existing Home Sales (y/y) +5.5%

Earnings Calendar March 25

Country Corporate Period
GE E.ON Y19

 

 

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Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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