COVID-19: Daily Dashboard

investment insights

COVID-19: Daily Dashboard

Three levels of response to contain the current shock to H1 2020, limit defaults, and avoid an unemployment spiral

 

  • A public health response: to contain the spread of the virus, and gain time so that cases do not overwhelm hospital capacity 
     
  • A monetary response: to avoid a funding shortage and ensure liquidity at a cheap borrowing cost
     
  • A fiscal response: perhaps in the form of tax rebates or income transfers, to partially shield economic actors from the temporary blow.

New infections, total infections, total deaths, fiscal stimulus and monetary policy as at 01.04.2020

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* LO estimate or reported figures
Sources:
Bloomberg, IMF, World Bank, Lombard Odier calculations
 

Public health

  • Strict lockdowns are proving efficient at flattening the new infection curve
     

  • Italy continues to show improved numbers: yesterday’s death toll was the lowest in a week and the number of new intensive care cases fell to 12, confirming the improvement on a trend basis. 
     

  • Italy has extended its nationwide lockdown until 13 April and Germany has also extended its own lockdown until 19 April 
     

  • The mortality rate in the UK has spiked, reaching 8% of cases and providing an important lagging indicator as testing has only recently increased and remains at fairly low levels 
     

  • President Donald Trump warned on 1 April that the toughest two weeks are ahead of the US with the hope that infections will peak by then
     

Strict lockdowns are proving efficient at flattening the new infection curve
  • Washington state and California which originally appeared to be epicentres of the outbreak in the US, have slowed surges of new cases, although it is possible that California’s tests are lagging. In New York, which remains the US epicentre, the daily increase in new infections has dropped to almost 10%, although in absolute terms it remains close to the highs of around 8,000 new daily cases. Yesterday, New York Governor Andrew Cuomo announced new measures closing all NYC playgrounds and requesting stricter enforcement of social distancing guidelines  
     
  • To address worries about the government’s management of a second wave of infections, China’s National Health Commission (NHC) is now reporting ‘asymptomatic cases’ of Covid-19 separately from confirmed symptomatic cases. This adds 130 such cases to its 31 March report. On 1 April, symptomatic cases under the previous criteria, increased by 35 and asymptomatic cases rose by 55 
     

  • Since China’s NHC began reporting ‘imported cases’ on 4 March, defined as Chinese citizens returning from abroad, such cases accounted for 62% of symptomatic cases.

 

Monetary response

  • There are no new developments on this front since yesterday.

     

Fiscal response

  • Private investment is declining globally. That means governments can borrow as much as needed, because private savings are stockpiling

     

  • Specifically, governments are spending whatever is needed to deal with infections and develop tests/vaccines, providing funds to cash-strapped families and businesses to avoid bankruptcies and support coronavirus-weakened economies without worrying about debt increases which are sustainable at current interest rates
     

  • In France, the partial unemployment scheme, which compensates employees for 70% of gross salaries and 84% of the net salary, is paid in full by the state, to a maximum of 4.5 times the minimum wage. So far, it has been requested by 337,000 companies for 3.6 million employees
     

Private investment is declining globally. That means governments can borrow as much as needed, because private savings are stockpiling
  • France has proposed an EU-wide coronavirus rescue fund as a first step to break a deadlock over Eurobonds, keeping the door open to long-term, broad instruments in response to crises 
     
  • Dutch Prime Minister Mark Rutte said the Netherlands would support a multi-billion EU coronavirus fund but probably at more modest levels than French proposals. Positions continue to evolve quickly and it is worth noting a suggestion by German Finance Minister Olaf Scholz that the EU make available EUR200 billion in aid for countries affected by the crisis
     

  • In the UK, Chancellor Rishi Sunak is working to overhaul the Treasury’s aid to small and medium enterprises, given concerns about rapidly rising insolvencies as companies struggle to access funding through the banking system 
     

  • Trump White House reportedly wants USD 600bn in more state aid as well as financial assistance for mortgage markets and the travel industries.
     

Portfolio positioning

  • The Investment Committee decided to reduce exposure to emerging market debt in hard currency across all profiles to further enhance the liquidity 
     

  • We will hold the sale proceeds in cash
     

The Investment Committee decided to reduce exposure to emerging market debt in hard currency across all profiles to further enhance the liquidity 
  • Following the recent relief rally, the committee rebalanced the equity allocation in line with the tactical asset allocation targets. We re-adjust the equity exposures to take account of the market drift 
     

  • We are buying some protection by implementing put spreads to cover parts of the equity notional.  
     

New infections as of 01.04.2020

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