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 02.04.2020

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

Public health

  • Global confirmed cases of Covid-19 are now more than 1 million, with the case fatality rate at 5.2%. The fatality rate at the global level is now substantially higher than China’s 4.0%. The daily global growth rate of infections fell for the second consecutive day to 8.5%, after reaching as high as 14.5% last week

 

  • Italy's epidemic evolves in line with previous days. The daily death toll is a tragic but stable +760 while the total number of infections grew by +4.2% or 4,668 and Italy has increased testing

 

  • Spain is also continuing to see a gradual decline in its daily infection rate: confirmed cases grew by 7.6%, the lowest since early March, though confirmed deaths rose by 961

 

  • The UK mortality rate has risen even further to 9%, with 2,926 deaths as the country struggles to increase its testing capacity. To date, 13,000 tests are conducted each day against a target of 25,000. This suggests that the fatality rate is likely exaggerated and that the number of infections is potentially much higher than reported figures
Global confirmed cases of Covid-19 are now more than 1 million, with the case fatality rate at 5.2%.
  • In the US, the epidemic continues to spread. More than 240,000 confirmed cases are now recorded, including around 30,000 new cases reported over the last day, an increase of 14%. President Trump has invoked the Defense Production Act, a 1950s law, to help boost dwindling supplies of masks and other supplies, while the administration is also considering the option of halting flights between Covid-19 hotspots

 

  • Russia has extended its lockdown measures until April 30

 

  • More details are now available for China’s classification of “asymptomatic” cases. These are situations where the patients are placed under medical observation for 14 days and then released once they pass two consecutive nucleic acid tests. The existing epidemic curve should be thought of as “symptomatic” cases. China announced 1,541 such cases (cumulative for two weeks up to 30 March presumably), but recorded a daily increase of 60 on 2 April. China’s symptomatic cases increased by 31 on 2 April. Of these cases, 29 were imported from overseas.

 

Monetary response

  • The publication of the Federal Reserve's balance sheet data has revealed an unprecedented pace of asset purchases, with a growth of about USD1.1 trillion between mid-March and early April to a record USD5.8 trillion. This translates into daily asset purchases of Treasuries and Mortgage-Backed Securities in the order of USD90 billion per day

 

  • Both the Fed and the European Central Bank have decided to postpone their respective framework review in order to prioritise their responses to the crisis.

 

Fiscal response

  • German finance minister Olaf Scholz said in an interview that Germany could offer Italy and Spain European Stability Mechanism (ESM) support, with looser conditions than applied during the euro area debt crisis

 

  • The euro area negotiations are reportedly close to a deal that would allow ESM credit lines for those countries needing financial aid to combat the effects of the epidemic. As a reminder, the ESM has a current capacity of EUR410 billion and can extend loans to euro area members subject to conditionality

 

  • Eurozone short-time working programmes will help to dampen a spike in unemployment claims. While this will lead to significant fiscal costs, the support to household incomes should mean that consumer spending recovers more quickly once the coronavirus crisis is over

 

  • Nevertheless, the epidemic is causing severe damage to labour markets. Spain has recorded its worst employment month in its history with 834,000 jobs destroyed, while in the UK the number of people applying for universal credit benefits has reached 950,000

 

  • US initial jobless claims surged yet again to 6.648 million for the week ending 28 March, a 3.341 million increase over the prior week. Still, as we have highlighted before, the approved stimulus package will ensure full income replacement for many displaced workers. Personal income should hold up in April as transfers offset the drop in wages and salaries, although some payments may take longer to arrive

 

  • Senate Minority Leader Chuck Schumer said additional US stimulus, so-called phase 4, may come by the end of April. Republicans are resisting that urgency, saying more time is needed to assess the efficacy of phase three.

 

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

 

  • 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
The committee rebalanced the equity allocation in line with the tactical asset allocation targets
  • We are buying some protection by implementing put spreads to cover parts of the equity notional.

New infections as of 03.04.2020

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Wichtige Hinweise.

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