investment insights

    COVID-19: Daily Dashboard

    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 of 26.03.2020

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    Public health

    • Global cases of the pandemic now exceed the 500,000 mark, half of which are in Europe, while the total deaths near 25,000

     

    • In Italy, new confirmed cases rose again by +6,153, a higher number compared with 25 March but lower than the previous peak

     

    • In Spain, recorded new deaths slowed slightly (+655), while the country reports more than 50,000 The parliament approved the extension of the state of emergency until 12 April

     

    • Germany increased its testing capacity to 500,000 tests per week, while large increases in testing are also under way in other countries including the US, UK, France and Switzerland

     

    • Cases in the US near 75,000, with more than 1,000 deaths. US testing has increased very significantly, with results from more than 100,000 daily tests being reported

     

    • China cases increased slightly; all of them imported. As a result, the Chinese authorities have suspended entry of foreigners, effective 28 March

     

    • Singapore is imposing a mandatory two-week quarantine on all travellers from the US, effective 27 March. The same measure already applies to travellers from Europe.
    Global cases of the pandemic now exceed the 500,000 mark, half of which are in Europe, while the total deaths near 25,000

    Monetary response

    • The Reserve Bank of India implemented an emergency rate cut of 75 basis points for the benchmark repo rate and a 90 bps cut for reverse repo rate. The cash reserve ratio was also cut by 1 percentage point

     

    • The Bank of Korea began full allotments for its repurchase operations to inject more liquidity.

     

    • The European Central Bank has released the legal details of the EUR 750 billion Pandemic Emergency Purchase Programme (PEPP) announced last week. The legal documentation confirms the expectation that the 33% issue and issuer limits on past asset purchase programmes will not apply to PEPP.

     

    Fiscal response

    • The EU leaders’ summit ended with no concrete progress on new measures to fight the crisis, with the European Council joint statement simply inviting finance ministers “to present proposals within two weeks”. Angela Merkel’s comments following the summit suggest that Germany does not support the idea of ‘coronabonds’, making progress unlikely

     

    • In a videoconference on 26 March, G-20 leaders pledged to do “whatever it takes” to contain the outbreak and its impact
    The EU leaders’ summit ended with no concrete progress on new measures to fight the crisis
    • The UK announced a fiscal package of about GBP 3bn per month in support of self-employed workers that were left out of previously announced fiscal measures

     

    • Singapore increases fiscal stimulus to support the economy, with total fiscal support accounts now amounting about 11% of GDP.

     

    Portfolio positioning

    • Based on the substantial public health, fiscal and monetary measures taken so far, we maintain our scenario of a material but transitory shock, but increase portfolio hedges (Japanese yen and gold) to navigate the current volatility. In addition, we regularly re-adjust the equity exposures to take account of the market drift after the declines, so that portfolios can benefit from the eventual recovery

     

    • We have taken the opportunity of improved market conditions to enhance the portfolios’ liquidity profiles by reducing our high yield exposure. We are keeping the proceeds in cash so that we are ready to react rapidly to any change in outlook

     

    • We have also increased our GBPUSD allocation in sterling mandates by 2% following the historic collapse of the currency to levels that, in our view, were not consistent with underlying fundamental drivers.
    We have taken the opportunity of improved market conditions to enhance the portfolios’ liquidity profiles by reducing our high yield exposure

    New infections as of 26.03.2020

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    Wichtige Hinweise.

    Die vorliegende Marketingmitteilung wurde von der Bank Lombard Odier & Co AG (nachstehend “Lombard Odier”) herausgegeben. Sie ist weder für die Abgabe, Veröffentlichung oder Verwendung in Rechtsordnungen bestimmt, in denen eine solche Abgabe, Veröffentlichung oder Verwendung rechtswidrig ist, noch richtet sie sich an Personen oder Rechtsstrukturen, an die eine entsprechende

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