OVERNIGHT NEWS
* Germany plans second fiscal stimulus package worth €50bn to €100bn, measured could incl debt relief for municipalities, extended state wage support, car purchase subsidies, family support
* Brexit: Britain expected to signal compromise on fisheries and level playing field trade rules if the EU backs off from demands on regulatory alignment and fishing access (Times)
* RBA keeps policy rate on hold at 0.25% and 3y AGB yield target at 0.25%; says depth of economic downturn may be less than previously expected; AUD/USD vaults 0.6800, AGB 2y/1oy steepens to 64bp
* SG Market Alert : EUR: PEPP increase may not derail euro bounce, US/China could
* SG GEO update : 2020 US GDP f/cast cut to -4.9%, euro area to -6.3%, UK to -9.2%, China to 2.6%, Brazil -7%, Russia -4.8%
* EM non-resident portfolio inflows slow to $4.1bn in May from $18.6bn in April, equities $0.7bn and fixed income $3.5bn, led by Asia and E. Europe (IIF)
* Nikkei +1.2%, EUR 10y IRS unch at -0.10%, Brent crude +1% at $38.7/b
SG 2020 growth forecasts mostly revised down
La debilidad del USD se prolongó ayer, mientras que el apetito por el riesgo se mantuvo relativamente sólido
teniendo en cuenta el difícil contexto en el que nos encontramos. La disminución de los casos de Covid-19 en las
principales economías y la paulatina reanudación de la actividad en todo el mundo siguen infundiendo cierto
optimismo en cuanto a la mejora de las condiciones económicas. Sin embargo, la recuperación en forma de “V”
parece improbable a pesar de todos los estímulos fiscales y monetarios implementados, teniendo en cuenta la
destrucción de empleo de los dos últimos meses, la reducción del potencial de crecimiento y el difícil retorno de la
confianza que seguirá limitando la recuperación. Además, se vislumbran grandes riesgos en las próximas semanas
y también meses, dadas las persistentes tensiones entre EE.UU. y China y el riesgo de un mayor deterioro de su
relación comercial, así como la posibilidad de nuevas olas de contagio del virus. Por otro lado, el exceso de
apalancamiento y el ajuste económico al que estamos asistiendo (la estimación del PIB de la Fed de Atlanta para el
2T20 es ahora del -52,8% t/t ajustado estacionalmente) implica que muchas empresas podrían experimentar
importantes problemas de insolvencia. Las continuas protestas y disturbios en Estados Unidos siguen siendo
motivo de preocupación, aunque los participantes en el mercado siguen haciendo caso omiso a pesar de que el
presidente Trump prometió desplegar tropas en todo el país como respuesta a las continuas protestas.
Aunque es probable que las perspectivas económicas globales sigan siendo difíciles una vez que los países salgan
de los confinamientos, el apetito por el riesgo de los inversores se ha visto reforzado por la inyección de liquidez.
En general, el colapso de la productividad amenaza a las empresas y las inversiones, pero las medidas de los
bancos centrales pueden retrasar y modificar la dinámica económica inmediata y la respuesta del mercado. El
repunte de los activos de riesgo continúa, pero el ritmo parece haberse ralentizado, lo que posiblemente se deba a
general sigue disponiendo de abundante liquidez para respaldar el optimismo y poder mantener el apoyo a las
divisas LatAm como clase de activo hasta que empiece a notarse la decepción económica.
more than two weeks after part of Europe reopened, Covid-19 seems to still be under control.
With the added optimism created by last week’s announcement, more buyers are dragged
into markets.
Yesterday, the Economics team published reviewed forecasts showing that the dip will be
deeper and the recovery slower especially in developed markets. However, current support
from the Fed and the expected added buying by the ECB is more than enough to push
sentiment and asset prices up
This morning in Asia,the PBoCannounced two measures aimed at supporting SMEs and
employment in China (See APAC comment for more details)
We should still be in a modest rally mode ahead of the ECB, and in the London morning
trading, prices have slowly drifted higher for risky assets.
Risk appetite continues, with overnight markets keeping calm. There are few catalysts to upset markets, with a slightly optimistic RBA allowing AUD to outperform peers and OPEC+ headlines pushing oil prices higher. USD is offered across our space, with most EM currencies benefitting as a result and EURUSD edging closer towards a test of 1.12. GBPUSD trades above 1.2550, although we think short covering might have something to do with it.
Headline risk remains however. Focus remains on the US protests, with curfews in major cities in place and growing concerns that the Trump administration could pursue more aggressive policies. Trump said as much on Monday evening, suggesting he could even mobilize the military. Positive headlines are set for EUR, with Germany fiscal stimulus talks today and increasing focus on PEPP, with the first breakdown of the ECB program to be released today ahead of Thursday’s meeting. US/China headlines seem unlikely today while ARS has seen the debt negotiation deadline extended again.
“Risk on” remains in vogue this morning although it is not entirely clear what
is prompting the enthusiasm. Comments from China’s officials suggesting
purchases of US soybeans are continuing (Global Times) may have helped the mood
after yesterday’s Bloomberg report of a pause in Chinese imports of US agricultural
products. The prospect of additional fiscal stimulus for Germany may have buoyed
sentiment in Europe alongside progress on the bailout of Lufthansa. The “risk on”
mood is driving the USD weaker, extending the sell-off from mid-April markedly lower
in the last few days. Protests in the US and the possibility of a military response by
the Administration feature prominently in the media, but the continued gains in US
equity markets suggest this unrest is not yet impactful on US assets. Simply, the
break below support levels on the USD at the end of May has seen the sell-off
accelerate, while this morning’s buoyant mood suggests markets are inclined to see
the global economic glass as “half full” rather than “half empty”.