1)The patient counts continue to drop in the hot spots of Europe, particularly Italy. Austria, Italy, Denmark and Norway are laying out plans to gradually reopen over the next month. NY might be passed its peak. The acceptance of wearing masks as things do reopen is becoming more widespread. A Hong Kong microbiologist who advises the Hong Kong government said this week to the WSJ, “If not for universal masking once we depart from our home every day plus hand hygiene, Hong Kong would be like Italy long ago. If you look at where we’ve had clusters, it’s places where the masks come off.” The chair of a WHO advisory panel on infectious hazards who said to the BBC that “It might be that wearing a mask is equally as effective or more effective than distancing.” Lastly, we are another week closer to rampant testing, effective therapeutics and an eventual vaccine.
2)The Fed announced more steps to help companies buy time until we reopen the economy and they further unfreeze parts of the credit market. Companies both large and small can benefit and markets that the Fed is specifically targeting certainly got a lift. The Fed is becoming the lender of all resort.
3)For the sake of the US consumer, many of which are painfully losing their jobs, the cost of living fell in March from February. The headline drop in CPI was 4 tenths and the core was lower by one tenth, both more than expected. Prices are still up 1.5% and 2.1% y/o/y at the headline and core respectively.
4)OPEC+ are close to some deal?
5)Taiwan never shut its economy down during the fight against the virus (they gained a lot of experience after SARS) and their March trade numbers were a bit better than expected. Exports fell .6% y/o/y instead of 2.2% as expected and imports were higher by .5% vs the forecast of down 4.8%. Helping the export number was a 3.2% rise in shipments to China but that just offset declines everywhere else and Q2 exports will certainly be challenged.
6)Chinese auto sales fell 43% y/o/y in March but rebounded by 367% from February as things begin to reopen.
7)Lower reserve ratio requirements and rate cuts in China led to a spike in lending in March as aggregate financing totaled 5.15 Trillion yuan vs the estimate of 3.1 Trillion. Of which bank loans made up 2.85 Trillion vs the estimate of 1.8 Trillion. Money supply growth as measured by M2 spiked by 10.1% y/o/y, well more than the forecast of up 8.8%.
8)A little levity in this time, //www.youtube.com/watch?v=QchQNNqU3Io&list=TLPQMTAwNDIwMjCAdGuh7UjvrQ&index=1
1)The heartbreaking death toll continues to rise.
2)The Fed is essentially nationalizing the US public markets except in stocks for now (say goodbye to whatever is left of free market capitalism if they do buy stocks). Its entrance now into corporate bonds, particularly high yield, via special purpose vehicles is a complete run around the Federal Reserve Act. They are being viewed as hero’s here but this is a movie we saw before. The Fed cuts rates sharply, encourages a huge build up of debt which then creates a fragile financial system and then an external event/recession comes, and it ALWAYS EVENTUAL DOES, and all this debt comes home to roost. The last time with households, this time with corporate balance sheets. Lower leverage and higher rates of savings does not immunize a system from a big recession but it gives it a lot of antibodies to handle it. Again, the Fed lights the match and then shows up in the fire trucks to put out the eventual fire.
3)The Fed’s balance sheet was up another $271b on the week to above $6 Trillion, up almost $2 Trillion over the past 6 weeks.
4)Initial claims totaled 6.61mm, about 100k more than expected but down slightly from the 6.65mm seen last week. Continuing claims, delayed by a week, rose to 7.46mm from 3.06mm last week but that was less than the estimate of 8.24mm
5)The initial April UoM consumer confidence fell to 71 from 89.1 and that was 4 pts less than expected but making an estimate nowadays is a shot in the dark. Most of the weakness was in the Current Conditions component which fell to 72.4 from 103.7 while the Expectations component was lower by about 10 pts to 70.0. One year inflation expectations fell one tenth to just 2.1%. What kept the Unemployment component to just a 7 pt drop was a lot of optimism that the job losses we are seeing now will quickly reverse itself over the next 12 months. As for now, income expectations plunged, not surprisingly. As to be expected, spending intentions fell sharply across the board.
6)Likely reflecting the breakdown in the mortgage market with the new factor being complete forbearance allowed on the paying of mortgage payments for up to one year with NO proof of hard ship and Mark Calabria, head of the FHFA, saying they are relying on the ‘honor system’, we saw a decline in mortgage apps for the week ended April 3rd. Purchases fell by 12.2% w/o/w, the 4th straight month of declines and are now lower by 33% y/o/y. This certainly also reflects the economic shutdown where buying a new house is not front of mind for most. Refi’s fell by 19.4% w/o/w but are still up by 144%.
7)The NFIB small business optimism index began to capture the economic shutdown as it fell to 96.4 from 104.5 and that’s the lowest since October 2016, the month before the election. Not surprisingly every component fell m/o/m and that decline from February is the largest on record. The NFIB said what any of us could have written: “The outbreak has left few, if any, owners unscathed. The economic impact is immense, and now, the questions are how long will it last and how quickly can the small business sector recover once on the other side.”
8)The UK consumer confidence index fell to -34 from -9 and that was a level last seen in February 2009.
9)The European Sentix investor confidence index dropped to -42.9 from -17.1. That is the lowest on record for this survey back to 2002. Sentix said simply “The coronavirus is holding the world economy in a stranglehold.”