Transactions. Restructuring. Transformation. Financial Engineering.

Daily COVID19 Global Economy Newsletter                              April 14, 2020

Transactions. Restructuring.
Transformation. Financial Engineering.

GLOBAL INSIGHT

A new study by researchers at the University of Oxford suggests that tracing apps
can be effective in reducing infection rates, even when just 60% of the population
adopts them. Western societies therefore need to learn from the successes of
China and South Korea, and balance fears of ramping up their own governments’
surveillance capacity against the harm people suffer from being kept in lockdown.
/ World Economic Forum

Austrians lined up outside hardware and gardening stores that reopened today
after the country became one of the first in Europe to ease lockdown measures.
The soft and partial restart of the economy - also one of the first to clamp down on
public life to halt the spread of the coronavirus - will be eyed by others in Europe as
a rehearsal for how to lift restrictions without provoking new infections. Chancellor
Sebastian Kurz has said he won’t hesitate to reverse course if the numbers were to
spike again./ Bloomberg

Non-bank financial firms such as investment funds have exhibited vulnerabilities
during the coronavirus crisis that may need fixing to help economies recovery. The
Financial Stability Board (FSB), which coordinates financial rules for the Group of 20
(G20) economies, said that although an initial wave of volatility has ebbed, markets
remain under great strain and in some cases illiquid. FSB Chair Randal Quarles said
the impact of the coronavirus pandemic on credit markets and investment funds
has highlighted potential vulnerabilities and the need to understand the risks and
resulting policy implications./ Reuters

CVC Capital Partners hits the hard cap for its fifth Asia Pacific Fund with
commitments of US$4.5 billion. CVC's Asia Pacific strategy is focused on control
and partnership investments in high quality businesses in core consumer and
services sectors across Asia. / CVC

Advanced economies will shrink about 35% this quarter from the prior three
months, four times as much as the previous record set in 2008 during the financial
crisis, according to annualized figures from Goldman Sachs Group Inc./ Bloomberg

Europe is heading for a double-digit slump in the first half of 2020 amid
widespread lockdowns to stem the spread of the coronavirus, according to
economists. Bloomberg’s monthly survey puts the contraction in the euro area at
more than 10% in the January-June period, with most of the hit -- 8.3% -- in the
second quarter. Even with an expected rebound later in the year, the bloc’s output
will still decline more than 5% in 2020./ Bloomberg

The International Monetary Fund said on Monday it would provide immediate debt
relief to 25 member countries under its Catastrophe Containment and Relief Trust
(CCRT) to allow them to focus more financial resources on fighting the coronavirus
pandemic./ Reuters

Small wealth management businesses are unlikely to survive unscathed from the
coronavirus crisis, the Financial Times said citing an industry report by Anna
Zakrzewski from BCG. According to the author, there will be consolidation of the
sector, not this year or next, but from 2022. The industry is split between those who
invest more in IT to cope with the digitalisation and those who do not. Mergers are
specially likely in Europe, which still has lots of small and medium-size entities./ FT

FRANCE

President Emmanuel Macron extended France’s lockdown to combat the
coronavirus and fended off criticism of his government by saying the country was
under-prepared before the pandemic hit. Macron aims to gradually begin opening
up the economy and schools again from May 11, he said in a televised address
Monday./ Bloomberg

The French government scrapped its days-old economic outlook after President
Emmanuel Macron extended a national lockdown, shutting down swathes of the
euro zone’s second-biggest economy. Finance Minister Bruno Le Maire said the
economy was now expected to contract 8% this year instead of the 6% flagged
recently, revising the number to take the longer lockdown into account./ Reuters

The French government’s budget deficit is set to hit a post-war record of 9% of
economic output this year, the budget minister said on Monday in the second
revision in less than a week. Budget minister Gerald Darmanin said that financial
shortfall would top the 7.6% flagged only last week after President Emmanuel
Macron extended a nationwide lockdown until May 11./ Reuters

UK

British ministers will decide in the next three days on extending the country’s
lockdown, with Foreign Secretary Dominic Raab telling reporters it was likely to
carry on and the government’s chief scientific adviser saying he expects the daily
rate of deaths to continue to rise. Since March 23, U.K. citizens have only been
allowed to leave their homes for essential work, exercise, and purchasing food or
medicine. The government’s Scientific Advisory Group for Emergencies will meet
Tuesday and Thursday to assess the latest evidence, trying to balance the danger
that lifting restrictions might increase infections with the potential harm to
people’s health and welfare of a long shutdown./ Bloomberg

The UK Treasury is looking at doubling the amount midsized companies can
borrow to £50 million under its proposed emergency coronavirus loan scheme
following concerns that many larger businesses would be left without adequate
state support. As well as doubling the size of the largely state-guaranteed loan,
ministers will also consider removing the £500m annual turnover cap to expand
what is dubbed the Coronavirus Large Business Interruption Loan Scheme to
larger companies. / FT via IHS Markit

The U.K. has paid out more than 1 billion pounds ($1.25 billion) to small businesses
across the country to help them weather the coronavirus pandemic. Almost
100,000 firms have so far drawn on the cash from the government’s grants
programs for small businesses, retailers and the hospitality sector. The small
business program awards eligible companies payments of 10,000 pounds, while
the one for retailers and the hospitality industry pays out sums of as much as
25,000 pounds./ Bloomberg

POLAND

Poland will gradually lift lockdown measures imposed to contain the novel
coronavirus from April 19, starting with restrictions on shops, the government said
on Tuesday, as it prepares to hold controversial presidential elections by post on
May 10./ Reuters

The owner of Poland’s national airline LOT said on Monday it had pulled out of
a deal to buy German rival Condor, raising the prospect of Berlin nationalising the
troubled business./ Reuters

SPAIN

Spain, one of the countries worst hit by the coronavirus pandemic, after the United
States and Italy, started to ease tough lockdown restrictions on Monday. Some
businesses, including construction and manufacturing, were allowed to reopen.
But most of the population are still confined to their homes, and shops, bars and
public spaces will remain closed until at least 26 April../ RFI

Spain came under heavy criticism on Monday for “recklessly” easing lock down
without sufficient protection for workers. The accusations came as Europe’s
leaders debated how far and fast to lift confinement amid signs the epidemic
is slowing down and pressure to kick start paralysed economies./ The Telegraph

Spanish utility Iberdrola has commissioned Europe’s largest solar PV plant, the
500MW Núñez de Balboa solar farm in the southwest of Spain, which was built
in the space of a single year./ Renew Economy

GERMANY

Now that Germany is deploying its financial firepower to fight the coronavirus
crisis, convincing the country that it was wrong to shun budget deficits for many
years just got even harder. The government of Europe’s biggest economy has long
faced calls by officials from the International Monetary Fund and the European
Central Bank, to the U.S. administration of Donald Trump, that it should spend and
borrow more. Its finance ministers, backed by voters, insisted that balanced
budgets and low debt were prudent policies storing up ammunition for a crisis../
Bloomberg

The European Commission has approved, under EU State aid rules, a German
guarantee scheme to support the trade credit insurance market in the face of the
coronavirus outbreak. Trade credit insurance protects companies supplying goods
and services against the risk of non-payment by their clients. Given the economic
impact of the coronavirus outbreak, the risk of insurers not being willing to
maintain their insurance coverage has become higher. The German scheme
ensures that trade credit insurance continues to be available to all companies,
avoiding the need for buyers of goods or services to pay in advance, therefore
reducing their immediate liquidity needs./ European Commission

ITALY

Italy’s companies and small businesses desperately need the 740 billion euros
($807 billion) the government pledged to keep the economy afloat through
the pandemic recession. By the time the money arrives, it might be too late. Italy’s
slowness compares with Germany’s swiftness. In Berlin, about 1.3 billion euros
are already being paid out to freelance workers and small companies, with about
140,000 applications processed in just a few days. In some cases, the money
arrived within 24 hours./ Bloomberg

Italy’s finance minister triggered a political storm on Friday as he signed up to a
eurozone rescue deal that involves the region’s European Stability Mechanism
bailout fund, a politically toxic prospect in Rome. Roberto Gualtieri was among
the ministers who signed up to a €500bn economic package late on Thursday
night in a deal that was hailed as a major breakthrough in the battle against the
economic pain wrought by the coronavirus-related lockdowns. But he and Prime
Minister Giuseppe Conte faced an immediate backlash as details of the
arrangement emerged. Italy did not win any explicit reference to the concept of
“coronabonds” — jointly issued debt underwritten by eurozone member states —
yet at the same time it agreed to a package that contains a role for the ESM, which
is viewed with deep suspicion in Rome. / FT

INDIA

India is likely to record its worst growth performance since the 1991 liberalisation
this fiscal year as the coronavirus outbreak severely disrupts the economy, the
World Bank said on Sunday. India's economy is expected to grow 1.5 per cent
to 2.8 per cent in the 2020-21 fiscal which started on April 1, the World Bank said
in its South Asia Economic Focus report. It estimated India will grow 4.8 per cent
to 5 per cent in the 2019-20 fiscal that ended on March 31./ The World Bank

RUSSIA

As covid-19 spreads, Vladimir Putin is invisible. The public was also told over the
past few months that the threat of the new coronavirus was greatly exaggerated,
that the Americans had invented it to harm China, and that Russia was well
protected. Now, Moscow and many other cities are in lockdown, while the number
of cases is rising exponentially. Yet Mr Putin has all but vanished from public view,
hunkered down in his residence. If there is blame in the air, he does not want to
catch it/ The Economist

Russia’s deepening economic crisis is on the verge of spilling into some of the
most remittance-dependent economies in the world. Migrant workers from the
former-Soviet Union send $13 billion home each year from Russia, where they are
allowed to work visa-free. But now that money is starting to dry up due to
lockdowns in Moscow and St. Petersburg that have halted construction projects
and sapped demand for taxis. Total remittances from Russia could drop by more
than 30%-40% this year, according to Eldar Vakhitov, an emerging-market analyst
at M&G Investments in London. The central bank says the self-isolation measure
could knock 1.5%-2% off economic growth in 2020 but a worst-case scenario being
discussed by the Russian government last month put the potential drop at 5%-
10%./ Bloomberg

CHINA

China's work resumption rate in large industrial enterprises rose to 97.1% on
national average based on latest data until 13 April, with on average 84% of
workers returning to their posts. Among all 31 mainland provinces, only Tibet has
reported work resumption rate of below 90%. Meanwhile, the resumption rate in
small firms has been gradually catching up, with more than 80% of SMEs having
restarted operations as of 10 April, according to the MIIT.
/ IHS Markit

China’s economic growth is set to stumble to its slowest annual pace in nearly
half a century, as the coronavirus health crisis shutters businesses and brings the
global economy to a standstill, a Reuters poll showed today. Growth in the world’s
second-biggest economy for 2020 was forecast at 2.5%, according to the median
of 62 analysts surveyed by Reuters, which would mark the weakest clip since 1976,
the final year of the decade-long Cultural Revolution that wrecked the economy.
That is a sharp easing from a 6.1% gain in 2019, and is below the 5.4% growth
forecast in the March poll./ Reuters

SECTOR NEWS

 Global market data (as of April 14, 2020)./ Reuters

REAL ESTATE

 Virtual home tours will become the real estate industry's new norm after
 the pandemic ends, 2 industry experts predict./ Business Insider

TRADE

The World Trade Organization has foretasted that the recession caused by the
COVID-19 pandemic, will have a more devastating effect on trade than the
financial crisis did./WTO via WEF

CONSUMER GOODS

The coronavirus has profoundly altered daily life in America, ushering in sweeping
upheavals to the U.S. economy. Among the most immediate effects of the crisis
are radical changes to how people spend their money. Some companies like
Walmart, Amazon and Uber Eats have seen spikes in purchases. But customers of
many other businesses have simply stopped spending, the data shows./ The New
York Times

OIL & GAS

Members of OPEC and their allies, including Russia and Mexico, announced
Sunday that they have agreed to cut production by 9.7 million barrels a day in May
and June, the deepest cut ever agreed to by the world's oil producers. After that,
the group will steadily ramp up production until the agreement expires in April
2022./ CNBC

GREEN ENERGY

A new alliance of ministers, chief executive officers and researchers urged the
European Union to build its recovery package after the coronavirus crisis around
the Green Deal strategy of sustainable growth. The group, an initiative led by
Pascal Canfin, a French member of the European Parliament, is pushing to
mobilize investment in projects that would put the EU on track to meet its goal of
becoming the world’s first climate-neutral continent by the middle of the century.
The bloc’s leaders, who last month pledged a green focus in an exit strategy from
the coronavirus crisis, are set to discuss next week measures worth more than half
a trillion euros ($550 billion) to help mitigate the economic impact of the
pandemic../ Bloomberg

TMT

Technology companies have been accused of making a “shameless” attempt to
exploit the coronavirus pandemic to avoid paying tax after the industry lobby
group urged the government to delay a new levy. TechUK, which represents
hundreds of technology companies including Facebook, Google, Apple and
Amazon, claimed that the government should “look again” at the digital services
tax and “give companies a bit more breathing space” by delaying liabilities for a
year./ The Times

Apple and Google partner on COVID-19 contact tracing technology. First, in May,
both companies will release APIs that enable interoperability between Android
and iOS devices using apps from public health authorities. These official apps will
be available for users to download via their respective app stores. Second, in the
coming months, Apple and Google will work to enable a broader Bluetooth-based
contact tracing platform by building this functionality into the underlying
platforms./ Google

Coronavirus: impact on media/Internet consumption worldwide/ Statista

AFTER HOURS

During lockdowns around the globe, species of all kinds have emerged in areas
previously crowded by humans (from the left: Corsica, Chile, Wales, UAE, Italy,
France, UK) / Bloomberg

Cartoon by John McNamee / New Yorker Magazine

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