Category: Economy

TOKYO, April 7 (Reuters) – Japan will sell a record amount of additional bonds, worth more than 18 trillion yen ($165 billion), to fund its coronavirus stimulus package, pushing overall market issuance beyond 147 trillion yen, two government sources with direct knowledge told Reuters.

The amount of extra bond issuance in the new fiscal year from April will exceed the previous record of 16.9 trillion yen issued during the 2009 global financial crisis, they said.

The sources were speaking on condition of anonymity because the debt issuance plan has not yet been finalised.

All the maturities, except for 40-year bonds, inflation-linked bonds and liquidity enhancement auctions, are subject to increase, they said.

While 40-year bonds and liquidity enhancement auctions remain unchanged from an initial plan, inflation-linked bonds will be cut by 1.2 trillion yen a year, they added.

Prime Minister Shinzo Abe has pledged to roll out a stimulus package worth 108 trillion yen ($990 billion), or a fifth the size of the economy, vowing to take “all steps” to combat deepening fallout from the coronavirus pandemic. ($1=108.8000 yen) (Reporting by Takaya Yamaguchi; Writing by Tetsushi Kajimoto; Editing by Clarence Fernandez)

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April 6 (Reuters) – The European Commission is planning to let member states help companies directly impacted by the coronavirus outbreak through an injection of equity, the Financial Times reported here on Monday, citing people with knowledge of the proposal.

The new scheme would call on European Union member states to “provide further support in equity or hybrid capital instruments” to such businesses, according to the report.

The proposal, which the FT said was being drafted, would add to a temporary framework announced last month that allowed companies to receive state grants up to 500,000 euros ($539,900) or subsidised state guarantees on bank loans.

Under the new proposal, which may be announced later this week, the financial support would be conditional on companies meeting certain standards of good governance and giving commitments on how they would use the aid, the newspaper added.

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NEW YORK, April 5 (Reuters) – Wall Street analysts and investors see a risk that stocks could retest recent lows in the coming days or weeks as they worry about the spread of the virus and its impact on the economy, although some spot glimmers of light at the end of the tunnel.

Wall Street’s main indexes fell more than 1.5% on Friday as the coronavirus abruptly ended a record U.S. job growth streak. The S&P 500 closed at 2,488.65, after rebounding about 13% from its intra-day late-March low, although it is still down more than 26% from its mid-February record high.

Markets have shown some signs of stabilization as investors parse a broad range of signals for clues on the trajectory markets may take in coming weeks.

Some point to easing volatility and improving liquidity in fixed-income markets as signs that the worst of the sell-off may be over. Investor sentiment, often seen as a contrarian indicator, is one signal pointing to an eventual turnaround in U.S. stocks. Still, markets remain turbulent and far off their highs.

U.S. Surgeon General Jerome Adams warned on Fox News Sunday that “this is going to be the hardest and the saddest week.”

However, there have been some positive signs. Michael Hewson at online trading company CMC Markets said that U.S. futures may get a lift on Sunday by a “fall in the death rate in NY” and some other places.

New York Governor Andrew Cuomo said deaths had fallen slightly from the prior day, even though he cautioned that it was not yet clear whether the crisis in the state was reaching a plateau.

Here is a roundup of some analyst and investor views from the past few days:

– Julian Emanuel at U.S. broker-dealer BTIG said in a research note on Sunday that if history is any sort of guide, he expects a “retest of the March lows in April, as the public health and economic bad news is likely to reach its parabolic peak.”

Emanuel said that part of what could make a bottom for stocks in the coming days is a realization that the real reopening date for the economy is not the end of April but rather the end of May.

Emanuel added that stocks often trough “when the headlines are most adverse, hope scarce, and emotions high” and said that as investors, “we want to be ready for that time, and we think it is coming in April.”

Emanuel pointed to one “uncommon phenomenon indicative of systemic hedging,” saying the S&P 500 VIX, which measures volatility, is currently above the Nasdaq 100 VIX, which is “usually reserved for times of market stress.”

– Christopher Wood at Jefferies wrote in a research note dated Friday that they are still expecting, at a minimum, “a re-test of the previous low on the S&P 500”, as well as a re-test of the 10-year Treasury bond yield low, and forecasts that will coincide with a renewed rally in the U.S. dollar.

Wood wrote that “markets are heading into the peaking of the bad news in Europe at the same time as cases in Britain and America, both behind in terms of the virus cycle because of the failure to lockdown earlier, continue to rise sharply,” Wood wrote. “This news flow is likely to unnerve investors in the short-term for understandable reasons.”

Still, Woods said “when that peaking out does occur, it should generate a decent tradeable rally.”

Jefferies equity strategist Steven DeSanctis, however, in a separate note said, said that hedge funds’ de-risking “seems to be behind us.”

– Andrew Slimmon, Managing Director and Senior Portfolio Manager on all long equity strategies at Morgan Stanley Investment Management, wrote in emailed comment on Friday that he also expects some “retest of the lows” but said it is possible that “we will not get back to the lows.”

He charts three stages of bear markets – the “panic low,” the “relief rally” and the “retest” and said the market is currently in the second stage. He sees financial services and consumer stocks as areas that are particularly attractive.

– Brad McMillan, Chief Investment Officer for Commonwealth Financial Network, wrote in emailed comments on Friday that “April is going to be a tough one, with lots of real—and very scary—headlines. The market will certainly respond to those headlines, so we should expect more volatility and quite possibly a retest of the March lows.”

– Michael Purves, at Tallbacken Capital Advisors, wrote on Friday that the VIX curve appears to be reflecting a few high level but important scenarios/risks, of rolling U.S. blackouts as incremental populations get hot, and that U.S. health policy is less cohesive than it is in other countries.

Purves also said there is “an ever growing number of second order impacts from this economic shut down which may not reveal themselves for several months (fiscal stimulus implantation risks, food inflation, labor strikes, rising political risk, unsuccessful reboot of Asian economies, re-outbreak of Corona cases etc.).”

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LONDON, April 5 (Reuters) – Britain should not start to lift restrictions on social contact until it is clear that coronavirus transmission is in retreat, otherwise a second wave could occur, England’s Deputy Chief Medical Officer Jenny Harries said on Sunday.

“The very last thing we would want to do is to have put in all of this effort, with everybody trying to do the right thing – almost everybody – across the country, and then finally lift the lid too early and we have a second spike,” she said.

“It will waste the effort we have put in. And we will still need to get over the first hump of the epidemic curve, and then look at the detail (of restrictions).” (Reporting by Paul Sandle and David Milliken; Editing by Angus MacSwan)

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