COVID-19: Dashboard

* LO estimate or reported figures
Sources: Bloomberg, IMF, World Bank, Lombard Odier calculations

Public health

• We are seeing encouraging signs that containment measures are proving effective with infection curves generally trending down. As we have consistently said, this crisis is primarily a public health challenge, and unless the spread of the virus is contained it is too early to start thinking about economic recovery

• In terms of the number of confirmed deaths (a hard though lagging data point, that does not rely on the number of tests conducted), the peak in Italy and Spain hit around 3 weeks ago and the daily numbers have trended down since. The same process is visible more recently in Germany and France and seems to have occurred in the US around 5 days ago

• In the US, apart from the improvements seen in New York, we also note signs of slowing in the spread for other badly affected states, such as Florida, Texas and Louisiana. The risk that another large outbreak may emerge, possibly in a southern state, has so far not materialized

• It is clear that the worst-case scenario has not occurred in any major economy, and that initial discussions of potentially millions of deaths are proving wide of the mark. This is why the focus should now be on the reopening procedures (more on this below), the risk of new waves, and developments on testing and treatment

• Finally, the reopening process continues, as after several smaller European countries started to lift some measures last week, today Germany is also relaxing some measures, with small shops reopening

• It is also worth noting that there has been a greater effort to coordinate reopening plans – more so than in the shutdown process. This is seen in the European Commission’s efforts, as well as in the US where three regional groups of governors are coordinating their reopening plans, as well as the set of broad guidelines published by the White House last week

• In South Korea, restrictions on gatherings, including church services, are due to be eased. However, the prime minister said social distancing will remain in place until 5 May

• There also appears to be some progress on the medical front, given growing evidence suggesting that Gilead Science’s Inc. remdesivir drug may be effective against Covid-19. While the data is not yet definitive because last week’s news referred to a trial at a single clinical site, an effective treatment would be a significant development, allowing authorities to limit restrictions.

Monetary and fiscal measures

• In the US, the USD350 billion Paycheck Protection Programme (PPP), designed to help companies keep employees on their payroll, ran out of funds last week. Press reports suggest that the Treasury and Congress are getting closer to an agreement to expand funds, with talk of new ‘3.5’ aid package. This would include USD300 bn for PPP USD50 bn for the Economic Injury Disaster Loan, USD75 bn for hospitals and USD25 bn for testing

• In China, commercial banks lowered the Loan Prime Rate (LPR) by 20 basis points today, reflecting the rate cut announced by People’s Bank of China last week. The one-year rate fell from 4.05% to 3.85%. The LPR is the reference rate against which all new loans, and outstanding floating-rate loans, are priced

• Last week’s IMF/World Bank/G20 meetings concluded without major breakthroughs. A prominent proposal for the IMF to issue a significant amount of Special Drawing Rights (SDRs) supporting developing economies by increasing their reserves was blocked by the US

• The Libor-OIS spread, a gauge for stresses in the money market, continues to normalise but remains at the upper end of its historical range. While the improvement is clear so far, the situation still requires close monitoring.

Economic impact

• European Union car sales fell 55% year-on-year in March. For comparison, the largest annual decline in the financial crisis was 27 per cent in January 2009.

• As shown in the normalized economic activity dashboard, with the exception Germany, supply side activity in European countries is currently struggling at around 55% of previous years, and using a week-on-week comparison, show a downward trend in almost all indicators

• Economic activity in the US stabilized at around 62% of previous years. US imports dropped 4% last week while air quality and road congestion signals all improved by more than 10%

• China normalized economic activity to approximately 86% of previous years’ levels. While imports and exports were almost unchanged last week, all our domestic travel indicators have been rising steadily. National holidays at the beginning of May will offer a key public confidence indicator.

China normalized economic activity to approximately 86% of previous years’ levels…national holidays at the beginning of May will offer a key public confidence indicator.

Portfolio positioning

• The trend has turned more positive, but we do not believe that all the conditions for a sustained equity market rally are in place yet. We continue to monitor the slowdown in European and US infection rates and the likelihood of a second wave of infections in Asia. Market attention will gradually shift away from the outbreak and towards exit strategies and the economic impact. There are both negative and positive catalysts ahead: positive Covid-19 developments may be mitigated by worrisome news flow including weak economic data, dividend cuts and credit rating downgrades

• We continue to adjust our portfolio exposures. Most recently, we have taken the opportunity of the recent decline in volatility to optimise our hedging strategy, increasing our equity protections and selling out-of-the money calls on gold.

Sources: Bloomberg, IMF, Lombard Odier calculations

New infections, total infections, total deaths, fiscal stimulus and monetary policy as at 19.04.2020

* LO estimate or reported figures
Sources: Bloomberg, IMF, World Bank, Lombard Odier calculations

Public health

• Last week, seven of the 12 countries in our Emerging Market dashboard showed daily-confirmed case growth rates of over 10%. That number has fallen to only two countries, Brazil and Russia

• Turkey remains among the worst affected, though there is some improvement. The rate of new infections is slowing. Confirmed cases are growing at a daily rate of 5.9% compared with 10.9% last week. However, the country still has the highest rate of new cases at 46 per million population, as well as the highest death rate at 23 deaths per million

• The number of cases continues to grow in Russia where the rate of 15% remains unchanged since last week. Russia shows the second-highest number of new cases at 41 per million though number of deaths are far lower at 2 per million

• Elsewhere, after showing slower growth in cases, the number of confirmed cases in South Africa is accelerating: daily cases grew 7% compared with 3% last week. Poland on the other hand continues to show improvements, with the growth rate in confirmed cases further decelerating to 5%, compared with 7% last week

• In Asia, India and Indonesia showed a decline in the growth rate of confirmed cases, but at relatively elevated levels of 7% to 8%. Thailand continued to show a low growth rate of new cases at 1%, while Malaysia also showed a significant reduction, growing 1.5% compared with 3.2% last week

• In LATAM, Chile continued to show the highest total with 509 confirmed cases per million. However, the daily growth in confirmed cases has slowed to 6% from 8% last week. Brazil on the other hand has a proportionately lower number of confirmed cases at 160 per million, but the growth in daily cases remains high at 10%, and has re-accelerated over the past week

• Both Colombia and Mexico continue to show the lowest number of total cases at less than 70 per million. However, Colombia’s infection rate has slowed considerably to 5% compared with 12% last week, while Mexico still remains high at 8.4% versus 11.4% last week.

Monetary and fiscal measures

• In the week ahead, central banks in Turkey and Russia hold scheduled meetings. The consensus is for Turkey to cut between 25 – 100 basis points and Russia to ease between 25-50 bps.

• Following an unscheduled meeting, Colombia’s central bank announced new measures to increase liquidity by cutting reserve requirements. Its board authorized the purchase of up to 2 trillion pesos of government domestic public debt (TES) bonds in the secondary market through the rest of April.

• Brazil’s Senate passed a first round vote on a ‘war budget’ to facilitate coronavirus-related spending by the federal government and lets the central bank buy corporate bonds. The bill needs a second approval.

 
Economic impact

• Last week, Fitch rating agency downgraded Mexico’s sovereign rating one notch to BBB- with a stable outlook.

Sources: Bloomberg, IMF, Lombard Odier calculations

Exports, Imports, Electricity, Air Quality as at 18.04.2020 / Congestion as at 12.04.2020

We try to understand the economic activities through three channels:

• Trade activities (Exports & Trade), Production activities (Electricity demand & Air quality), City activities (City congestion & Flights).
• Countries are coloured based on their mean normalized indicator: Green > 85%, 85% ≥ Yellow > 60%, 60% ≥ Red

* Exports statistics based on the Shipping data are subject to revision for the past week. Adjustments are expected
** Data will be updated once it is available
Sources: Bloomberg, Baidu, MariTrace, AirSavvi, FlightRadar24, TAS, TomTom, Weibo, AQICN, Lombard Odier calculations
 

• EURUSD swap basis: it is the net interest (in bps) received by a party which lends EUR to borrow USD. When too many participants require to borrow USD, the USD cost increases resulting in a USD funding squeeze and triggers a significant widening (negative) to the EURUSD swap basis.
   
• Libor OIS spread: Libor is the rate at which major banks lend to each other for unsecured debt. The OIS is a rate very closely linked to the Fed rate. 
  In that respect, Libor incorporates a risk premium while OIS is virtually risk free. A widening of the spread suggests an increase in the risk premium.
   
• Normal range: this is calculated on a 3Y rolling basis. Namely, it is the 3Y rolling average plus/minus 1.5 standard deviation. 
   

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