The European stock markets weren’t quite as enthusiastic, only managing between 1-1.5% of gains, but they didn’t get a rate cut and the virus is much more prevalent on this side of the Pond, so all things considered the optimism levels aren’t too bad.
Congress has agreed an $8bn stimulus package to try and smooth out the disruption that looks to be coming their way – 159 cases and 11 confirmed deaths at the time of writing – though the House is yet to sign off on it, this has led markets to believe there’s even more support on the way.
The US market rally wasn’t just down to the rate cut and the possible funding though – some are saying that Joe Biden’s return from the caucus wilderness had a hand in it too. The former vice president ‘won’ the super Tuesday Democratic caucuses, finishing ahead of Bernie Sanders in states won and now holds the lead in the race with 566 delegates to Bernie’s 501. The reason the market likes this is that they see either Trump or Biden being friendly to markets and pro the status quo, which certainly suits their agendas.
This does put Mike Bloomberg out of the race, which Trump lauded in a fairly amusing tweet: The biggest loser tonight, by far, is Mini Mike Bloomberg. His “political” consultants took him for a ride. $700 million washed down the drain, and he got nothing for it but the nickname Mini Mike, and the complete destruction of his reputation. Way to go Mike! . Michael Bloomberg had positioned himself as a hedge against Biden failing to perform though and was only really likely to step up the fight if Biden had have performed poorly… so back to running his empire he goes.
In the UK; Flybe has fallen into administration this morning. The airline had been on the brink in January and has since found itself being thrown a lifeline by the government in the form of a bailout, only to have that taken away again because A, it doesn’t meet European competition rules and B, every other airline jumped up and down in anger at the unfair support. The airline was living hand to mouth and with the immediate drop they’ve seen in business flights because of the coronavirus, they didn’t have the cashflow to continue. We’re sure buyers will be lining up to take their incredibly valuable slots at Heathrow and Gatwick.
Incoming Bank of England governor Andrew Bailey has said that he isn’t in favour of an immediate interest rate cut in response to the virus. He wants to see “more evidence that we have at the moment, as to exactly how this is feeding through”. We like the sound of that.
Deputy head of the BoE, Ben Broadbent, has said that there could well be a role for economic support to help smooth over short term credit issues that would otherwise risk longer term problems. this is how we feel about the situation.. Assuming that this is transitory and can be dealt with in a few months, supply chains will be quickly restored and consumer confidence, the capability to spend and therefore demand will bounce back very quickly – therefore what we need to do is make sure people aren’t put out of business in the short term, as the knock on of that into the economy would have lasting effects.
Let’s see what today brings… if you can’t get enough of the permanent news coverage of corona, you can go to this rather impressive infographic from Johns Hopkins that gives you a near real time update on the cases around the world – car crash TV in our minds, but then people will watch anything (even the Kardashians!)
Have a great day