Markets are still yo-yoing all over the place – particularly the FX market which looks to be suffering from a severe lack of people at their desks!

The lack of market participation by funds and investment vehicles is being amplified by banks who are literally telling their staff to quote for trades and then cover them off, rather than running any kind of speculative trading position. This is dramatically reducing the volume of trades and sucking the liquidity out of the space, making for a continuing rollercoaster for those of us that are left in!

Interestingly, the euro has found a little bit of support, as those analysing the details of the ECB‘s emergency purchase programme have interpreted it as being loosely worded enough to give the ECB much more firepower than they had alluded to in the first place. We’re still waiting on governments there to deliver though.

Reuters run a piece on how those talks across Europe are going and it doesn‘t look good: It’s coming back to the old north/south divide with the ‘club med’ states pushing hard  for joint debt issues, whilst the northern countries are resisting as much as they can. There’s a virtual EU summit today where no doubt the matter will be front and centre of the debate.

The FT talks about how the ECB need to also take action on supporting bond Exchange Traded Funds (ETFs) if they want to ‘fix’ the bond market. ETF‘s don’t suffer from the same capital requirements as physical bond holders, so when investors run for the door, there’s no holding them back on technicalities – what this means is massive price distortions between the value of the underlying bond and what investors are able to sell them for, which in turn creates distortions in the main bond market – a complex science, but one that is better explained by them over ten paragraphs than me attempting it in one!

Ford could be the first automaker in trouble, as S&P have downgraded their bonds to junk status. The ratings agency said that they were borderline before the coronavirus outbreak but  the potential for prolonged plant shutdowns and potential of a recession has pushed them to make the cut. Ford may be first, but many more will follow.


Looking at equities; the market does seem to have ‘bought the rumour and sold the fact’, as we feared they might, after the US stimulus package announcement failed to keep the rockets firing underneath the price rises. Investors will be wary on a number of fronts; that the package isn‘t going to be immediate enough to save some, that it won’t go far enough to stave off long term damage and that in the background Trump might re-open the country and keep this going on for far longer than needs be.

With all of the memes flying around at the moment, it’s actually the real moments that can get the biggest laughs – take this clip from a news conference from Trump yesterday on BBC news, where he quotes that “we’ve done a hell of a job, nobody’s done the job that we’ve done and it’s lucky that you have this group here right now for this problem, or you wouldn‘t even have a country left” – what kind of sauce are they putting on his hamburgers?!

The US is quickly gaining on Europe as the epicentre of the virus, with more than a thousand deaths now and the increase in deaths is outpacing everywhere else. New York state is so far hardest hit and of course, that’s where Wall Street is, so traders there are seeing this first hand and then reacting accordingly.

Closer to home; Rishi Sunak is going to unveil his support package for the self-employed this afternoon. The government has struggled with how to compensate those with incomes not taxed at source, but has said that they expect this system to be at parity with the PAYE scheme they announced last week. The delay has come from the complexity of designing a scheme that is a ‘catch all’ for the majority of the five million self-employed whilst not creating something that can easily be exploited.

Saving the worst news for last; Apple is weighing up delaying the launch of their 5G iPhone. Traditionally this would happen in September with product available very shortly afterwards. Apparently supply chain is less the issue and it’s more because there will be less consumer demand as we pick up the pieces from all of this and therefore they want to wait until more people have a bit of free cashflow once again.

Be well.


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