The data are pointing to a massive hit to economies following the shuttering of many businesses. Corporate earnings estimates have been slashed and companies are not bothering with guidance anymore. Some 1.3 million cases of the novel coronavirus have been recorded worldwide, although the pandemic now seems to be slowing. The rate of new cases in seriously affected areas such as Italy and Spain is in the region of 8%. More upbeat noises have been coming from the White House recently.

Against this backdrop, stock markets opened to gains on Monday. Equities were relatively resilient last week, keeping drawdown to a minimum. The S&P shed 2% compared with 0.6% by the Eurostoxx 600, despite the plunge in banking stocks in response to the cuts in dividends. The Swiss market gained nearly 3% on the back of pharma stocks and Nestlé. The recovery in the price of crude (Brent +37% last week) – kicked off by Donald Trump tweeting about a 10 million-plus reduction in output measured in barrels per day expected from Saudi Arabia and Russia – boosted oil-related stocks, although the price of crude was down yesterday after the OPEC meeting was postponed until Thursday.

There have been a handful of signs that the contagion in several countries is slowing, but these have been positively viewed by investors. Additionally, the Eurogroup is set to meet tomorrow to flesh out a centralised response to the crisis. Some talk of a package of measures financed through Eurobonds, with no mention of the “Troika” nor “austerity”, according to two German ministers. The funding plan reportedly marks out EUR 200bn for healthcare and an equivalent sum for lending through the European Investment Bank. Altogether that would correspond to 4.5% of the Eurozone’s GDP.

PMIs for March, reported last week, reflect a plunge in business activity, especially in services. The Eurozone composite PMI clocked in at 29.7 versus 51.6 in February. In Germany the reading was 35, and a miserly 17.4 for the services index in Italy. In the US, 701,000 jobs were lost in March, marking the first decline since 2010 and not far from the job destruction seen in March 2009 (-800,000). Worse still, this figure does not cover the second half of the month, when nearly 10 million initial jobless claims were submitted.

How the real economy and business will be impacted by the shutdown is still undetermined. For this reason, many investors continue to favour cash, which is in turn generating large inflows into money market funds.
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