Doing deals

Posted by: Paul Donovan

25 Mar 2020
  • The US Senate has agreed on a deal for fiscal stimulus worth just over 9% of last year's GDP. A quarter of this focuses on loans to businesses – great for firms with stable or delayed demand, less helpful for firms with an absolute loss of demand. Job preservation is key. The lower the unemployment increase, the earlier and stronger is phase two (the economic bounce-back).
  • US President Trump (or the administration) is considering a further tax cut by suspending trade taxes for 90 days. This seems to finally recognize that trade taxes (tariffs) do most damage to US companies, and have been squeezing their profit margins.
  • The Eurozone finance ministers are closer to agreeing to access European Stability Mechanism emergency funding (they seem to think this might be an emergency). Countries could borrow up to 2% of GDP. The focus of the fiscal response in Europe is at a country level, but the ECB and the ESM provide extra pan-Eurozone assistance.
  • UK inflation numbers are out (they are released early as pre-briefing journalists has been suspended). Disinflation forces are evident in commodity prices. German business sentiment is unreliable but will be a focus for markets desperate for new information. US data is likely to be ignored.

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