Stimulus groundhog day

Posted by: Paul Donovan

23 Apr 2020

Daily update

  • Another day, and of course another stimulus. The German government has agreed an extra EUR 10bn, cutting taxes for restaurants and increasing pay for furloughed workers. If people are locked down at home and less able to spend, but receive nearly all their income, the result is savings. Those savings may be spent when lockdowns end. The US House votes on stimulus 3.5 today.
  • The EU heads of government get together (virtually) to talk about common funding for stimulus in the second economic phase (the bounce back). Meanwhile the ECB has said that it will ignore the credit rating agencies if they downgrade bonds below investment grade. Which raises the question, what are the credit rating agencies for nowadays?
  • Oil prices lifted a little as US President Trump sent some aggressive tweets on Iran. Normally oil prices rise on tensions in the Gulf because of fears of supply disruption. However, with the oil market as out of balance as it is, it is doubtful that President Trump's belligerence will do that much to prices in the near term.
  • South Korean GDP was marginally better than consensus in the first quarter. However, the forecast range was so wide that "consensus" could be replaced with "random number generator".

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