Marknadsövervakning - 12th May 2020

The UK government made itself look foolish as Ministers had trouble explaining the new lockdown structure. There are already scenes of commuters packing onto London underground trains, so it wouldn’t surprise if there was another increase in pandemic cases. There are news reports that the chancellor is considering extending the furlough scheme, we understand this will possibly be announced later this evening.

The IFO institute reported that 39% of German companies in the car industry decided to cut jobs in April 2020. To balance this news, ECB’s Schnabel said the ECB stood ready to adjust the size and duration of the pandemic emergency purchase programme (PEPP). He continued that the ECB was ‘fully committed to countering diverging spreads’, which of course was good news for Italian bonds. German Chancellor Merkel said the court ruling on the ECB had ‘great importance’ before continuing that the court ruling is ‘solvable.’

The dollar gained ground as equities slipped. There was news that the US government was talking to US companies to persuade them to return back to manufacturing. This is a real example of how the supply chains are already changing away from China. The issue for business is that US labour is more expensive than Chinese labour, and as such it could be that labour is replaced with technology. We have US CPI for release this afternoon and expect a fall of 0.7% from last month.
The commodity currencies had a tricky start to the week, as the dollar was bought across the board. Australian business confidence was -46 but was an improvement on last month’s -65 reading.

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