Weekly Digest - INVESTEC
Please find this week’s edition of Weekly Digest attached.
Last week saw the VIX volatility index fall materially over the course of the week to the lowest level since the end of February. On Friday, the 14.7% US unemployment rate was slightly better than forecast, and the vast majority of the unemployed were “on temporary layoff”. Also on Friday, Eurogroup finance ministers agreed on details of the €240bn European Stability Mechanism pandemic tool, which should be available from mid-May. There remains, however, no word on the fundamentally more important EU Recovery Fund, which will provide fiscal support underwritten by all members.
Boris Johnson set out his plans for a gradual release from lockdown using an alert scheme, suggesting we will see a slower, weak u-shaped recovery. The number of new daily cases globally is at just over 86,000 – broadly flat with the new case incidence over the past six weeks.
The key question remains the shape of the recovery, not the depth of the trough. A key determinant of this is the speed and comprehensiveness of the release from lock-downs. The experience in China continues to suggest that Weak-U or Mid-U are realistic expectations if the same “alert level” scheme is used and no vaccine is available. The UK’s policy, as described by Prime Minister Johnson, appears similar to China’s, with the ability to raise or lower the restrictions on personal freedom based on threat.
As normal recently, I hope it is also interesting to share a mixture of updates and new ones to this email:
1) The US accounts for 30% of new daily infections, down from 36% last week. Both Russia and Brazil account for 12% of daily new infections
2) The US is now regularly conducting over 200k tests per day with just over 12% testing positive
3) US at the bottom of it’s “U”? The unemployment rate in Feb was at 3.5%, the lowest rate in fifty years. Two months later we have the highest rate in at least seventy years at nearly 15% with the rate expected to increase next month
4) Based on Apple map route requests, people are moving around more (and dodging public transport).
– The earnings season winds down this week, with 91 Blue Chips from the S&P 500 and the EuroStoxx scheduled to report. Of particular interest to us are reports from Vodafone, Prudential, Renishaw, Cisco and Mirriad Advertising.
– If you are due a UK year-end tax report, a pdf copy is now available via Investec Online (and 2019’s report) under the documents section. This is on the website rather than app and an email will also be sent shortly to direct you. Hard copies will be posted once our printer centre has completed this