Hoping for a health lull, the markets are recovering

In Europe, the rebound was 5.77% in Frankfurt, 4.61% in Paris and 3.08% in London.

From Tokyo to Wall Street, markets regained momentum on Monday in hopes of seeing Europe and the United States move closer to a possible coronavirus spike.

The New York Stock Exchange was particularly dynamic: its flagship index, the Dow Jones, rose 7.73% while the Nasdaq, with its strong technological coloring, gained 7.33% and the broad S&P index 500 appreciated by 7.03%.

The wave of relief started early in the day in Asia, with star index Nikkei of Tokyo ending, for example, up 4.24%.

In Europe, the rebound was 5.77% in Frankfurt, 4.61% in Paris and 3.08% in London. Milan finished up 4% and Madrid 3.99%. In Zurich, the SMI gained 2.38%.

The start of this week is explained by “the growing optimism vis-à-vis the mortality figures linked to COVID-19 which are starting to reach a plateau level in Europe” after Spain, Italy and France reported a decline in deaths in their respective countries on Sunday, said Michael Hewson of CMC Markets.

At the end of the day Monday, the authorities in Italy and France however indicated that the death toll had started to rise again.

In the United States, investors have also been reassured by a semblance of stabilization in New York State, epicenter of the pandemic in the country: in the last two days, the number of daily deaths from the pandemic recorded in the State, however, seemed to level off just below 600, after a record 630 from Friday to Saturday.

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Short-term respite?

In addition, investors have also learned of “a series of new measures announced by Japan, Singapore and Spain to cushion the economic effects of the virus, while in the United States, the Democratic President of the House of Representatives, Nancy Pelosi, raised the prospect of another plan later this month to stimulate the US economy, “said Hewson.

In this context, “some investors want to take on risk, wanting to hear that life will resume a somewhat normal turn within a reasonable horizon”, underlines Régis Aubert, equity manager at Financière Arbevel.

But the shift to optimism could soon slip in the face of deterioration in new health data, warn several analysts.

On the oil side, prices started dropping sharply Monday after the postponement of a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies intended to possibly limit the excess supply of black gold on the world market. In London, a barrel of Brent dropped 3.2% to 33.05 dollars while in New York a barrel of WTI plunged 8% to 26.08 dollars.

The debt market did not move much, true to its attitude of the past few days, confident in the support of central banks.

On the foreign exchange market, the euro stabilized against the dollar while the pound lost ground when it was announced Monday evening that British Prime Minister Boris Johnson, suffering from COVID-19, had been placed in intensive care .

Less shock than in 2008

With more than 73,000 deaths worldwide and an unprecedented loss of economic activity, the pressure remains very strong.

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But, according to Isabelle Mateos y Lago, deputy director of the team in charge of sovereign institutions at BlackRock, “you have to keep in mind that this is a shock that should be short-lived compared to a classic recession”.

“For the 2008 crisis, she said, it took several years to correct the excesses, which represented a shortfall of around 50% of world GDP in 2007″.

“If the confinements can be lifted after a quarter, the impact is expected to be 10 to 15% of GDP in 2019, a shock four to five times less than that of 2008,” said the specialist.

This temporary impact and overall less significant, to which are added “the fact that the political and monetary response is extremely ambitious”, as well as “the technical measures deployed by the central banks to ensure a return to normalcy” especially in terms of liquidity , “Helped the markets find a floor to stabilize”, she said.

Now the key question, she anticipates, is “how long will the stabilization phase last before the epidemic recedes – in China it took three weeks” – and “how is it going to be?” operate the containment exit? ”.

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