Deutsche Bank sees UK GDP shrinking 6.5% in 2020; warns of downside risk By Reuters


© Reuters. The spread of the coronavirus disease (COVID-19) in London

(Reuters) – Deutsche Bank (DE:) said on Monday it expected Britain’s economy to shrink 6.5% in 2020 in what it suggested could be the biggest recession for a century.

The bank said the economy had likely contracted 1.9% in the first quarter and predicted a record 13% drop in the April-June period on a quarter-on-quarter basis.

While Deutsche saw UK growth rebounding swifty, it warned of “downside risks”, hinging on the duration of the economic lockdown.

“For now, we expect growth of COVID-19 cases to peak by around mid-April. Should this prove optimistic, the hit to the economy will likely be more acute than anticipated,” the bank added in a research note.

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UAE central bank takes new anti-coronavirus steps, bringing stimulus to $70 billion By Reuters


© Reuters.

DUBAI (Reuters) – The United Arab Emirates’ central bank said on Sunday it had reduced banks’ reserve requirements for demand deposits by 50% to support the country’s economy during the COVID-19 pandemic.

The aggregate value of all capital and liquidity measures adopted by the central bank since March 14 is 256 billion dirhams ($69.70 billion), the Central Bank of the United Arab Emirates (CBUAE) said in a statement.

The bank halved the reserves requirements for demand deposits for all banks to 7% from 14%, which it said will inject about 61 billion dirhams of liquidity to support banks’ lending and liquidity management.

The central bank also extended the duration of a previously announced stimulus package for affected retail businesses and corporates.

The deferral of loan principal and interest payments for customers was extended until the end of the year, and banks participating in the scheme can benefit from a capital buffer relief until December 2021. The value of the capital buffer relief is 50 billion dirhams.

Banks are also allowed a “zero-cost funding facility” against collateral until the end of this year – a programme also worth 50 billion dirhams.

Banks will be allowed to use a third of their current liquidity buffers and have the flexibility to maintain a minimum loan coverage ratio (LCR) of 70% and a minimum eligible liquid assets ratio (ELAR) of 7%. The overall release of regulatory liquidity buffers is estimated at 95 billion dirhams, the regulator said.

CBUAE said it has collaborated with other regulators to issue guidance on financial reporting standard IFRS 9 for banks and finance companies.

“The planned implementation of certain Basel III capital standards will be postponed to 31 March 2021 for all banks, to minimize the operational burden on the financial industry during this challenging period,” the central bank said.

“CBUAE has issued a new requirement for all banks to apply a prudential filter to IFRS 9 expected loss provisions,” the bank said, adding it aims to minimise IFRS 9 provisions’ effect on regulatory capital “in view of expected volatility due to the COVID-19 crisis.”

IFRS 9 provisions will be gradually phased-in during a five-year period through the end of 2024.

The guidance was issued for public consultation on Sunday and is expected to be finalised by April 8.

“The additional measures announced today will effectively relieve the pressure on financial institutions, allowing them to continue to carry out their crucial role as the backbone of the economy while offering the required relief and continued access to funding for businesses and households,” the bank’s governor, Abdulhamid Saeed, said in the statement.

Saeed was announced as the central bank’s new governor on Thursday.

 

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Irish central bank predicts record unemployment, 8.3% GDP fall By Reuters


© Reuters. A Belfast to Dublin bus is seen outside the Customs House in the Irish Financial Services Centre in Dublin

By Graham Fahy

DUBLIN (Reuters) – Ireland’s central bank said on Friday the shock to the economy from the coronavirus pandemic could be greater than in any year of the financial crisis as a record collapse in services sector activity demonstrated the speed of the decline.

Unable to make a conventional forecast without knowing how long the crisis will last, or the economic toll it will take, the bank estimated that gross domestic product could fall by 8.3% in 2020 if current containment measures last three months.

Ireland, whose economy grew by 5.5% last year, ordered its citizens a week ago to stay home until at least April 12 to slow the spread of the virus after a gradual ramping up of restrictions from mid-March.

As a result the transport, tourism and leisure sectors led a collapse in services sector output last month, according to the AIB IHS Markit Purchasing Managers’ Index (PMI) for services which fell to 32.5 from 59.9 in February on Friday.

It was the first time the survey dropped below the 50 mark that separates growth from contraction since 2012 when years of strong growth in the economy began. The month-on-month drop was more than four times greater than the previous record.

The central bank expects the jobless rate to soar to around 25% during the second quarter, from 4.8% at the start of the pandemic. The rate could fall back to 12.6% by the end of the year, Central Bank Director of Economics Mark Cassidy said.

A surge in people seeking some form of welfare income support since the introduction of measures to limit the spread of the virus has left the state supporting 513,350 people, or a fifth of the labour force, data showed on Thursday.

The central bank estimated that the total cost of the fiscal measures introduced so far stood at 8.2 billion euros, which on top of tax revenues that already fell sharply in March would turn the government’s forceast pre-coronavirus budget surplus of 0.7% of GDP into a decit of 6%.

The interventions will push debt as a proportion of gross national income or GNI* – a new, more accurate way of measuring the debt pile – to 112% from 97% in 2019.

It said the situation could be worse if the public health situation does not improve over the coming months, with added risks including firms forced to close during containment, the extent of permanent job losses or permanent income cuts and changes to consumer behaviour as the pandemic eases.

“Even if we get a grip on the pandemic within the time period that we are assuming, there is a lot of uncertainty about the longer-term degree of scarring or more persistent effects,” Cassidy told a conference call.

Finance Minister Paschal Donohoe said the central bank’s GDP estimate was in line with the possible scenarios his department were looking at and that the government would have to examine ways to support exporters as many big markets may lag Ireland’s recovery from the virus.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Bank of America cuts Brazil 2020 GDP forecast to -3.5% from -0.5%: report


FILE PHOTO: A Bank of America logo is pictured in the Manhattan borough of New York City, New York, U.S., January 30, 2019. REUTERS/Carlo Allegri/File Photo

SAO PAULO (Reuters) – Bank of America on Thursday cut its 2020 forecast for Brazil’s gross domestic product (GDP) to a 3.5% contraction from a 0.5% fall, it said in a report, citing the strong impact on consumption and investment stemming amid the coronavirus pandemic.

The bank also revised its forecast for the Brazilian foreign exchange rate, saying it now sees the U.S. dollar at 5.2 reais from 4.8 reais previously.

Reporting by Gabriela Mello; Editing by Chizu Nomiyama



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Boom in Denmark’s economy may be replaced by 10% contraction, central bank says By Reuters


© Reuters. Denmark’s Central bank sign is seen on a bank’s headquarters in Copenhagen

By Jacob Gronholt-Pedersen and Stine Jacobsen

COPENHAGEN (Reuters) – A boom in Denmark’s economy may be replaced by a contraction of as much as 10% this year as the coronavirus outbreak hits the Nordic economy, the country’s central bank said on Wednesday.

The bank, which had previously forecast 1.5% GDP growth in 2020, however said that strong public finances put Denmark in a favorable position to get the economy back on track.

Its latest projection is more pessimistic than that of economists at the country’s biggest banks, as the central bank warns the export-driven economy will continue to suffer from weak demand from abroad even after Danish society reopens.

“The boom in the Danish economy has come to an abrupt end in early 2020,” the central bank said in a statement.

Depending on the depth and length of the crisis, the economy may contract between 3% and 10% this year, with its main scenario forecasting a 5% contraction, it said.

In comparison, economists at Danske Bank and Nordea say they expect the Danish economy to fall 2.5% and 3%, respectively, this year.

“In Denmark, our starting point for getting the economy back on track when the outbreak subsides and the measures are rolled back is strong. But it is going to hurt, before we get there,” central bank governor Lars Rohde said.

The Nordic country has reported 90 coronavirus-related deaths, but saw the number of hospitalizations of corona patients fall on Tuesday for the first time.

The country’s Prime Minister Mette Frederiksen said on Monday that the government may gradually lift a lockdown after Easter if the number of coronavirus cases and deaths remain stable.

The government has announced economic aid packages to the businesses struggling from a lockdown that will cost the state more than 60 billion Danish crowns ($8.8 billion).

“The rescue packages adopted by the Danish parliament are helping to buoy up firms and employees,” says Rohde. Still, the central bank projects that one-third of private jobs in Denmark will be affected by the lockdown.

A recovery of the economy is highly dependent on developments abroad, the central bank warned.

“Once the economic restrictions are phased out, more conventional fiscal stimulus will probably be required to underpin demand,” said Rohde.

With public debt at around 33% of GDP, much lower than the OECD average, Denmark has room to finance support for its businesses.

The central bank has significantly raised the target for government bond issuance this year and has moved forward an auction for a new 30-year bond, which will be held later on Wednesday.

As a result of increased financing needs, the central said it expects public debt to increase to more than 40% of GDP this year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Corporate cash crunch makes bank funding metric look jittery By Reuters


© Reuters.

By David Henry

NEW YORK (Reuters) – A high-temperature gauge of bank funding costs is at levels not seen since the 2008 financial crisis. But rather than signaling stress among major lenders, it is showing the biggest demand for cash the world has ever seen, industry sources said.

The gauge, known as the Libor-OIS Spread, is an imperfect measure of extra interest big banks pay for longer-term financing than the cost of overnight funds.

The spread for three-month debt on Friday was an astounding 1.38 percentage points, twice as high as anytime in the last 10 years. During the 2008 crisis, it climbed above 3.5 percentage points.

Big spreads have historically suggested that banks were having trouble borrowing. But this time, market experts say, it is an indication of unprecedented demand for cash as companies and individuals try to stay afloat while the coronavirus pandemic chokes off income.

“The real economy is looking to raise cash,” said Josh Younger, a fixed-income market strategist at JPMorgan Chase & Co (N:). “When you have a rush for funding, it percolates through to this spread. It does not reflect a bank funding crisis like we saw in 2008.”

Corporations are drawing down credit lines and trying to borrow more cash from banks to make up for shortfalls at a time when huge economies are all but shut down to prevent coronavirus from spreading. They have also been taking back cash that was parked in money-market funds that, in turn, lend to banks.

(See Reuters graphic breaking down the novel coronavirus in the U.S. – https://graphics.reuters.com/HEALTH-CORONAVIRUS-USA/0100B5K8423/index.htm)

NEED FOR CASH

Credit concerns about banks and the loans they made may surface at some point during this crisis, but that has not happened yet, said a longtime Wall Street executive with expertise in funding markets, who was not authorized to speak publicly. For now, the need for cash is more than enough to explain the spread, he said.

Major public corporations have announced new loans and draws on credit lines of $208 billion during the coronavirus panic through Thursday, according to research by JPMorgan analyst Vivek Juneja. That figure had nearly doubled since Sunday, and does not reflect borrowing from smaller companies, or those that do not need to file disclosures.

Institutional money market funds which corporations use to hold cash have suffered redemptions in the last month of $102 billion, or 31% of their assets, according to JPMorgan.

New Federal Reserve programs to support money-market funds and commercial paper borrowing, which lasts for a few weeks, should help satisfy the corporate cash demand, according to a report by Barclays (LON:) fixed-income analyst Joseph Abate.

That would take some pressure off dollar funding costs generally.

Still, the Fed programs are just getting started and may have to be tweaked before the Libor-OIS levels come back down, Abate noted.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Bank of Canada Cuts Rates to 0.25%, Plans Asset Purchases By Bloomberg


© Reuters. Bank of Canada Cuts Rates to 0.25%, Plans Asset Purchases

(Bloomberg) — The Bank of Canada slashed interest rates for a third time in a matter of weeks, and announced what appears to be a large scale asset purchase program to help shield the nation’s economy from coronavirus fallout.

The Ottawa-based central bank lowered its policy rate Friday by another half a percentage point to 0.25%, adding in a statement that the unscheduled rate decision brings the rate down to its effective lower bound. The Bank of Canada also announced plans a new commercial paper purchase program as well as a minimum of C$5 billion ($3.5 billion) a week in government securities.

The move was necessitated by quickly deteriorating conditions, including a flood of new jobless claims last week, that suggest the economy is poised to produce one of the sharpest drops in economic activity in history. The energy-heavy Canadian economy is also having to contend with the crash in oil prices.

The Bank of Canada last cut rates to these levels in 2009, during the global financial crisis. A move toward large scale asset purchases would also be its first foray ever into so-called quantitative easing.

The move by the central bank is part of a wave of policy rate cuts and brings Canada’s benchmark rate closer to most other advanced industrialized economies.

The Bank of Canada has now lowered interest rates three times this month, with a cumulative easing of 1.5 percentage points. The Federal Reserve has also cut by 150 basis points this month. In addition to lowering borrowing costs, the central bank has also announced in recent days a slew of new liquidity measures to inject cash into the banking system and money markets and to ensure it can handle any market-wide stresses in the financial system.

 

 

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South Korea’s Largest Bank Launch a Crypto Custodial Service By Cointelegraph


South Korea’s Largest Bank Launch a Crypto Custodial Service

Major South Korean bank KB Kookmin Bank is expected to launch a cryptocurrency custody service in the near future.

According to a report from local news outlet Digital Today on March 27, the bank filed a trademark application for KBDAC, referring to a proposed Digital Asset Custody subsidiary, at the end of January, 2020.

Continue Reading on Coin Telegraph

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Australia central bank buys semi-government bonds as state revenues crunched by coronavirus By Reuters


© Reuters. Pedestrians walk past the Reserve Bank of Australia building in central Sydney

By Swati Pandey

SYDNEY (Reuters) – Australia’s central bank stepped into the semi-government bond market for the first time since launching its quantitative easing program to combat the coronavirus pandemic as state revenues deteriorate sharply.

The Reserve Bank of Australia (RBA) on Wednesday bought A$2 billion ($1.2 billion) in semi-government bonds – issued by state and territories – with maturities ranging between January 2026 and June 2030.

The semi-government market has been under severe liquidity stress in recent weeks with businesses across Australia forced halt operations as new lockdown measures kick in to curb the spread of the coronavirus.

State government revenues will also be severely hit as Australia pauses property auctions and buyer inspections of homes from midnight.

“This has material implications for state government revenues, some of whom rely heavily on stamp duty from home sales,” said ANZ economist David Plank.

“As a consequence, we expect to see considerable near-term volatility in semi-government spreads.”

With the number of coronavirus cases surpassing 2,250 in Australia, analysts say the restrictions on the movement of people will push the country into its first recession in three decades, lead to severe budget deficits and lift the supply of government securities.

“On our analysis, the cyclical budget deterioration in the COVID-19 recession will potentially be in the order of 5% of GDP, with risks to the upside,” Westpac chief economist Bill Evans said.

Australia’s budget had deteriorated by 5.6% of its gross domestic product (GDP) during the last recession in the early 1990s.

Evans expects the budget to move from being in balance in the year-ended June 2019 to a deficit of A$90 billion in the current financial year and an even larger shortfall of A$160 billion next year.

This compares with the government’s previous expectation in December of a surplus of A$5 billion for 2019/20 and A$6 billion for 2020/21.

“The stock of government securities on issue is set to jump, mirroring the cumulative budget deficit for the two years to 2020/21,” Evans added.

Westpac expects government issuances to climb to A$820 billion by June 2021, up 51% from June 2019.

Since launching its “unlimited” quantitative easing program last Friday, the RBA has bought A$13 billion in sovereign bonds.

In a separate release, the central bank said it pumped A$2.4 billion into the banking system on Wednesday, while the surplus cash held by banks at the RBA hit a record A$53.6 billion.

The RBA also said it would offer $10 billion as part of a global effort to meet demand for the U.S. currency through a repo tender to be held on march 26.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Swiss National Bank currency interventions hit highest since Brexit vote By Reuters


© Reuters.

By John Revill

ZURICH (Reuters) – The Swiss National Bank hiked its foreign currency interventions to their highest level since the Brexit referendum in 2016, data on Monday indicated, showing the central bank’s determination to counter the Swiss franc’s coronavirus-driven rise.

Swiss sight deposits rose by nearly 6 billion Swiss francs last week, supporting the SNB’s statement it is escalating its currency market interventions to slow the rise of the safe-haven currency.

Total sight deposits, which include other deposits on sight in Swiss francs, rose to 608.826 billion Swiss francs ($617.41 billion) from 602.992 billion francs in the previous week.

The 5.8 billion franc increase was the biggest this year and followed an increase of 4.4 billion francs a week before and 2.78 billion francs at the start of March.

The SNB said last week it was escalating its foreign currency purchases to stem the rise in the franc, which has appreciated as investors sought safe assets while stock markets have plunged during the coronavirus pandemic.

The franc has risen to its highest level against the euro () in four-and-a-half years as a result, threatening Switzerland’s export-reliant economy.

The central bank declined to comment on Monday, but last week said it was “intervening more strongly in the foreign exchange market to contribute to the stabilization of

the situation”.

The rise in sight deposits showed the SNB was clearly increasing its activity, said Alessandro Bee, an economist at UBS.

“This is the strongest weekly rise since mid-2016, after the Brexit vote, and is a clear sign of intervention,” Bee said.

Sight deposits, a proxy for the SNB’s interventions, increased by 6.3 billion francs after the Brexit vote in June 2016.

The central bank had no theoretical limit on how much it could spend, but it would prefer not to spend more than 10 billion francs a week for several weeks, Bee said.

The interventions also seems to be slowing the franc’s appreciation, with the SNB able to avoid cutting its -0.75% interest rate further into negative territory at its policy update last week.

“Interventions seem to be working as the Swiss franc is not passing the 1.05 barrier against the euro, and I believe the SNB will continue to defend that barrier,” said Karsten Junius, an economist at J.Safra Sarasin.

“There is no limit for the SNB and its reaction will continue to depend on the severity and length of the coronavirus crisis.”

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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