Elevenses 24th March 2020

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  • European PMIs lower: Eurozone’s plummeted to 31.4 and UK’s 37.1 from 53.0
  • BOE says “all elements of the substantial capital and liquidity buffers that have been built up by banks could be drawn on”
  • UK’s lockdown not being fully complied with it appears, packed tube trains, etc, further enforcement possible
  • UK’s CBI show manufacturers most pessimistic since GFC, expectations -20 from +8 in February

S&P 500 futures hit upper limit.

I’m going to use a war analogy to explain the Bank of England’s point regarding capital buffers and why banks will need to draw fully upon them. On September 15th 1940, as the Germans had launched a massive bomber raid, Churchill turned to Air Vice Marshall Keith Park about Britain’s fighter aircraft. Churchill asked “How many more have you got?” to which the Air Vice Marshall replied, without a shred of irony, “none”. Every serviceable fighter aircraft in the United Kingdom was in the air at the same time. The reserves were being used.

The Week That Will Be
This week we will find out:

  1. How is global economic growth? – PMIs (Tues), US Jobless Claims (Thurs), UK Retail Sales (Thurs)
  2. How much monetary & fiscal stimulus will come in 2020? – BOE (Thurs)
  3. Will Trump win re-election? – Fiscal package promised Monday

We already know:

  1. The world economy is in recession.
    • It doesn’t matter about the progress of the virus, the sudden stop of the global economy makes a recession inevitable.
      • The only question is whether it . . .

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