Lebanon Makes About Turn on Banks’ Asset Freeze as Repayment Date Draws Close
COVID-19 UPDATE
Thursday saw 3,300 new cases of COVID-19 with only 139 of those recorded in China as the global spread accelerates. Cases in South Korea and Italy continued to rise with confirmations now standing at 6,284 and 3,858 respectively. The 3% death toll in Iran makes it the worst hit country outside China with over 100 deaths recorded so far. Japan’s 1,045 confirmed case so far are believed to be significantly lower than is actually on the ground as questions have arisen over the country’s testing approach; the Japanese government has said it can test up to 3,800 people daily but only 8,111 tests had been conducted as at March 4 according to the Health Ministry.
UNITED STATES
Concerns over the ability of governments to contain the spread of the virus as well as its impact on the economy sent US stocks sharply lower on Thursday. As the toll of infections creeps towards 100,000 with new cases being mostly ex-China, benchmark 10Y USTs closed at an all-time low of 0.9120%. The DOW led the slide, down 3.57% while the S&P and the NASDAQ closed 3.39% and 3.09% lower respectively. Year-to-date, the DOW is now 8.5% down while the S&P is -6.4% and the NASDAQ -2.6%. Yield on 30Y USTs also notched an all-time low at 1.5407% while 2Y USTs closed at 0.5973%.
UNITED KINGDOM
The UK announced its first COVID-19 death on Thursday as confirmed cases rose to 115. The announcement came as Prime Minister Boris Johnson met up with chancellor Rishi Sunak and BoE governor Mark Carney to plan an economic response to the outbreak. The measures could include monetary easing by the BoE ahead of the scheduled March 26 meeting as well as incentivising banks to help small companies that may face supply chain interruptions. The chancellor’s budget, due next week, is set to suspend fiscal rules set out in the 2019 Tory manifesto such as a balanced budget by 2023. The pound closed firmer at $1.2954 while yield on 10Y and 30Y UKTs closed lower at 0.331% and 0.854% respectively.
EUROPEAN UNION
The latest manufacturing orders data for Germany in January provided a bright spot amid the gloom brought about by the coronavirus. Figures released by the Federal Statistics Office on Friday showed manufacturing orders rose 5.5% for the month following a 2.1% decrease in December; the figure was above the 1.4% expected in a WSJ poll. While on an annual basis orders fell 1.4%, the data raises some optimism ahead of the January industrial production data due on Monday. The euro closed firmer at $1.1237 while yield on 10Y and 30Y DBRs closed lower at -0.686% and -0.210% respectively.
ASIA
Asian markets tumbled on Friday as to cap yet another dismal week for stocks as risk-off sentiment held sway. The ASX led the slide down 2.80% while the NIKKEI and the HANG SENG closed 2.71% and 2.32% lower. The CSI closed a comparatively more modest 1.21% lower.
MENA
Lebanon made an about turn on a freeze order on 20 banks less than 24 hours after the ban was imposed. The financial prosecutor had on Thursday imposed a lockdown on bank assets as well as those of their board members amid an investigation into the illegal transfer of billions of dollars as well recent sales of Eurobonds into foreign funds. This turned out to be quite a week for banks as it began with a formal inquiry by the financial prosecutor over the transfer of $2.3 billion offshore during October and November 2019 culminating in the dramatic U-turn on an asset freeze. Lebanese banks are the biggest holders of the country’s debt and have been at odds with the government over how to handle looming repayments. LEBAN 20s due for redemption on Monday were lower, trading in the low 59s on Monday.
LATAM
Argentina cut its benchmark rate by 2 points to 38% on Thursday – an 8th time in 3 months – as officials look to stimulate the economy amid expectations of slowing inflation. The rate now stands at 38% from 63% when President Alberto Fernandez assumed power in December with the monetary policy committee saying cooling prices justified the cut although the economy was not yet in the clear. February inflation is expected to slide below 2% which will be the first time in 2 years amid price freezes in public transport, utilities and some food items as well as capital controls on the peso. The peso closed weaker at 62.4211 to the dollar while ARGENT 48s were about two points lower, trading in the high 39s.
RUSSIA
In a sign of Russia’s increasing influence on OPEC, the oil group’s proposed 1.5 million barrels per day cut will need the approval of Russia before it comes into effect. The deal set to take effect in April should it get approved, will see the OPEC members shave 1 million barrels with non-OPEC members will shave 500,000 barrels. Brent has fallen 25% since its January peak amid expected slowdown with the coronavirus outbreak and was trading in the low 49s Friday morning. The ruble closed weaker at 67.6331, the lowest since January 2019, while RUSSIA 47s were higher, trading in the high 135s.