COVID-19 Update 31 March 2020
South Africa sees IMF loan to fight coronavirus as last resort
South Africa would only consider approaching international agencies such as the International Monetary Fund (IMF) for emergency funding as a last resort to help in the country’s fight against the coronavirus, the finance minister said on Sunday.
South Africa entered a 21-day lockdown on Friday with people restricted to their homes and most businesses shuttered. The country has reported more than 1,180 cases of coronavirus, but no deaths, and now faces a near certain deep recession.
Moody’s downgrade compounds Covid-19 challenges
The decision by Moody’s to downgrade South Africa’s sovereign rating to below investment grade was not unexpected. Its timing, however, puts additional pressure on the country’s economy at an already precarious time.
“I have been expecting this downgrade since the February 2020 national budget,” said Johann Els, chief economist at Old Mutual. “While the budget contained some positive measures, such as the surprise willingness to cut the size of the public sector wage bill, there were many negative factors as well.
When the virus crisis is over, the legal battles begin
While the Covid-19 outbreak carves a vein of destruction across the planet, companies worldwide are reviewing millions of contracts to assess whether they can plead force majeure – or an inability to perform due to the pandemic.
It’s a dead certainty that the courts will be clogged for years with cases arguing the limits of force majeure. Judges will be called on to separate the opportunists – those who had already defaulted on contract obligations which had nothing to do with the virus – from genuine cases of force majeure.
Africa is two to three weeks away from height of virus storm
Africa is two to three weeks away from the worst of the coronavirus storm and needs an emergency economic stimulus of $100 billion to bolster preventative measures and support its fragile healthcare systems, according to the United Nations Economic Commission for Africa.
Almost half of the funds could come from waiving interest payments to multilateral institutions. That would give countries the fiscal space needed to impose social-distancing measures, widen social safety nets and equip hospitals to treat the sick ahead of an expected surge in infections, UNECA Executive Secretary Vera Songwe said by phone from Washington.
Local & Regional:
SA could approach IMF and World Bank to help fund coronavirus health interventions
SA will consider approaching international financial institutions such as the IMF, the World Bank and the New Development Bank to help fund health interventions against the coronavirus crisis, finance minister Tito Mboweni said.
His comments, at a briefing on Sunday, followed discussions held on Friday between the IMF and the International Monetary and Financial Committee (IMFC), which advises the IMF board of governors on various issues, including on how to deal with shocks to the financial system. The body is chaired by the South African Reserve Bank governor Lesetja Kganyago.
SA downgrade sets scene for greater turmoil
SA’s financial markets, hit by dislocations that prompted Reserve Bank intervention, could have a shaky start on Monday after Moody’s Investors Service stripped the country of its last remaining investment-grade rating.
In his initial reaction, finance minister Tito Mboweni said on Friday that the Moody’s action “will further add to the prevailing financial market stress”.
Rand hits record low of R18 a dollar after SA’s junk status rating
The rand reached a record low and weakened past the psychologically important R18 a dollar level during intra-day trade on Monday morning, with the Covid-19 outbreak and SA’s latest junk status rating darkening the outlook for domestic assets.
Moody’s Investors Service issued its junk status rating after close of trade on Friday, meaning it is now non-investment grade with all the three major ratings companies. The agency also put SA on a negative outlook.
Double whammy of plunging oil and pandemic hits African producers
Collapsing oil prices have left African producers facing not only lost revenue when they most need it to tackle the coronavirus pandemic, but also a fall in hard-won market share they may never regain.
The continent’s producers such as Nigeria, Angola and Algeria cannot compete with the lower costs of erstwhile allies Saudi Arabia and Russia, who are flooding the market with oil.
South Africa’s treasury announces tax relief for business hit by coronavirus
South Africa’s National Treasury said on Sunday it was introducing a new tax subsidy of 500 rand ($28) per month to employers for the next four months to cushion financial losses suffered by firms due to the coronavirus.
In a statement the treasury said it would also permit businesses with revenue of 50 million rand or less to delay paying 20% of their employees’ tax liabilities over the next four months..
Retail landlords face rental troubles over Covid-19 lockdown
The Covid-19 lockdown is forcing more retailers into a position where they may not be able to pay their property rentals, which is set to add to the pressures being experienced by retail landlords and South Africa’s struggling listed property sector.
Edcon announced last week that it can only pay workers’ salaries due to the impact of Covid-19 on sales, and now peer clothing giant The Foschini Group (TFG) plans to stop rental payments as a result of the lockdown.
Africa’s web of creditors complicates coronavirus debt relief
Africa is crying out for debt relief to weather a perfect storm of coronavirus, plummeting oil and commodity prices, mounting budget deficits and weaker currencies. But delivering the relief that would allow governments to pump resources into creaking healthcare systems and shield economies against the fallout from the pandemic is a tall order.
International:
Asian stocks suffer amid worry about length of global lockdown
Asian shares slipped on Monday and oil prices took another tumble as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies despite central banks’ best efforts.
“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies has increased,” said JP Morgan economist Bruce Kasman.
They now predict global GDP could contract at a 10.5% annualised rate in the first half of the year..
Stocks Decline; Dollar Snaps Four-Day Retreat: Markets Wrap
Stocks declined on Monday and U.S. equity futures slipped after a bounce in risk assets last week was buried by three days of negative news on the coronavirus. The dollar rebounded and Treasuries turned higher, while oil fell.
Stocks
Futures on the S&P 500 Index fell 0.4% as of 9:13 a.m. London time.
The Stoxx Europe 600 Index dipped 1.3%.
The MSCI Asia Pacific Index decreased 0.8%.
Currencies
The Bloomberg Dollar Spot Index increased 0.5%.
The euro dipped 0.6% to $1.1074.
The British pound declined 0.8% to $1.236.
The Japanese yen was little changed at 107.93 per dollar.
Bonds
The yield on 10-year Treasuries decreased four basis points to 0.64%.
Germany’s 10-year yield decreased seven basis points to -0.55%.
Britain’s 10-year yield fell nine basis points to 0.278%.
Commodities
Gold fell 0.5% to $1,619.67 an ounce.
West Texas Intermediate crude decreased 5.2% to $20.40 a barrel.
Global markets take another beating as more countries shut up shop
Financial markets around the world took another hammering on Monday as a rising tide of national coronavirus lockdowns threatened to overwhelm policymakers’ frantic efforts to cushion what is likely to be a deep global recession.
Oil slides as traders fret about how pandemic will affect demand
Crude oil benchmarks fell sharply on Monday, with Brent hitting its lowest since November 2002, as the global coronavirus pandemic worsened, and the Saudi Arabia-Russia price war showed no signs of abating.
Brent futures were down 6.7%, or $1.68, to $23.25 a barrel as of 4.49am, after earlier dropping to $23.03, the lowest since November 2002.
Gold slips on Monday as traders favour cash
Gold prices edged lower on Monday as a flight to cash to cover losses in equities overshadowed measures by global central banks to contain the economic fallout from the coronavirus epidemic. Spot gold was down 0.2% to $1,614.46 per ounce by 5.46am after Friday’s 0.7% drop. US gold futures fell 0.4% to $1,646.60 per ounce.
EMERGING MARKETS-Stocks fall as recession fears grow
- MSCI EM stock index down 1.4%
- Currencies weaken against stronger dollar
- Moody’s downgrades South African credit rating to “junk”
- Oil prices tumble, pressure rouble
Emerging markets stocks fell on Monday with investors bracing for a sustained blow to economic activity as the coronavirus continued to spread, while South Africa’s rand weakened 2% after the country lost its last investment grade credit rating.
Markets had rallied through most of last week after a blizzard of monetary and fiscal measures offered a partial backstop to fallout from virus containment measures. But as the number of infections and deaths continued to rise exponentially, the number and durations of lockdowns across the world rose, likely intensifying what is set to be a deep global recession.
Articles of interest:
EXCLUSIVE: The 11 factors that will shape SA’s lockdown
Lockdowns Intensify; More Countries Add Stimulus: Virus Update
Stocks
https://www.bloomberg.com/markets/stocks
Is Now The Time To Buy Stocks?
https://www.forbes.com/sites/davidrae/2020/03/22/is-now-the-time-to-buy-stocks/#662617071829
Sources:
- bloomberg.com/Africa
- af.Reuters.com
- businesslive.co.za
- moneyweb.co.za
- forbes.com