In the U.S.:
- The Fed announced a new FIMA facility that will allow foreign central banks that need to raise dollars to do so via repo transactions rather than having to sell their securities in the open market.
- Initial jobless claims rose to a staggering 6.648M, doubling last week’s 3.283M reading. Continuing claims up to 3.029M from last week’s 1.784M. A jump in cases was expected as state unemployment offices struggled to process the flood of applications and adapt computer systems to accept new types of claims allowed under the CARES Act
- March headline nonfarm payrolls fell 701K, well below consensus for a 145K decline. First negative print since Sep-10. The unemployment rate jumped to 4.4%.
Simon Property Group (SPG) announced that it would be furloughing 30% if its workforce. The mall giant also slashed executive pay in order to combat the ill effects of the coronavirus.
- March manufacturing PMI jumped to 52.0 versus February’s record-low level of 35.7. Production and new orders surged back into expansion territory while export orders rebounded though remained moderately below neutral.
- The PBOC announced that it would cut the reserve requirement ratio (RRR) for small- and medium-sized banks by 100 bp in two equal steps, one on April 15th and the next on May 15th. The latest RRR cut is the third this year as the country recovers from the coronavirus pandemic.
- Prime Minister Shinzo Abe announced that a stimulus package to combat the coronavirus pandemic will be rolled out next week. Reuters reported that the package will target small firms and households hardest hit by social distancing policies.
S&P Global Ratings released a report saying that Hong Kong’s residential property transactions will remain sluggish throughout the first half of the year, after dropping 27% y/y during January and February.
- Final March Eurozone services PMI was 26.4 versus February’s 52.6 reading. Readings across the bloc collapsed with particular weakness in the hardest hit areas of Italy, which fell to 17.4 from 52.1, and Spain, which fell to 23.0 from 52.1.
- Oil rallied this week after comments from US President Trump, who said he expects Saudi Arabia and Russia to end their price war soon. President Trump added that they could agree to cut production by 10-15M barrels.
UK and European logistics REIT SEGRO Plc provided an update to the market this week on the impact of the COVID-19 pandemic on its business. CEO David Sleath reiterated “Our primary focus is the health, safety and well-being of our employees, whilst working hard to support our customers and other business partners during this challenging period.” SEGRO indicated that it had received 71% of its rent from occupiers on the quarterly rent day, with a further 25% expected to be delayed. This compares to 96% of rents received at the same time last year. SEGRO indicated that it is working on a case by case basis with customers suffering short-term cash flow issues, primarily through reprofiling the timing of rental payments. It reiterated that it has a diverse customer base, with suppliers of critical goods and services also seeking additional space for short and longer-term lettings. Management also commented that “Whilst current global events are unprecedented, we anticipate that the structural trends that have been driving occupier demand for high-quality, well located warehouse space will remain intact and may even be strengthened by the crisis, as the importance of logistics supply chains has been thrown into sharp focus in recent weeks.” The company also reinforced its strong balance sheet and capital position. SEGRO indicated that it’s rental income would need to fall by 80% or asset values by 64% before any debt covenants are breached. It had cash and undrawn facilities of £1.2bn at 31 March, a LTV of 26%, an average debt maturity of just under 10 years and no major debt maturities before 2023. Lastly, SEGRO confirmed its plans to make its final dividend payment of 14.4 pence/sh on May 1, 2020 relating to the 2019FY subject to approval at its upcoming AGM on April 21, 2020.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.