The epidemic worsens the Italian economy, Country stimulation is the focus!

In Daily Market Review, English
March 11, 2020

The epidemic worsens the Italian economy

The outbreak spread very quickly in Italy. The number of diagnoses in an instant approached South Korea. The most worrying thing is that the number of deaths due to the epidemic is the largest outside of China, which gives the Italian authorities a lot of pressure to step up their domestic epidemic prevention work, such as closing the city and stopping large-scale ball games. Due to the current outbreak in Italy, it is the richer economic provinces in the northern part of the country, including the financial center of Milan. This is worse for the Italian economy, which is extremely vulnerable after the European debt crisis. Now the market is worried that if the epidemic lasts for a long time, more companies will go bankrupt, and once the Italian commercial bank can’t bear the shock, there is a chance to trigger another financial crisis. These worries can be seen in the recent sharp rise in Italy’s 10-year national debt yield. As of Tuesday (10th), the local 10-year Treasury bond yield reached a high of 1.458%, which is a strong contrast to the yield of the same-year Treasury bond yield of approximately -0.743% in the Eurozone. I believe the situation in Italy will put pressure on the European Central Bank to expand loose monetary policy at the interest rate meeting on Thursday. However, at this stage, the market is still generally estimated that this Thursday’s interest rate meeting, the European Central Bank cut interest rates by only 0.1%.

 

Country stimulation is the focus!

Because the market is expected to heat up the stimulus measures issued by various countries, US stocks and the US dollar rose sharply on Tuesday, which caused gold to fall to around 1640 US dollars. Another reason for the recent plunge in gold is that the plunge in international oil prices has also partially threatened gold with commodity attributes. However, analysts believe that as the market digests the impact of the plunge in oil prices, while global bond yields continue to decline, gold will continue to be sought after. At the same time, the consensus of the market is that fiscal policy is the key factor to promote economic recovery, so we need to continue to pay attention to the trend of fiscal stimulus in various countries.


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