Rothschild & Co Asset Management: Marktausblick Europa

Marc-Antoine, what do you think about Europe? What can we expect for the months to come?

Marc-Antoine: Lockdown measures to suppress the COVID-19 pandemic have led to a major recession. Most countries have begun to roll back these measures gradually, but some restrictions will extend well into H2 2020. The ECB has committed to act forcefully to support the economy and has announced new longer-term refinancing operations, lowered twice the interest rate applied in TLTRO III operations and eased collateral standards. In addition, the ECB has expanded its asset purchases, mainly through the EUR 1350 billion Pandemic Emergency Purchase Programme, with net purchases set to continue until at least June 2021. In the absence of a European fiscal capacity, the fiscal response to the crisis has been so far almost exclusively left to national budgets, with governments adopting measures such as increased healthcare spending, income support to households, tax deferrals, public loans and credit guarantees and short-time work schemes. Yet, despite widespread use of later, the unemployment rate is set to increase substantially by year-end. Meanwhile, the many rounds of talks between the EU and the UK have not led to significant headway. The UK negotiator David Frost stressed that some of the “EU’s unrealistic positions” will have to change in order to find an agreement. EU negotiator Michel Barnier warned that there were still large gaps between both sides on most areas. Overall, a trade deal by year-end remains uncertain.

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