Market Overview

Italy will allow factories and construction sites to reopen from May 4 and permit limited family visits as it prepares for a staged end to Europe's longest coronavirus lockdown, Prime Minister Giuseppe Conte said on Sunday. He revealed the details in an interview for the La Repubblica newspaper. Companies allowed to open will be required to strictly comply with the necessary sanitary standards, signor Conte remarked. The Italian authorities are also considering the resumption of the operation of strategically important enterprises, including those that are engaged in exports. According to the newspaper, these companies can get permission to resume work as early as the end of this week.

It was maybe even a blessing in disguise when the European Commission finally decided last week to launch a 540-million Euro aid package only as of June 1, and also nothing has been resolved again with the recovering funding and with the so-called "corona-bonds" with joint financing, which the Nordic countries have blocked. Over the weekend the Finance Minister of neighbouring Austria, Gernot Bluemel, also reconfirmed Austria's stance in an interview for Frankfurter Allgemeine Zeitung that the European Union's planned recovery fund should mainly provide repayable loans and not grants as demanded by Italy. Mr Bluemel said that the Austrian government is ready to increase its 38 billion Euro aid package if needed, while the country's 2020 budget deficit could reach 10% and its state debt could hit 80% of its gross domestic product (GDP). But the state debt for Italy was already 130% of its GDP even before the coronavirus crisis, so the Italian authorities had repeatedly stated before that that the country could not afford to wait until June. In fact, signor Conte directly said that the decision to introduce the plan to start with lifting the quarantine measures was taken now because of the difficult economic situation in the country.

The dilemma concerning a too long lockdown of everything for the sake of questionable safety on the one hand and a chance of quickly rescuing many sectors of the economy, which are suffocating from economy lockdown has no right answer. The Italian government finally made a choice by saying "hello" to the economy and then taking steps to say "goodbye" to the quarantine time. They got up the courage to say stop to the lockdown and to say "go go go" to more normal rhythms of life. That especially makes sense taking into account the minimum number of new viral victims for April 26, which was 260 vs 415 cases the day before, and this was also the minimum number since the beginning of the severe quarantine in Italy. Hospitals began to cope with the load of patients as daily new infection cases detected was 2,324 yesterday, that is 35% of the peak number. These numbers are the lowest since the first days of March.

The Italian FTSE MIB stock index and pan-European Stoxx 600 opened at 1.8% higher today if compared with Friday's close. The US S&P500 and Nasdaq indexes also continue to climb on the back of this encouraging news for the world economy. Among other reasons for moderately positive sentiment on stock exchanges is that the US Small Business Administration (SBA) strategic plan and the Bank of Japan's initiative to expand bond purchases with the removal of its previous target limit of 80 trillion Yen per year. However, this is not completely new information, so it seems that today's movements are determined by news from Italy and other European countries that are rushing to open up their economies.

Italy's Deputy Industry Minister Stefano Buffagni told La Stampa today that the government is ready to invest in all those small and medium businesses that plan to increase their capital after the coronavirus emergency, so the government is planning to become a temporary shareholder. He added that this new proposal, named as Coronaequity, is designed for companies with up to 250 employees and would be a part of a larger package worth two billion Euros. Italy is going to attract more private investments into government bonds. The country's Treasury said on Friday it would offer 10.5 billion Euros in six-months and 75-day bills at the auction on Tuesday.

Another sign of returning to normal life is that Giuseppe Conte gave the go-ahead on Sunday for professional sport teams to start training again in May. He did not set a date for football Serie A championship to be resumed yet, but Claudio Lotito, president of SS Lazio already called for Italy's league to restart by saying that "the system risked blowing up" if not resumed in an interview with la Repubblica newspaper on Monday. He added that he would be ready for a one-match challenge between Lazio and Juventus - the two top contenders - to establish a winner of the league for the 2019/2020 season.

Notable changes in the direction of easing quarantine measures are also taking place in a number of other European countries. In the Czech Republic citizens are allowed to travel abroad, including for holidays, starting from April 24. Czechs will also be able to move freely outside their homes but in groups of no more than ten people. All stores and service companies with a retail area of up to 2,500 square meters, fitness centres, and libraries will start operating from April 27. Zoos will also welcome visitors, but only outdoors. Liturgies in churches are also expected to resume.

The Croatian government has announced a plan consisting of three stages. Stores will be the first to reopen, and then, in May and June, intercity and international traffic will gradually resume. Educational and health institutions, sports and cultural centres will start working. In Switzerland, the lifting of the ban will also begin on April 27 and will take place in three stages. First on April 27, general medical offices, dental offices, beauty salons, massage parlours, car washes and household goods stores will be opening.

Greece will gradually withdraw from the quarantine starting from the end of April, a process that will take 63 days, the government said. The details are to be announced today by Prime Minister Kyriakos Mitsotakis. It is already known that some civil services will start working from April 27. Mortgage offices, magistrates' courts and primary courts will resume working. In addition, as of April 27, road traffic of cars and taxis will be allowed without any restrictions.

In Spain, where strict measures of self-isolation were imposed, children under 14 are allowed to go for walks starting from April 27. Nevertheless, the high-alert regime is likely to be extended until May 9, Prime Minister Pedro Sanchez said.

It is likely that all the latest news on the pace of giving loose reign to the population in different countries plus the corporate reports could be the main drivers that may set both further direction and speed of the movements for indices and share prices. And it is natural that even if the overall positive background is maintained, the situation for different companies may be very different. For example, the shares of Deutsche Bank soared over 11% after Germany's largest bank said it would beat first-quarter earnings estimates with a first-quarter profit of 66 million Euros, despite taking a provision for loan losses of around 500 million Euros. Volkswagen shares climbed over 3% after the carmaker said on Monday it had resumed work at its biggest factory in Wolfsburg. Despite the assistance provided by governments, the dynamics for airlines shares, including Lufthansa, are much less pleasant.

The earnings season will be in full swing with around 175 companies of the S&P 500 list reporting this week, including Apple, Facebook, Alphabet (Google), Amazon, Microsoft, Caterpillar, Ford, General Electric and Chevron.

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