Monthly Market Pulse: April 2020

Since our last Monthly Market Pulse the world economy has continued to nosedive. When you received our March Monthly Market Pulse on 2 April, coronavirus had claimed 24,000 lives and infected over half a million people worldwide, over one-third of the world’s population had just started or were starting to quarantine and the imminent fear for many governments was the collapse of their national health systems. Fast forward four weeks and coronavirus has claimed nearly 200,000 lives and infected over two and a half a million people worldwide, governments around the world have continued to promise unprecedented fiscal and monetary rescue packages to help fight the economic crisis resulting from Covid19 and the IMF predicted the biggest economic downturn since the Great Depression. China saw its GDP shrink for the first time since 1992.

Chart of the month: Equivalent Yields (%) and all-property capital values (2019 Q1 =100)

Picture 1

Politics

  • Boris Johnson became the world’s first prime minister to contract Covid19 and was subsequently admitted to intensive care after a deterioration in his breathing.
  • A number of European countries, including Germany, Austria, Norway and Czech Republic started to ease the lockdown. Others, some of the world’s worst affected counties, are now working on a step by step exit strategy to reopen the economy.

Business & Economics

  • China’s economy suffered its first contraction in 28 years, shrinking 6.8% in an extraordinary shock to the global economy.
  • In its direst warning yet about the impact of Covid19, the International Monetary Fund (IMF) said that “the great lockdown” will result in the biggest economic downturn since the Great Depression. The IMF forecasts global GDP to shrink by 3% and GDP in advanced economies to contract by an average 6.1%. this year.
  • The Federal Reserve (Fed) took more unprecedented measures to prop up the American economy announcing a series of programmes that will provide $2.3trn in credit and support to households, businesses and state and local governments.

Real Estate

  • Early indications on the impact of Covid19 on UK property came with the release of CBRE’s monthly property index earlier in April. This pointed to a 3% month-on-month decline in capital values during March, with retail hit especially hard.
  • The broad MSCI monthly data showed a 2.6% month-on-month drop with a major sector deviation: retail and leisure were hit hardest. The monthly decline in values in retail (-4.8%) and leisure properties (-6.1%) was significantly worse than elsewhere.
  • In contrast, capital values in offices and industrial fell more modestly, declining around 1% month-on-month. The March data only include the first two weeks of the full lockdown, so things are likely to get worse in April and May.

Equity Markets

  • Stock markets continued to swing widely. The S&P500 had its best week since 1974 for the four days ending 9 April rising by 12% (markets were closed on Good Friday).
  • China’s central bank took more steps to increase liquidity, pumping another 100bn yuan into the financial system ahead of an expected contraction in Q1 GDP.
  • Amazon’s share price hit new highs. It is up by a third since mid-March, giving the company a valuation of $1.15trn.

FX & Commodities

  • Saudi Arabia and Russia ended their oil price war agreeing to a deal that will see oil-producing countries cut output by a record 9.7m barrels a day over the next two months, around 10% of global supply.
  • The market continued to deteriorate further last week. US oil prices turned negative for the first time in market history as the market continues to struggle amid the coronavirus-induced supply glut.
  • Gold prices continued to decline as inflation expectations sank after US crude oil prices plunged below zero for the first time on record.

Amid the current volatile and rapidly changing situation, at Blend Network we continue to regularly and closely monitor the loan book. We are in regular contact with all of our borrowers, speaking with them even more than usual. We continue to closely inspect the development of our projects and our service to borrowers has not been disrupted; we are releasing money according to monitoring certificates as usual. You will have the regular loan updates that we share with you.

As mentioned earlier this month in the message by our CEO, we remain strongly committed to continue lending to experienced property developers who come to us with a solid project, an enviable track record and a strong exit strategy. Our underwriters are working very hard to ensure that our pipeline of loans remains of high quality so that we can keep bringing you great risk/reward loans as we have done so far. So, keep an eye on our upcoming loans and start lending with Blend Network.

 

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