Europe

The coronavirus will depress mergers and acquisitions activity, hurt advisory revenues and change the emphasis of deal-making in 2020, writes David Rothnie.

The UK has pledged £30bn ($37.62bn) of stimulus to cushion the coronavirus pandemic’s economic impact, and now the Debt Management Office’s remit is expected to be £40bn higher than last year. But the Budget, delivered by UK chancellor Rishi Sunak on Wednesday, seemed to have little effect on Gilt yields, despite rising on the day.

Costain Group, the UK construction and engineering firm, has unveiled a £100m capital increase to shore up its balance sheet following a disappointing set of 2019 results.

AMS, the Austrian sensor maker, has launched a Sfr1.75bn (€1.65bn) rights issue, despite volatile equity markets but bankers hope that the attractive entry price and the steady nature of the company itself will be enough to ensure a successful deal, despite difficult equity markets.

Spreads on financial institutions bonds are recovering from a brutal sell-off at the beginning of the week, as European governments and central banks weigh in to help economies deal with the Covid-19 coronavirus outbreak.

Once again, corporate bond markets have staged a recovery after a shutdown of several days as asset prices plummeted in response to the growing coronavirus outbreak. Three industrial companies plus JP Morgan issued bonds in the US on Tuesday, which “all went exceptionally well” according to a head of syndicate in London. Danone launched on Wednesday the first euro corporate issue of the week, paying a high spread but small new issue premium.

The European Union is set to make at least €25bn of budget funding available for sectors affected by the Covid-19 coronavirus, as its institutions join forces to tackle the economic impact of the outbreak. Rules on state aid and public finance will also be loosened, giving member states more room to launch fiscal stimulus measures.

One of the internal candidates to become the next permanent head of European M&A at RBC Capital Markets has quit to join a boutique.

Deutsche Bank said this week that it will keep its $1.25bn 6.25% additional tier one outstanding beyond its first call date, having become the second European bank to extend the life of an AT1 for economic reasons.

The recent fall in the price of oil is having a knock-on effect on non-core currency issuance. While oil dependent markets could take a hit as their currencies weaken, some net importers could benefit from a stronger currency and safe haven flows.

On Monday, a day when European stock indices plummeted, hedge fund giant Bridgewater Associates was executing short positions against 37 of the continent's companies, particularly in France, Germany, Spain and the Netherlands.

What a time to be a new UK chancellor of the exchequer preparing to make your maiden Budget speech, as Rishi Sunak will do on Wednesday. He has motive and opportunity to borrow big and pay little for it. Brexit and the coronavirus outbreak mean a lot of spending will need to be funded to keep the UK economy running. But how the cash is deployed will shape the government's credibility in the eyes of Gilt investors.