Limping out of the lockdown

Highlights:

• As new Covid-19 cases flatten out, governments prepare for the exit from lockdowns. This will ease economic pain. But it is a fragile enterprise, given the risk of resurging infections.
• The global economy is headed for its worst slump since WWII, with the recovery set to be protracted and disinflationary pressures likely to grow.
• Bold and timely responses by fiscal and monetary policy help to cushion the fallout, supporting risk sentiment and Credit markets in particular.
• European leaders seem set to agree only on a soft form of intra-European burden sharing. EMU sovereign risk will remain largely in the hands of the ECB, which seems determined to deliver.

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