What companies are set to suffer in a COVID-19 recession?

In Europe, Norwegian Air Shuttle shares are also suffering down 60% since the COVID-19 outbreak was acknowledged in China and down 92% from the peak in July 2015. It all points to more pain for airliners. On the other side the winners will be fantastic stocks as aviation is critical for a global economy so demand will come soaring back when the COVID-19 virus has ended.

The table shows the 30 companies in the S&P 1200 Global index with the highest current 1-year default rate in bps. and the biggest change since the COVID-19 outbreak was official acknowledged by China. The companies with the highest default rate are concentrated in the metals, airlines, banks and automobiles industries which should not be that big a surprise as these industries have very high sensitivity to the coronavirus.

One of the really big companies that have seen its default rate rise 86 bps. is ThyssenKrupp which is facing headwinds in many of its divisions and has recently announced that it’s looking to divest its elevator business. But this is really a knife into the heartland of the German industrial engine. In general Europe looks weak here with escalating COVID-19 outbreak will most likely put the continent into a recession which could 1) re-ignite the pain trade in banks and 2) put the green deal on the sideline.

What is probably the most scary about our list of companies with the highest default rates is the concentration among European banks. In the last 12 years European policymakers have failed to strengthen the banks and the ECB never paid interest on excess reserve like the Fed so European banking system never really healed. With an impending recession it could get ugly in the European banking industry with potential another round of bailouts, at least in a worst-case scenario. The STOXX 600 Banks index is also close to the lowest levels since 1986 when the index started. That’s 34 years of no return to shareholders excluding dividends.