1. Payrolls to tell no more than half the story
It’s payrolls day – with a difference. The monthly employment report from the U.S., due at 8:30 AM ET, is likely to be bad, but won’t tell anything like the whole story given that the cut-off date is the week of March 12, that is, before any major lockdowns in the U.S.
The reality, as indicated by the weekly jobless claims data on Thursday, is much worse. Over 9 million Americans have filed for unemployment benefits in the last two weeks. That’s around 6% of the workforce.
The Cleveland Federal Reserve President Loretta Mester said the jobless rate could reach 15% in the near future, echoing comments earlier this week by colleague James Bullard.
2. Oil prices hit highest since mid-March on supply deal hopes
Oil prices climbed to their highest in two and a half weeks after a spate of newswire reports citing mostly unnamed sources added further details to President Donald Trump’s bold claim of a likely deal to end the global price war. U.S. crude futures rose 4.2% to $26.41 a barrel, while global benchmark Brent soared back above $30 to trade at $32.59 a barrel, up 8.9%.
The OPEC+ format, which includes both Saudi Arabia and Russia, has called an emergency meeting for Monday. However, Reuters reported that the group would insist on a cut in U.S. production as part of any deal.
Other reports cited sources saying a cut of 10 million barrels a day, roughly 10% of world oil supply, was “realistic”. Trump had said the cut could be up to 15 million barrels a day. He has also said he will meet with U.S. oil bosses today, with meetings possibly stretching into the weekend.
President Vladimir Putin is also due to meet with Russian oil producers Friday, the Kremlin said.
3. Stocks set to open lower; dollar strengthens again
U.S. stock markets are set to open lower as the market absorbs the implication of Thursday’s jobless claims data.
By 6:35 AM ET (1035 GMT), the Dow Jones 30 Futures contract was down 236 points or 1.1% at 21,036 points. TheS&P 500 Futures was down 1.1% and the Nasdaq 100 contract was down 1.0%.
The dollar index rose 0.5% to its highest in over a week as both the euro and sterling fell sharply in the wake of apocalyptic readings from IHS Markit’s purchasing manager indices. However, the dollar gained against both currency commodities and haven currencies such as the yen and Swiss franc, suggesting that the tension in global funding markets has further to run.
Elsewhere, China’s central bank cut its reserve requirements again in an effort to prop up domestic liquidity – even though the virus peaked over a month ago in that country and anecdotal reports suggest a broad, if slow, rebound in activity.
4. Europe's PMI horror show
Europe is facing a recession deeper than in 2008/9, judging by the look of the latest survey data. IHSMarkit revised down its March PMIs across the region, due mainly to shocking declines in services activity, which makes up the bulk of all European economies, even Germany’s.
In Italy, the services PMI fell to 17.4, from 52.1 in February. That’s the lowest number Markit has ever reported for any of its PMIs, ever - worse even than Greece at the depths of its recession in the last decade.
Claus Vistesen, eurozone economist with Pantheon Macroeconomics estimates that eurozone GDP fell 4% in the first quarter and will shrink a further 10% in the current quarter, “based on the notion that activity will be at a hold in April and most of May.”
5. Disney , GE furlough workers; trouble with SBA loan plan
Walt Disney (NYSE:DIS) and General Electric (NYSE:GE) said they will furlough thousands of workers, as the Covid-19 outbreak reaches ever deeper into U.S. economic life.
Disney said the cuts will apply to all its U.S. divisions. The company has shut its domestic parks indefinitely, while its cruise division has suspended sailings. In addition, blockbuster movie releases have been pushed back to next year.
GE’s cuts affect mainly the aviation division, where future demand is being rapidly revised downwards due to the collapse in air travel and the uncertainty over how quickly and fully it will rebound.
Elsewhere, there were signs that the U.S. government’s $350 billion plan to help small businesses faces problems. JPMorgan (NYSE:JPM) said it wouldn’t be able to process applications for government-guaranteed loans, which can be submitted from today. Bank of America (NYSE:BAC) is limiting applications to existing customers.
The Federal Reserve’s planned Main Street lending facility is also facing delays. Boston Fed President Eric Rosengren said Wednesday that it won’t be ready for “another couple weeks.”
1. Jobless claims set for another huge increase
Brace, brace. The U.S. is due to report last week’s initial jobless claims at 8:30 AM ET (1230 GMT), the latest sign of how badly the Covid-19 pandemic is hitting the U.S. labor market.
Those who had hoped for some clarity from payrolls processor ADP (NASDAQ:ADP) on Wednesday were disappointed as the company took March 12 as its cut-off date, excluding last week’s record 3.28 million surge in claims.
Inevitably, there’s a huge range of forecasts for this week’s number, from 1.5 million to as much as 6 million, the latter being Goldman Sachs’s revised estimate.
There are also data on the U.S. trade balance in February, which may show a sharp drop in imports from China, and the ISM’s Business Conditions index at 9:45 AM ET. February’s durable goods orders, at 10 AM, are of historical interest only.
2. U.S. Covid-19 death toll hits 5,000 as Florida locks down
The death toll from the Covid-19 coronavirus in the U.S. topped 5,000, while the number of confirmed cases rose over 14% to 216,724, according to Johns Hopkins data.
That’s over twice as many as China has reported, although the U.S. government said on Wednesday that intelligence reports suggest China dramatically under-reported the impact of the disease. Crematoria in Hubei province, where the pandemic started, have reportedly returned the remains of far more people than were confirmed as dying in recent days as the state has relaxed its lockdown measures.
Evidence of strains on the corporate world continue to mount. Carnival (NYSE:CCL) had to scale down the equity part of its capital raising after failing to find enough buyers, while Boeing (NYSE:BA) is reportedly offering buyouts across its whole workforce.
Elsewhere, Softbank said it wouldn’t cash out WeWork founder Adam Neumann and other early shareholders as it had previously agreed, while The Wall Street Journal reported that the creditors of movie theater chain AMC Entertainment have appointed lawyers to advise it on a debt restructuring.
3. Oil prices surge on hopes of peace deal
Crude oil prices surged some 10% after President Donald Trump said he thought an end to the price war launched by Saudi Arabia and Russia could come within days.
By 6:15 AM ET, U.S. crude futures were up 10.2% at $22.38 a barrel, while the global benchmark Brent was up 11.1% at $27.50.
The news comes after the third-biggest combined rise in stocks of U.S. crude and gasoline in history, numbers that underlined the collapse in demand in the world’s largest consumer. Trump is due to meet with U.S. oil industry bosses on Friday.
Oil and gas stocks in Europe also rebounded sharply, amid hopes that their prized dividends will stay intact (in contrast to most of the rest of the stock market). Royal Dutch Shell (LON:RDSa) stock rose 8.2% by mid-morning in London, while BP (LON:BP) stock rose 7.5% and Total (PA:TOTF) rose 3.6%.
4. Stocks set to open higher, dollar gives ground
U.S. stocks are set to open higher after a negative start to the new quarter that saw major indices slip by around 4%.
By 6:15 AM ET, the Dow Jones 30 futures contract was up 361 points or 1.7% at 21,101, while the S&P 500 futures contract was up 1.6% and the Nasdaq 100 futures contract was up 1.2%.
Overnight, China’s CSI 300 had risen 2.3% while Europe’s Stoxx 600 was up 0.3%.
The dollar, meanwhile, was easing across the world after three days of increasingly ominous gains. The dollar index, which tracks the greenback against a basket of developed world currencies, fell 0.1% to 96.655.
5. China prepares stimulus for auto market
China said it would step up measures to support its auto market, the world’s largest, after an unprecedented drop in sales of nearly 80% in the first two months of the year.
The commerce ministry will relax or remove restrictions on car purchases in some regions to help sales of new vehicles, while accelerating plans to boost the scrapping of old ones, Reuters reported, citing comments from Wang Bin, the deputy head of the ministry's consumption promotion division.
The news lifted the shares of European auto groups by between 1.4% and 3.6%, while also supporting suppliers’ share prices.
1. Trump warns of a tough April; tariff suspensions mooted
President Donald Trump warned of a painful month ahead after the White House projected up to 240,000 Americans could die of the Covid-19 coronavirus.
“This is going to be three weeks like we’ve never seen before,” Trump told reporters, completing a pivot away from weeks of downplaying the outbreak.
Johns Hopkins data estimates over 189,000 cases in the U.S., a rise of 15% on the day. The U.S. death toll has now topped 4,000, with around one quarter of those coming in New York City.
Various reports suggest the White House is poised to announce the suspension of more U.S. import tariffs in the coming days to ease conditions for importers already struggling with a drop in demand from consumers.
2. Europe's factory output slumps, while China's rebounds
Europe’s factory activity fell to its lowest level in seven years in March, according to the latest purchasing manager indices released by consultancy IHS Markit. The Caixin PMI for China, meanwhile, rebounded back above the growth line.
The figures had been largely anticipated, but prompted another lurch downward in European stock markets in early trading, with the benchmark Stoxx 600 index losing 2.7% and the U.K. FTSE 100 losing 3.1%.
The FTSE in particular was hit by the latest round of capital conservation measures, as HSBC (LON:HSBA), Barclays (LON:BARC), Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) all suspended their dividends under pressure from regulators. The banks account for some 12% of U.K. companies’ dividend payments, many of which would normally be reinvested in normal times.
3. Stocks set to open lower; ADP's payrolls report eyed
U.S. stock markets are set to open the second quarter markedly lower, asset managers preferring to make more conservative bets for the next three months after the stock market’s worst quarter since the 2008 financial crisis.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 636 points or 2.9% at 21,115 points. The S&P 500 Futures contract was down 2.9% and the Nasdaq 100 futures contract was down 2.5%.
The market is bracing for the release of the ADP private payrolls report for March, which will shed more light on how far and how fast the labor market is deteriorating.
Restaurant chain owner CraftWorks is expected to fire 18,000 staff after its plans to restructure in bankruptcy proceedings collapsed, The Wall Street Journal reported.
Also in focus will be Xerox (NYSE:XRX) and HP (NYSE:HPQ), after the former ended its interest in merging with the printer-maker late on Tuesday.
4. Carnival tries to stay afloat
Cruise line operator Carnival (NYSE:CCL) will try to complete an ambitious $6 billion capital raising in an effort to get through an unprecedented collapse in demand due to the outbreak.
Panama-listed and unlikely to receive support from any government package, Carnival’s plans are a test of private markets’ willingness to back business through a sudden stop, and trust in a future that has near-zero visibility.
The company is trying to place $1.25 billion in new stock (the price of which has fallen over 70% so far this year) as well as $1.75 billion in convertible notes and $3 billion in senior notes which will be supported by liens on the group’s ships.
Even with such backing, the company is reportedly marketing the senior notes with a coupon of 12.5%.
5. Crude tests $20 again amid further capex cuts
U.S. crude oil prices bounced off the $20 a barrel support level but remain under pressure, after a call between President Donald Trump and his Russian counterpart Vladimir Putin failed to generate any concrete measures on addressing the glut on world markets.
The American Petroleum Institute’s weekly report on U.S. oil supplies on Tuesday showed crude inventories rising by over 10 million barrels last week, illustrating the difficulties caused by the collapse in demand for fuel. The U.S. government’s inventory data are due at 10:30 AM ET (1430 GMT).
Elsewhere, BP (LON:BP) said it would cut capital spending by 20%, in line with cuts announced by most other majors. It's cutting capex at its U.S. shale operations by half.
1. Phase 4 is on the way as virus and lockdowns spread in U.S.
The White House and Congress are already working on a ‘phase 4’ economic support package, less than a week after President Donald Trump signed the $2.2 trillion ‘phase 3’ deal into place, according to Bloomberg.
The news agency reported that White House officials have compiled lists of requests from government agencies totaling roughly $600 billion. House Speaker Nancy Pelosi told reporters that more support for local government could be necessary, along with further direct payments to households.
The U.S. is rapidly taking over from Europe as the global epicenter of the Covid-19 pandemic, with 164,610 confirmed cases and a death toll of 3,170 that is still rising quickly. New York City alone has 67,000 cases and has registered 1,342 deaths, according to Johns Hopkins.
Maryland, Virginia and Washington D.C. all enacted tighter restrictions on non-essential movement and business on Monday.
2. WHO sees Europe hitting peak Covid-19 soon; data calm before the storm
The World Health Organization said the Covid-19 outbreak may peak soon in Europe, but fatalities continued to rise in Spain, France and Italy. In Italy, at least, the figures show a clear slowdown in growth.
The virus already appeared to be showing in the region’s hard economic data, with eurozone inflation falling to 0.7% on the year in March, from 1.2% in February, chiefly due to lower oil prices.
However, the labor market apocalypse will have to wait another few weeks, as Germany’s jobless number rose by only 1,000. ING analyst Carsten Brzeski noted that the cut-off point for the data was before the nationwide lockdown began 9 days ago.
3. China PMI rebounds strongly
The Chinese economy showed signs of stabilization after its record contraction in the first two months of the year. The official Purchasing Managers Index rose to 52 in March, back above the line that indicates economic growth, from 35.7 in February.
The news tallies with reports of individual countries reopening factories as lockdowns across the country are eased. However, most of those companies reporting have simultaneously said that their facilities are working well below capacity due to ongoing operational constraints.
The yuan was left little changed against the dollar.
4. Stocks set to open higher, dollar strengthens again
U.S. stock markets are poised to open higher, as market price in reports of further U.S. stimulus and a faint light at the end of the virus tunnel for Europe. End-of-quarter portfolio rebalancing also appears to be playing a role.
By 6:35 AM ET (1035 GMT), the Dow Jones 30 futures contract was up 27 points, or 0.1%, at 22,193. The S&P 500 futures contract was up 0.1% and the Nasdaq 100 contract was up 0.4%.
European markets were also broadly higher, with the benchmark Stoxx 600 rising 0.7% to 316.94.
China and most other Asian markets, with the exception of Japan, had also closed higher in a broad risk-on move.
The dollar, however, was on the march again, rising 0.5% as Japanese banks in particular chased greenbacks for their year-end accounting.
5. Democracy, currencies in trouble in Central Europe
The euro hit a new all-time high against the Hungarian forint, after Hungary’s parliament voted through a radical new law that effectively suspends constitutional law and raises grave doubts about its long-term place in the European Union.
The law extends a state of emergency declared by Prime Minister Viktor Orban earlier this month I the context of the Covid-19 pandemic. It allows him to rule by decree for an unlimited period. It also makes the spreading of ‘fake news’ punishable by up to five years in prison.
By 6:35 AM ET, the euro was at 359.115 forint, down fractionally from an earlier high of 360.41.
The euro has now risen some 7% against the forint in the last month, and by 5.5% against the Polish zloty, which is also under pressure from concerns about a drift to authoritarian rule. Poland's nationalist right-wing government is currently pressing ahead with plans for an election on May 10, despite the obvious public health risks.
1. Trump to keep U.S. distancing in place longer; sees higher death toll
President Donald Trump pushed back his timeline for reopening the U.S. economy, citing the risks of letting the Covid-19 outbreak spiral further out of control.
In a press conference on Sunday, Trump extended the federal guidelines on social distancing measures to the end of April.
He also sharply increased his estimates of the pandemic’s impact even in a best-case scenario, saying that keeping the U.S. death toll to between 100,000 and 200,000 would mean that “we, altogether, have done a very good job.”
That would imply that the U.S. still has the worst of the pandemic ahead of it: Johns Hopkins data put the total number of U.S. deaths from Covid-19 only at 2,500 so far, with over 143,000 confirmed cases.
2. Oil prices hit 17-year low on outlook for U.S. demand
Oil prices tumbled to a 17-year low after President Trump pushed back the timeline for reopening the U.S. economy, creating an even more pressing problem of near-term oversupply.
Goldman Sachs (NYSE:GS) analysts estimate that global oil demand last week was some 26 million barrels a day below pre-pandemic levels.
By 6:15 AM ET (1015 GMT), U.S. crude futures were down 4.6% at $20.52, having earlier dipped as low as $19.92 a barrel. Brent crude futures were down 4.8% at $26.62, bouncing from an intra-day low of $25.16.
3. U.S. stocks sete to open mixed
U.S. stocks are set to open mixed in the wake of Trump’s comments. By 6:15 AM ET (1015 GMT), the Dow Jones 30 futures contract was down 71 points, or 0.2%, at 21,398. The S&P 500 futures contract was flat and the Nasdaq 100 futures contract was up 0.1%.
The dollar, meanwhile, was finding a floor after its precipitous decline in the last week. The dollar index rose 0.4% against a basket of developed market currencies, rising against the pound after Fitch downgraded the U.K.’s credit rating at the weekend.
The dollar was also strong against most emerging market currencies, and hit a new all-time high against the South African rand on Sunday, before consolidating gains on Monday. It also hit its highest in nearly two months against the Egyptian pound, amid reports that banks had been instructed to limit withdrawals and deposits.
4. China rejoins the monetary easing party
China’s central bank rejoined the ranks of global central banks easing monetary policy, after a hiatus. The People Bank of China cut its seven-day reverse repo rate, a key reference point for its other benchmark rates by 20 basis points to its lowest-ever rate 2.2%.
The official yuan rate stayed broadly stable within its recent range around 7.09-7.10 the dollar, while the offshore yuan rate weakened to 7.1050.
Elsewhere, China’s largest banks warned that their asset quality could suffer later in the year due to the post-pandemic recession, despite posting better-than-expected results for the latest quarter. Anecdotal reports out of China indicate that the actual mortality rate in Wuhan was far higher than official data admitted.
5. Banks cut dividend payouts, EasyJet grinds to a halt
European banks started to suspend their dividend payments and buybacks under pressure from their supervisor, the European Central Bank.
Unicredit (MI:CRDI), which had earlier this year outlined plans for its first buyback in a decade, and Dutch giant ING (AS:INGA) were among the biggest to suspend payouts, as did Bank of Ireland (IR:BIRG). ABN AMRO (AS:ABNd), which warned of a $200 million clearing loss on a single client last week, also suspended payouts and warned of a heavy quarterly loss.
Cash conservation measures stepped up in the travel sector too. EasyJet (LON:EZJ) grounded its entire fleet, putting its workforce on a state scheme that will pay 80% of their wages up to a certain threshold.
1. U.S. labor market impact
Due to the timing of the survey period for the U.S. nonfarm payrolls report for March it likely preceded the worst of the impact on the labor market. Economists still expect Friday's figures to show a loss of 100,000 jobs.
A significant overshoot of that and the unprecedented $2 trillion stimulus package approved by Congress could suddenly start to look inadequate. The government's package includes a $500 billion fund to help hard-hit industries and a comparable amount to fund direct payments of up to $3,000 apiece to U.S. families.
Ahead of that, Thursday’s jobless claims report is expected to show another massive wave of new claims for unemployment benefits in the week to March 28, after they surged to a record 3.28 million in the preceding week.
2. Trump walks back remarks about faster reopening
Investors will be closely following developments in the White House after President Trump appeared to back off from remarks he made last week about getting the economy going again by Easter Sunday.
Trump said Saturday he was unsure about whether the United States will reopen for business by April 12th following shutdowns in major cities across the country.
Some investors believe an earlier return to work would boost the U.S. economy, but health experts say a haphazard patchwork of restrictions across states could make the coronavirus impact worse. Cases in the U.S. soared past 115,000 on Saturday, the highest number in the world.
Trump, who is concerned about the economic repercussions of an extended shutdown of nonessential business has accused his Democratic critics of wanting to keep the economy in paralysis to improve their chances of ousting him in the Nov. 3 election.
3. Chinese PMI data
Already Chinese factories' Jan-Feb profits have hit their lowest in a decade and Tuesday’s PMI survey data for March will very likely reveal more pain. And just like everywhere else, job losses are mounting up, regardless of how many cheap loans are being offered to businesses.
While China seems to have contained the coronavirus, allowing work and travel to resume the major economic damage may still be to come. With infections climbing exponentially in the U.S., Europe and the other markets China exports to, and with supply chains in disarray, China being hit by a supply-demand shock.
4. Eurozone data
There is a lot of economic data coming out of the Eurozone this week and Monday’s March economic sentiment data will offer insights into how businesses and consumers assess the situation, even though is predated new restrictive measures put in place since the survey was conducted.
The slump in oil prices means that March’s inflation will have tumbled, while reports on retail sales and unemployment are for February, so will still not show the full magnitude of the economic fallout from measures put in place to try to contain the coronavirus pandemic.
5. Q1 wraps up
Few will regret the end of the first quarter of the year. Fears of a U.S.-Iran war gave way to the coronavirus pandemic which JPMorgan analysts have estimated will have pushed the world economy into a 12% contraction in the three months to March. The quarter saw the most brutal global equity collapse since the Great Depression, exacerbated by a 60% oil price slump.
The start of Q2 may not bring much relief, with coronavirus still spreading rapidly and keeping large parts of the global economy shuttered. Banks have rushed to slash Q2 forecasts too, so expect more turbulence on financial markets.
But markets have rebounded and may actually end Q1 on a high after governments pledged a $5 trillion stimulus effort and major central banks slashed rates and restarted asset purchases. Investors will be watching to see if infection rates are peaking, but there is still no certainty about when the coronavirus will be got under control.
--Reuters contributed to this report
1. U.S. overtakes China in Covid-19 cases
The U.S. has now overtaken China in the total number of confirmed cases, with nearly 86,000, despite having only one quarter of the population. The U.S. death toll approached 1,200, still well behind the likes of China and Italy.
In a press conference on Thursday, President Donald Trump said the figures were a credit to U.S. testing and repeated his priority of restoring activity as quickly as possible, saying that “people want to get back to work.”
Separately, the Washington Post reported that the G7 had been unable to agree on a joint communique due to the U.S.'s insistence of calling the Covid-19 virus the "Wuhan virus".
2. Senate support package due for House vote
The House of Representatives is expected to vote on the $2.2 trillion package passed earlier this week by the Senate, despite rumblings of resistance from individual lawmakers.
Republican Rep. Thomas Massie of Kentucky told a local radio station on Thursday he would oppose allowing the bill to pass by voice vote, effectively forcing a physical vote in Washington for which it would be difficult to gather a quorum.
However, the effect of the bill and of measures taken by the Federal Reserve continues to course through global funding markets, driving the dollar index below 100 and putting it on course for its biggest weekly drop since 2009.
3. Stocks set to open lower as profit-taking kicks in
U.S. stocks are set to open lower on Friday after a breathless rally over the last three days that meets the technical definition of a new bull market.
By 7:10 AM ET (1110 GMT), the Dow Jones 30 futures contract was down 470 points or 2.1%, while the S&P 500 contract was down 2.1% and the Nasdaq 100 futures contract was down 1.8%.
The Chinese CSI 300 had earlier fallen 0.5%, not helped by a 38% drop in industrial profits over the first two months of the year, while Europe’s Stoxx 600 fell 2.7%.
4. Europe struggles, medically and financially
Europe continues to struggle with the Coronavirus, both medically and financially.
Spain reported its deadliest day of the outbreak so far with 769 deaths on Thursday, while Italy also broke a three-day sequence in which new infections and deaths had slowed. The deterioration in Italy’s figures appear due to the virus spreading further beyond the region of Lombardy in the north.
A teleconference among EU leaders on Thursday, meanwhile, produced no further progress on coordinating the bloc’s response to the outbreak, due to a dispute over proposals to issue joint debt, led by France, Spain and Italy.
Elsewhere in Europe, the U.K. government effectively suspended the housing market due to public health concerns, a measure that rippled through the shares of realtors, banks and builders on Friday.
5. Russia keeps pressure on oil; U.S. Senators up in arms
Crude oil prices turned lower as the rally in other risk assets ran out of steam, leaving participants to focus on a mind-blowing level of oversupply in the near term. By 7:10, U.S. crude futures were down 0.1% at $22.55, while Brent was down 1.2% at $26.02
Additionally, Russia’s deputy energy minister was quoted by newswires as saying that Russia thought a fair price for oil is between $45 and $55 a barrel. That’s somewhat below the level that many western oil companies have used for their baselines in recent years, and also below what many shale producers would need to breakeven, at least in the current environment of sky-high borrowing costs.
A group of Republican Senators, chiefly representing oil and gas producing states, urged the administration to take action against Russia and Saudi Arabia for conducting “economic warfare” against the U.S.
1. Stimulus bill passes in the Senate, moves to House
The ‘phase 3’ package of support measures for the U.S. economy moves to the House of Representatives, after the Senate finally approved the $2 trillion bill by a reassuring 96-0 vote.
The bipartisan support reduces the risk of major holdups in the House, whose Speaker Nancy Pelosi had repeatedly attacked its generosity on government support for large corporations.
A vote in the House is due on Friday, after which it is likely to be signed into law immediately by President Donald Trump.
2. Jobless claims to show extent of economic damage from pandemic
The scale of the impact of the Covid-19 pandemic on the U.S. economy will become clearer as the U.S. releases initial jobless claims for last week at 8:30 AM ET (1230 GMT).
A record surge is expected, reflecting the laying off of workers as states and cities across the country prepared to go into lockdown.
Expectations for the number are widely spread, ranging from 2 million to over 4 million, compared to last week’s 281,000.
California Governor Gavin Newsom said that in his state alone, over 1 million people had filed new claims last week. California is ahead of the infection curve in the rest of the U.S., so increases in other states may not be as severe.
3. Stocks set to open lower after two straight Up Days
U.S. stocks are set to open lower after posting their first back-to-back gains in six weeks as the Senate’s stimulus bill finally passed.
By 6:50 AM ET (1050 GMT), the Dow Jones 30 futures contract was down 98 points or 0.5%, while the S&P 500 Futures contract was down 0.9% and the Nasdaq 100 contract was down 0.8%.
Stocks had also retreated overnight in Asia, where the Nikkei fell by 4.5% and the Chinese CSI 300 by 0.4%. Europe also gave up some recent gains, the benchmark Stoxx 600 losing 1.2%.
Despite that, funding stresses in many markets seemed to ease further, the dollar index falling 0.7% to its lowest in over a week.
4. Fallen Angels
Ford Motor's (NYSE:F) credit rating was downgraded to junk by Standard & Poor’s, in what was arguably the highest-profile illustration yet of a trend that is fast getting real in corporate debt.
Occidental Petroleum (NYSE:OXY) was also cut to junk after a two-notch downgrade to BB+ from BBB.
The distinction between investment grade and junk has become more important in the last week, as only the former qualifies for the Fed’s new backstop measures for the corporate debt market. That makes high-yield issuers, including the likes of United Airlines which was downgraded further into junk territory on Wednesday, particularly dependent on the bailout provisions of the phase 3 U.S. stimulus bill.
5. Argument over Euro bonds set for another round
European Union leaders are set to press Germany and others to agree to the issuance of common bonds to finance the explosion in government spending and deficits caused by the Covid-19 outbreak.
Nine leaders, including French President Emmanuel Macron and the prime ministers of Spain and Italy, published a direct appeal to EU Council President Charles Michel on Wednesday for “corona bonds”, a day after the Netherlands, Germany and Austria had refused to discuss it at a meeting of eurozone finance ministers.
The argument threatens to put in the spotlight longer-term issues of debt sustainability among the euro zone’s periphery, reviving concerns over the currency union’s long-term viability.
G20 leaders are also due to hold a conference call to discuss reactions to the pandemic.
1. Senate agrees stimulus deal; Trump agitates to end lockdowns by Easter
The U.S. Senate finally agreed on the terms of a $2 trillion package of measures to support the economy through the Covid-19 crisis.
Majority Leader Mitch McConnell said the Senate will move to vote on the bill later Wednesday, although there still remains some doubt as to how quickly it can pass in the Democrat-controlled House of Representatives.
The final terms are still not known, but various officials have indicated they include direct payments to U.S. families and a big increase in unemployment insurance, as well as some $500 billion in support for larger companies and $150 billion for the health care system.
President Donald Trump said late on Tuesday he wanted to reopen the economy by Easter, on April 12 this year, minimizing the nationwide down time.
2. Markets pause for breath after epic (bear-market) rally
Global stock markets struggled to extend a two-day rally on news of progress on Capitol Hill.
By 6:45 AM ET (1045 GMT), the major U.S. indices were all running out of steam, after the Dow posted its biggest one-day gain since 1933 on Tuesday in anticipation of the agreement.
The Dow Jones 30 futures contract was up less than 0.1%, while S&P 500 futures were down 0.6% and the Nasdaq 100 contract was down 0.4%.
3. Dollar squeeze eases further
The global squeeze for dollar eased further, as the emergency liquidity lines set up by the Federal Reserve both at home and abroad addressed an acute shortage of ready cash.
The dollar index, which tracks the greenback against a basket of developed market currencies, fell 0.90% to 101.34, over 2.5% down from Monday’s high but still up more than 2% on the week.
Demand for seven-day dollars at the European Central Bank’s daily swap operation was down by over half from last week. The dollar also retreated against emerging currencies such as the South African rand, Mexican peso and Russian ruble, but rose another 0.4% against the Chinese yuan.
4. Euro zone inches toward activating ESM, as Ifo index falls further
The euro zone inched closer to deploying its regional bailout fund, the European Stability Mechanism.
A meeting of eurozone finance ministers indicated that member states could count on borrowing up to 2% of GDP through an ‘enhanced conditions credit line’, for which the usual tight conditions on fiscal and structural reforms would likely be waived or at least substantially relaxed.
However, there was no discernible progress toward the issuance of joint debt, as has been urged in the last week by the Prime Ministers of Spain and Italy, the two eurozone countries hit worst by the Covid-19 virus.
Elsewhere Wednesday, the scale of the coming European recession was underlined as German research institute Ifo revised down its closely-watched business climate index for March to 86.1, its lowest since August 2009.
5. Oil reverses as price war drags on
The bounce in crude oil prices topped out, as little of substance materialized to back up hopes of an early end to the global price war.
By 6:45 AM ET, U.S. crude futures were down 2.0% at $23.52 a barrel, while Brent was down 3.2% at $26.27 a barrel.
Norwegian major Equinor (NYSE:EQNR) joined Chevron (NYSE:CVX) and others in announcing a 20% cut in this year’s capital spending that now appears to be the industry-standard response.
Government data for oil inventories are due at 10:30. The figure for gasoline is likely to be as closely watched as that for crude stocks, given the record lows that gasoline futures have posted recently, and warnings of reduced U.S. refinery runs.
1, Congressional Stimulus Package in Focus Again
While another rescue plan from the Federal Reserve to ensure liquidity in the financial markets was initially greeted by equity buying, that enthusiasm faded as the Senate was unable to agree on a stimulus package.
Republicans and Democrats remain at loggerheads about the details of a package of about $2 trillion to help businesses and individuals.
A procedural vote failed again, so the major indexes could be tethered to any headlines out of Capitol Hill tomorrow.
Senate Majority Leader Mitch McConnell said that further delay could mean a package would be delayed until Friday, according to published reports.
2. March PMIs Arrive
Manufacturing and services activity in Europe and the U.S. highlight the economic calendar for tomorrow.
The eurozone numbers arrive at 9 AM GMT.
The March Markit manufacturing purchasing managers’ index (PMI) is expected to come in at 39, according to economists’ forecasts compiled by Investing.com. The services PMI is also expected to have dropped to 39, while the composite PMI is seen 38.8.
The U.S. numbers are due to be released at 9:45 AM ET (13:45 GMT).
March’s manufacturing PMI is expected to have fallen to 42.8, with the services PMI forecast to come in at 42.
At 10:00 AM ET, February new home sales numbers arrive.Sales of new homes are expected to have dropped 2% in February to an annual rate of 750,000.
3. Nike to Report With Stores Shut
Nike (NYSE:NKE) is still scheduled to report earnings after the market closes tomorrow and could give investors a snapshot of how things are faring in retail and apparel.
The company is expected to report a profit of 61 cents per share, down from 68 cents per share in the year-ago quarter, according to analysts’ forecasts compiled by Investing.com. But sales are seen rising to about $9.9 billion from $9.61 billion.
On March 15, Nike made the decision to close its stores in multiple countries, including the U.S., Canada, Western Europe, Australia and New Zealand.
But it is still selling goods on its website and its apps, which could provide insight into how online retail is holding up for more discretionary goods.
1. House Democrats stall McConnell's $1 trillion package
The Senate’s ‘phase 3’ package of economic support measures for the U.S. economy stalled after running into resistance from House Democrats. A procedural vote on the package, originally scheduled for Sunday evening, has accordingly been rescheduled to midday eastern time, according to various reports.
The bill has a sticker value of well over $1 trillion, including a reported $50 billion earmarked for the stricken airline industry.
On Sunday, St. Louis Fed President James Bullard told Bloomberg he thought U.S. economic activity could halve in the second quarter as activity shuts down.
President Donald Trump again expressed impatience with the effect of public health measures on the economy, tweeting that “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF” and promising a review of the administration’s current advice within a couple of weeks.
2. Euro zone to meet amid calls for it to take giant leap with 'Corona bonds'
EU finance ministers are set to hold another teleconference on Monday ahead of a Eurogroup meeting on Tuesday, amid growing calls for the currency union to issue joint debt instruments to share the burden of supporting the economy through the Covid-19 crisis.
Portugual's central bank Governor Carlos Costa on Monday followed Italian Prime Minister Giuseppe Conte in calling for the bloc to issue jointly-guaranteed debt, a proposal that was repeatedly resisted by the likes of Germany and the Netherlands during the last euro crisis.
Germany itself is set to end a decade of austerity this week with a new emergency budget that envisages a deficit of around 156 billion euros and total support measures for the economy of over 1 trillion ($1.07 trillion)
The Ifo research institute estimated a hit to the German economy of some 730 billion euros from the pandemic.
3. Signs of a slowdown in new Covid-19 cases in Europe; U.S. picture unclear
The rate of growth in new Covid-19 infections across Europe appeared to slow, albeit the overall numbers of both infections and deaths continue to rise alarmingly.
At the weekend, Europe’s largest economy, Germany, imposed a two-week ban on all non-essential meetings of more than two people, while Chancellor Angela Merkel went into self-isolation after having contact with a doctor who subsequently tested positive for the Covid-19 virus.
Elsewhere, Spain extended its emergency lockdown regime by another two weeks to early April while the U.K. reportedly pondered stricter measures to enforce its hitherto relaxed steps to encourage social distancing.
Analysts at Pantheon Macroeconomics said the rate of new infections also appears at first sight to be slowing in the U.S., but warned that the incompleteness of testing data made it impossible to say for sure. Chief economist Ian Shepherdson noted that New York City data are probably more reliable than national data. "The number of cases per million is now much higher than in Italy, and, at 941 yesterday, it will soon shoot above Hubei's 1,185," he wrote in a note to clients.
4. Stocks set to open lower amid ongoing signs of liquidity squeeze
U.S. stocks are set to open lower on disappointment at Congress’s failure to pass the latest economic support bill, amid ongoing signs of liquidity stresses in various asset classes.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 504 points, or 2.7%, while the S&P 500 Futures contract was down 2.7% and the Nasdaq 100 futures contract was down 2.3%.
Overnight, risk assets had trended down in both Europe and Asia, but declines were mostly orderly.
However, signs of dysfunction in markets continue to pop up, with the Financial Times reporting that Goldman Sachs (NYSE:GS) had to intervene to support liquidity in two of its money market funds, while reports also circulated of various Scandinavian funds suspending redemptions.
The reports suggest that central bank efforts over the last two weeks to keep markets functional haven’t been entirely successful.
5. Big Oil cuts back
Royal Dutch Shell (LON:RDSa) and Total (PA:TOTF) both suspended their stock buyback programs and announced big cuts to capital expenditure to conserve cash.
However, both companies left their dividends intact for the time being.
In the U.S., meanwhile, The Wall Street Journal reported that Occidental Petroleum (NYSE:OXY) is set to appoint two representatives of activist investor Carl Icahn to its board, ending a bitter struggle over the company’s direction as it struggles with a heavy debt load after last year’s acquisition of Anadarko.
Crude oil futures resumed their declines, WTI falling 0.5% to $22.50 a barrel and Brent falling 4.1% to $25.87.
1. Data to show early economic hit from virus
Few doubt that the global economy will tip into recession as countries around the globe go into lockdown amid ongoing virus containment efforts. It goes without saying that large drops are likely in PMI data coming out this week in the U.S., Eurozone and the U.K.
The PMI surveys are typically conducted in the second half of a month and the data in the "flash" survey is usually collected in the week or so before the data is released, so economists reckon next week's PMIs will provide the most comprehensive overview so far of the coronavirus impact.
Meanwhile, Thursday’s figures on initial jobless claims will be the first to show the full extent of the impact on the U.S. labor market. Economists at Goldman Sachs have estimated claims are set to jump to a record 2.25 million, according to an analysis of preliminary reports across 30 states.
2. U.S. government response awaited
Republicans and Democrats in the U.S. Senate on Saturday continued with efforts to reach a deal on a $1 trillion-plus bill aimed at mitigating the coronavirus pandemic’s economic fallout for workers and businesses.
White House economic adviser Larry Kudlow said he expects the final legislative package to be worth $1.3 trillion to $1.4 trillion.
Taken together with steps already taken by the U.S. Federal Reserve and the administration, the prospective bill would have a $2 trillion net impact on a U.S. economy, according to White House officials.
3. Liquidity squeeze to ease?
A liquidity squeeze prompted the Federal Reserve on Friday to enhance the dollar liquidity swap line arrangements it has with the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank.
To see if that does the trick, watch for dollar exchange rates to stabilize.
Demand for the world’s reserve currency had jumped amid a rush for cash in anticipation of a prolonged pandemic, with there being a substantial liquidity mismatch between global demand for U.S. dollars and those on offer.
4. U.S stock valuation picture may become clearer
As the U.S. stock market has tumbled, valuations have also come down sharply.
The S&P 500's price-to-earnings ratio, based on earnings estimates for the next year, has dropped from over 19 times in late February to 14.2 times as of last Wednesday, according to Refinitiv data, taking the valuation below its historical average.
But the picture is complicated by the fact that earnings estimates may have not come down enough to account for the coronavirus fallout.
The picture may become clearer in the coming weeks, as the first quarter comes to an end and companies start preparing their results. Last week, FedEx (NYSE:FDX) and Marriott (NASDAQ:MAR) withdrew their 2020 financial forecasts because of the outbreak.
Nike (NYSE:NKE), Micron Technology (NASDAQ:MU), and KB Home (NYSE:KBH) are among the U.S. companies due to report results this week.
5. Emerging markets
Emerging market assets have been hammered, with currencies plunging to fresh record lows, bonds plunging and stocks down nearly 10% last week. Several factors have contributed - the strong dollar, a darkening economic outlook, tumbling oil prices as well as rising borrowing costs.
Investors piling into the greenback have seen enduring stresses in dollar funding markets, with hurried swap lines between central banks earlier in the week doing little to alleviate the credit strains at the heart of the problem.
Central banks in the United States, the euro zone, Canada, Britain, Japan and Switzerland stepped in again on Friday, agreeing to increase the frequency of their one-week U.S. dollar credit facility.
In emerging markets, policymakers that lack the firepower to support currencies or face challenges to cut rates, will be keeping their fingers crossed that steps taken by major central banks will be enough to end the crisis.
--Reuters contributed to this report
1. California in lockdown as virus spreads; Germany may follow on Sunday
California ordered its population of 40 million to stay home to stop the spread of the coronavirus, the latest hammer blow to the global economy from a virus that is still spreading fast outside of China.
In Germany, expectations of a full lockdown are also rising as Chancellor Angela Merkel scheduled a call with state governors for Sunday to assess the effectiveness of the less draconian measures that have so far been taken.
Worldwide, the death toll from the virus has now topped 10,000, while the number of confirmed cases has hit 245,000, according to data compiled by Johns Hopkins University. The U.S. tally of confirmed cases has risen to 14,250. California Governor Gavin Newsom estimated that over half of the state’s population – some 25 million people - will be infected over an eight-week period.
2. Republicans stimulus bill: helicopter money and part-nationalization
Senate Republicans introduced a stimulus package worth over $1 trillion to buttress Congress’s more modest first two attempts to support the economy through the coronavirus outbreak.
The plan makes so-called ‘helicopter money’ a reality, calling for adults to receive up to $1,200 per month, with an extra $500 for every child. Payments will scaled down for higher earners.
The bill also includes $50 billion in loan guarantees for passenger air carriers, $8 billion for cargo air carriers and $150 billion for other large businesses, and authorizes the federal government to take equity stakes.
3. Dollar retreats as squeeze eases
The extreme dollar rally went into reverse, as a massive expansion of central bank liquidity finally started to bring the supply of dollars back into line with demand.
The Federal Reserve’s action to backstop the commercial paper and money market funds this week has underpinned domestic U.S. markets, while the announcement of nine more dollar swap facilities with foreign banks will allow dollars to reach more corners of global markets more quickly, reducing near-term default risks.
Other central bank actions, such as the dramatic expansion of quantitative easing programs at the European Central Bank and Bank of England in the last 36 hours, have also supported European markets.
By 6:55 AM ET (1055 GMT), the dollar index that tracks the greenback against a basket of developed market currencies was down 1.0% at 102.54. It’s still up 3.9% on the week, however.
4. Stocks rally ahead of futures and options expiry
The easing of stress in funding markets has allowed global stock markets to bounce sharply. U.S. stock markets are set to open higher, with the Dow Jones 30 futures indicating a gain of 719 points or 3.6%. The S&P 500 futures contract is up 3.2% and the Nasdaq 100 futures contract up 4.4%.
In Europe, the Stoxx 600 benchmark rebounded sharply to be up 3.6%, while in Asia, the Chinese CSI 300 closed up 1.3%.
Market movements are being amplified by the fact that most of the March contracts in the world’s major futures and options products expire Friday – the routing ‘quadruple witching’ effect.
5. Oil rockets on report of U.S. output regulation
Crude oil futures leaped on the back of a report by The Wall Street Journal alleging that the U.S. is imposing production quotas on domestic companies. By 6:55 AM ET, U.S. crude was up 5.1% at $27.22, while Brent was up 4.5% at $29.46 a barrel.
The U.S. has a history of regulating production through the Texas Railroad Commission back to before World War 2, but abandoned the practice nearly 50 years ago.
The WSJ reported that the U.S. may lean on Saudi Arabia and Russia to rein in their output, with the threat of sanctions directed at the latter in particular.
Bloomberg reported that President Vladimir Putin sees the price war initiated by Saudi Arabia as ‘blackmail’ and is refusing to give in. Russia’s budget is designed to balance at a price of $40 a barrel, while Saudi Arabia and most OPEC producers need a much higher price to meet their budget needs.
1. Senate approves $500 billion stimulus; Fed to backstop money-market funds
The U.S. Senate passed without amendment the House of Representatives’ $500 billion bill of emergency measures to support the U.S. economy, the latest in a growing list of global actions to backstop an economy headed for recession due to the coronavirus pandemic.
The bill, dismissed by the administration and Senate Republicans last week as a ‘liberal wish list’ includes provisions for paid sick leave and free testing for the virus.
Attention is now turning to the administration’s next step, which reports suggest will include a $50 billion support package for the airlines industry and a further $500 billion in direct payments to households to make good expected income shortfalls.
Additionally, the Federal Reserve announced a new lending facility aimed at easing stresses in the money-market fund sector, which has been rocked by a surge in redemptions.
2. ECB bazooka stems growing euro zone break up risk
The European Central Bank announced its biggest ever anti-crisis package, aiming to nip in the bud growing doubts about its willingness to backstop the currency union’s weaker member states.
The ECB said it would buy up to another 750 billion euros ($820 billion) in government and private-sector bonds and lift its previous self-imposed limits that stopped it concentrating its firepower on countries facing the biggest stress.
Greek and Italian bond spreads, which had surged since President Christine Lagarde’s communications gaffe at last week’s press conference, narrowed sharply, but the boost to market confidence was less evident in stocks, with only Italy and Spain among the bigger markets posting gains.
The Australian and Swiss central banks also announced further easing measures.
3. Stocks set to open lower; dollar drives higher
U.S. stocks are set to open lower again on Thursday as the widening shutdown of the U.S. and European economies focuses minds on the depths of the coming recession.
By 6:50 AM ET (1050 GMT), the Dow Jones 30 futures contract was down 343 points, or 1.7%, while the S&P 500 futures contract was down 1.7% and the Nasdaq 100 contract was down 0.8%.
European stocks were mixed, while Chinese and other Asian markets had ended lower overnight.
The global dollar squeeze continued, driving the dollar index to its highest since January 2017, rising 1% against the Swiss franc after the Swiss National Bank signalled it would step up interventions in the currency market to stop the franc appreciating. The dollar also posted extraordinary gains against emerging currencies from Indonesia to Mexico. The dollar also hit a five-month high against the Chinese yuan of 7.1496. The Norwegian krone suffered its worst daily drop in half a century, amid collapsing oil prices.
4. Jobless claims to grab attention
While most economic indicators are passing by unnoticed, markets will be paying attention to the release of U.S. initial jobless claims at 8:30 AM ET (1230 GMT).
Given their timeliness, the numbers will be the first hard data to show the actual impact of slowing activity on the job market.
Elsewhere, German business confidence, as measured by the Ifo index, registered its sharpest monthly decline ever in an early unscheduled release.
5. Liquidity hit by stressed marketplaces
Concerns about liquidity in global markets continue to grow as exchanges restrict operations and bank traders disperse from their cavernous trading rooms to work from home.
The New York Stock Exhchange has decided to close its trading floor after two employees tested positive, albeit electronic trading, which accounts for the vast bulk of turnover, will continue as normal.
In London, ever-tighter lockdown measures are expected to hit liquidity in European markets, and the global foreign exchange market.
Short-selling bans in various markets such as France, Italy and Span remain in place, further crimping liquidity in European stocks.
1. Markets resume sell-off
Global stock markets resumed their descent, afraid that government measures to support the economy still won’t be enough to avoid a sharp recession.
By 6:45 AM ET (1045 GMT), U.S. stock futures had given up most of the gains made by underlying cash indices on Tuesday. Dow Jones 30 Futures were down 833 points or 4.0%, while the S&P 500 Futures contract was down 3.7% and the Nasdaq 100 futures contract down 4.5%.
In Europe, the benchmark Stoxx 600 was down 4.6%, while in Asia overnight, the Nikkei and Chinese CSI 300 had both fallen 1.7%, while Australia’s S&P/ASX 200 fell 6.4%.
Signs of dysfunction in financial markets continue unabated, as the European Central Bank allotted $75.8 billion through an 84-day swap operation with eurozone banks – more than it ever did during the 2008/9 crisis. It also lent another $36 billion through a one-week facility.
The benchmark 10-year Treasury yield rose 15 basis points to 1.14%, while gold futures fell 1.1% to $1,509.02 an ounce.
2. The dollar is the ultimate risk-aversion measure
The biggest single indicator of risk aversion, and of stress in global financial markets, remains the price of the dollar (hence the massive demand for dollars at the ECB’s swap operation).
The index that measures the dollar against developed-market peers has risen over 4% against developed-market currencies in the last nine days, and hit a fresh two-year high overnight, thanks to sharp gains against commodity currencies such as the loonie, Aussie and kiwi.
It’s making even sharper gains against emerging currencies, hitting a fresh all-time high against the Brazilian real on Tuesday, and rising 3% against the ruble to a new four-year high in early European trading on Wednesday. The dollar’s also up 4% against the Mexican peso overnight, and up over 1% against the Turkish lira at a two-year high.
3. France gets its bazooka ready after Merkel flags talks on euro-bonds
France is due to announce an emergency budget in what is likely to be the latest in a series of fiscal bazookas to be fired at the Covid-19 pandemic.
Late on Tuesday, German Chancellor Angela Merkel raised the hope that the crisis could lead to the euro zone issuing jointly-guaranteed bonds to finance the region’s response packages. That would be a major leap forward from the response to the sovereign debt crisis that began a decade ago.
However, eurozone sovereign spreads continued to widen on Wednesday, mindful that any such move would need the approval of parliaments that have become more sceptical, rather than less, toward such measures over the last few years. German 10-year bond yields rose to a two-month high of -0.27% on a combination of Merkel's comments and forced selling by portfolio investors to raise liquidity.
4. Biden nearly home and hosed
Former Vice President Joe Biden all-but wrapped up the Democratic Party’s presidential nomination with a clean sweep of primary victories in Florida, Arizona and Illinois.
The victories amped up the pressure on Vermont Sen. Bernie Sanders to drop out of the race. After the latest round of primaries, Biden has 1,147 delegates compared to Sanders 861. To be sure of victory, candidates need the support of 1,991 delegates at the national convention.
5. Tesla will have to shut its Fremont factory
Among many stocks likely to be pressured at the opening is Tesla.
Alameda County officials confirmed on Tuesday that the carmaker’s Fremont factory is not classified as an essential business and is therefore subject to the lockdown order issued by Bay Area authorities over the weekend.
The measures will bring Tesla’s most important production facility effectively to a halt. However, it’s far from alone in having that problem – German automaker BMW joined Volkswagen and Fiat Chrysler in suspending production at its European factories earlier Wednesday.
1. Airlines seek $50 billion bailout as Trump warns of recession
U.S. airlines have approached the federal government with a request for $50 billion in financial assistance, plus tax relief, as they struggle with a crisis that threatens to eclipse even the period after the 9/11 attacks.
Airlines for America, the industry association, said on its website it has asked for grants of up to $25 billion and loans of up to another $25 billion.
At a press conference on Monday, President Donald Trump had said: ““We’re going to back the airlines 100…We have to back the airlines. It’s not their fault.”
Bloomberg reported on Tuesday that, over the last 10 years, the U.S.'s biggest airlines spent 96% of free cash flow on stock buybacks.
In a significant change of tone, Trump had said at the press conference that the coronavirus could last through August, and that the U.S. economy may tip into recession as a result.
2. Philippines Shuts Financial Markets
The Philippines became the first country to shut its financial markets due to the Covid-19 crisis.
The Manila Stock Exchange has fallen by around one-third since the virus started to make headlines in mid-January, despite the government ordering state pension funds to increase their purchases of equities last week.
The Philippines only has a relatively modest 142 cases of Covid-19 confirmed, according to John Hopkins data. The move follows an order on Monday by President Rodrigo Duterte to impose emergency quarantine measures in Luzon, which accounts for some two-thirds of the country’s GDP.
More modest restrictions on financial markets have also been imposed in Europe on Tuesday. France, Spain and Italy all imposed short-selling bans on selected stocks and index products.
3. Risk aversion gains upper hand again
The overnight bounce in U.S. stock futures has fizzled, setting cash markets up for only a weak bounce when they open.
By 6:40 AM ET (1040 GMT), the Dow 30 futures contract was up 208 points, or 1.0%, while the S&P 500 futures contract was also up 1.0% and the Nasdaq 100 futures contract up 1.6%.
The S&P VIX index, which closed at its highest since 2008 on Monday, was down only fractionally at 80.66.
The dollar, which had plunged last week as the Federal Reserve wiped out the greenback’s interest rate premium, is now rebounding sharply as investors put an increasingly high premium on the world’s most liquid and trusted financial asset. By 6:40 AM ET, the dollar index, which tracks the greenback against a basket of developed-market currencies, was up 0.8% at 98.975.
4. Europe in Lockdown
President Emmanuel Macron instructed France’s population to self-isolate for 15 days to stop the spread of the coronavirus. It’s the most restrictive public health measure in Europe outside Italy.
Macron promised to set aside 300 billion euros in state support for the economy, around 13% of GDP, without providing too much detail about how it would be spent.
He also promised that no French business would be allowed to fail during the outbreak. For context, over 4,000 French enterprises failed each month on average in 2019.
Europe continues to report sharp increases in new infections, albeit the pace of increase in Italy, which has suffered the worst outbreak, appears to be slowing.
European heads of government are due to hold another teleconference at 12 PM ET (1600 GMT). The EU has already said it will effectively suspend its fiscal rules for the duration of the crisis.
5. Volkswagen, Airbus, Renault to suspend production
More of Europe’s biggest companies said they will suspend production at their factories, against a backdrop of increasingly severe quarantining measures across the continent.
Volkswagen said it will suspend production at most of its European plants from Saturday, initially for a period of two weeks.
In addition, Airbus (PA:AIR) said it would stop production at its plants in France and Spain. Automaker Renault (PA:RENA), having said it would halt production in France on Monday, now says it will also suspend production in Spain.