US initial jobless claims dropped -261k to 6,606k in the week ending April 4. Four-week moving average of initial claims rose 1,599k to 4,266k.
Continuing claims rose 4,396k to 7,455k in the week ending March 289, highest on record. Four-week moving average of continuing claims rose 1,439k to 3,500k.
Accounts of the ECB meetings in March (11-12, 18), noted “there was unanimous agreement that bold and decisive action was needed to counter the serious risks posed by the rapidly spreading coronavirus for the monetary policy transmission mechanism.”
“Reservations were expressed by some members about the necessity of launching a new, dedicated asset purchase programme.” However, “notwithstanding the hesitation, readiness was also expressed to go along with the carefully phrased communication, in the light of the scale of the market disruptions and challenges faced in the pursuit of the ECB’s mandate.”
EU finance ministers failed to agree on the coronavirus rescue package earlier this week after a 16-hour video conference meeting. The meeting is due to reconvene at 1500GMT today.
Ahead of that, German Economy Minister Peter Altmaier said, “it’s important that we take this decision today on the 500 billion euros that is in discussion — that’s an incredibly large sum of money that we could use to help a lot of people, especially in the hardest hit countries, Spain and Italy.”
“I have confidence that (German Finance Minister) Olaf Scholz, together with his colleague (French Finance Minister) Bruno Le Maire, can push this forward today and we are all working on that together,” he added.
ECB President Christine Lagarde told French daily Le Parisien that EU leaders should not “get fixated on coronabonds”. There could be other forms of solidarity between European countries in figure the coronavirus crisis. Members could have joint spending from a shared budget. Or there could be a reconstruction fund to finance investments after the crisis.
Lagarde also told Italy’s Il Sole 24 Ore that European governments have to support each other to country the coronavirus shocks. Fiscal and monetary policies nee to be aligned. And, “if not all countries are taken care of, the others will also suffer… solidarity is in the interest of all.”
UK GDP contracted -0.1% mom in February, below expectation of 0.1% mom. Index of services rose 0.0% mom. Index of production rose 0.1% mom. Manufacturing rose 0.5% mom. Construction dropped -1.7% mom. Agriculture dropped -0.1% mom.
For the three months to February, GDP grew just 0.1% 3mo3m. Index of services rose 0.2% 3mo3m, the only positive contribution to GDP growth, by 0.15%. Index of production dropped -0.6% 3mo3m, contributed to -0.08% GDP growth. Construction dropped -0.2% 3mo3m, contributed to -0.01% GDP growth.
Rob Kent-Smith, Head of GDP, Office for National Statistics: “Today’s figures show that in the three months to February, which was before the full effects of Coronavirus took hold, the economy continued to show little to no growth. Most elements of the services sector grew, though manufacturing continued to decline. Construction saw a notable fall in February, as wet weather and flooding hampered housebuilding. The underlying trade balance moved into surplus in the latest 3-months, the first seen since comparable records began over 20 years ago. This surplus was caused by a large fall in goods imported from EU countries.”
Also from the UK, industrial production came in at 0.1% mom, -2.8% yoy in February, versus expectation of 0.3% mom, -2.8% yoy. manufacturing production came in at 0.5% mom, -3.9% yoy, versus expectation of 0.3% mom, -3.9% yoy. Goods trade deficit widened sharply to GBP-11.5B, versus expectation of GBP -6.0B.
RBA said Australia’s financial system faces “increased risks” from the coronavirus pandemic, but it’s “well placed to manage them”. The systems enters the challenging period in a “strong starting position”. “Capital levels are high and the banks’ liquidity position has improved considerably over recent times,” it added. “The Australian banks also enter the downturn with high profitability and very good asset performance.”
While most businesses were in good financial health before the pandemic, “some pockets of vulnerability were evident in the retail trade, food and accommodation services, agricultural and construction sectors.” Increase in business failures and loan arrears are “likely over the coming months”. And, there is “considerable uncertainty” around the trajectory of the economic shock and subsequent recovery
BoJ Governor Haruhiko Kuroda said in the regional branch manager meeting that “the spread of the coronavirus is having a severe impact on Japan’s economy through declines in exports, output, demand from overseas tourists and private consumption.” And, “the economic outlook is extremely uncertain.”
“For the time being, we won’t hesitate to take additional monetary easing steps if needed, with a close eye on developments regarding the coronavirus outbreak,” he added.
FOMC minutes noted that “all participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain.” Hence, “almost all members agreed to lower the target range for the federal funds rate to 0 to 1/4 percent.”
“With regard to monetary policy beyond this meeting, these participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to ¼ percent until policymakers were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals”, the minutes added.
Separately, Dallas Fed President Robert Kaplan said because of the coronavirus pandemic shock, consumer behavior could be more cautious. “It’s not just the safety concerns… it’s also financial and potentially job insecurity which might cause them to save more and spend less.”
Chicago Fed President Charles Evans warned of a potentially fragile recovery at least until a vaccine is available. Continuing pandemic would risk a “deep and prolonged” downturn. Richmond Fed President Thomas Barkin said “businesses will have to find a way to convince consumers to shop, or eat out, to travel, or go to a concert or a game,” after reopening up.
US commercial crude oil inventories rose 15.2 million barrels in the week ending April 3, much higher than expectation of 9.8 million barrels. At 484.4 million barrels, inventories are about 2% above the five year average for this time of year.
WTI crude oil recovered to 30.65 last week but turned sideway since then. Traders are holding their bets await OPEC++ meeting on production cut. Technically, price actions from 20.40 are seen as a corrective move. Stronger rebound could be seen to 38.2% retracement of 65.38 to 20.40 at 37.58. We’d expect strong resistance from there to limit upside, at least on first attempt. However, sustained break of 4 hour 55 EMA (now at 26.8) will suggest that the corrective recovery is finished and bring retest of 20.40 low.
WTO said that world trade is expected fall by between -13% and -32% in 2020 as coronavirus pandemic disrupts normal economic activity and life. While the ere “wide range of possibilities”, the decline will “likely exceed” the trade slump on the 2008-09 global financial crisis.
Nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest. Under the optimistic scenario, the recovery will be strong enough to bring trade close to its pre-pandemic trend. The pessimistic scenario only envisages a partial recovery.
Ifo economist Timo Wollmershaeuser said in the report that the Germany economy “slumped drastically as a result of the corona pandemic” and GDP could shrink -4.2% in 2020. Unemployment rate will “skyrocket to 5.9%”. Fiscal stabilization measures will lead to a record” deficit of EUR 159B. Though, GDP could rebound next year with 5.8% growth.
Downside risks include:significantly slower weakening of the pandemic; Restarting economic activity works worse than in the base scenario or triggers another wave of infection, further measures to fight infection come into force, which shut down production longer or to a greater extent than assumed here; Faults in the financial system; Sovereign debt crisis; Realignment of global value chains and sales markets
EU Finance Ministers failed to agree on coordinated coronavirus economic rescue after marathon talks. “After 16 hours of discussions we came close to a deal but we are not there yet,” Eurogroup chairman Mario Centeno said. “I suspended the Eurogroup and continue tomorrow.”
It’s reported that there was a major disagreement between Italy and the Netherlands. Italy required a reference to debt mutualization in the recovery instrument but the Netherlands rejected.
Separately, ECB Governing Council member Martins Kazaks warned that “If policymakers leave monetary policy as the only game in town, that would be irresponsible.”
US Treasury Secretary Steven Mnuchin said he’s asking the Congress to “secure an additional $250 billion for the PPPLoan program to make sure small businesses get the money the need.” The funding would be on top of the USD 349B in forgivable loans to small businesses enacted on March 27.
Mnuchin also told bank CEOs that “we want to make sure that every single small business can participate. We want to assure the workers that if you don’t get the loan this week, there will be plenty of money for you next week,”
Separately, Senate Majority Leader Mitch McConnell said “It is quickly becoming clear that Congress will need to provide more funding or this crucial program may run dry.” He’s targeting to get Senate to vote on the measure on Thursday.
Senate Small Business Committee Chairman Marco Rubio said, “there is a critical need to supplement the (loan) fund to ensure America’s more than 30 million small businesses will be able to access this critical lifeline.”
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South Korean President Moon Jae-in announced additional support to the economy as businesses and domestic demand devastated by the coronavirus pandemic. 36 trillion won of cheap loans will be available to exporters. Measures of 17.7 trillion won will be rolled out to boost consumption and domestic demands. The new measures are on top of the planned economic package of 100 trillion won announced in late March.
Separately reported by the central bank, Household loans rose a net 9.6 trillion won in March, highest jump since record began in 2004. That came after another record of 9.3 trillion won rise back in February. Mortgage lending rose a net 6.3 trillion won, slowed from February’s 7.8 trillion won.
New Zealand ANZ business confidence dropped to -73.1 in the April’s preliminary reading, down from March’s -63.5. Own activity outlook dropped sharply from -26.7 to -61.2. Export intentions dropped from -25.8 to -43.6. Investment intentions dropped from -14.4 to -50.2. Employment intention dropped from -22.5 to -53.8.
ANZ said, “firms are reeling from the abruptness and ferocity of the storm that has enveloped them, and with uncertainty extreme, planning a way out is very difficult. The quick-fire fiscal and monetary response will have helped, but times just don’t get much tougher than this.”
Rating agency S&P kept Australia’s sovereign rating unchanged at AAA, but downgraded the outlook from “stable” to “negative”. The outlook was upgraded from “negative” to “stable” less than two years ago in September 2018, when the budget came close to balance.
“The COVID-19 outbreak has dealt Australia a severe economic and fiscal shock” S&P said. “We expect the Australian economy to plunge into recession for the first time in almost 30 years, causing a substantial deterioration of the government’s fiscal headroom at the ‘AAA’ rating level.”
Nevertheless, “while fiscal stimulus measures will soften the blow presented by the COVID-19 outbreak and weigh heavily on public finances in the immediate future, they won’t structurally weaken Australia’s fiscal position,” S&P said.
Treasurer Josh Frydenberg said the outlook downgrade was “a reminder of the importance of maintaining our commitment to medium term fiscal sustainability.”
US Treasury Secretary Steven Mnuchin said “there’s extraordinary demand,” on the small business coronavirus loan program. Overall 3000 lenders have already participated in the USD 349B program. If small businesses cant get the loan today or tomorrow, “don’t worry, there will be money”, he said.
“We have $6 trillion to put in the economy, we’re meeting with all the advisers on the airlines this week, we’re working very quickly on that,” Mnuchin added. “So I can assure you, the president has instructed us to get this money into the economy fast.”
White House economic adviser Larry Kudlow said he still believes “that in the next four to eight weeks we will be able to reopen the economy and that the power of the virus will be substantially reduced and we will be able to flatten the curve.”
that when US return to normal, things are going to be different,” he said. “That’s going to be a new feature of American life. And I don’t know how quickly that gets up and going, but it’s going to be very, very important because we obviously want to prevent any recurrences.”
Japan Prime Minister Shinzo Abe finally declared state of emergency for seven prefectures today. The one-month emergency period starts today on April 7, covering Tokyo, Osaka, Kanagawa, Saitama, Chiba, Hyogo and Fukuoka.
Abe said, “According to experts’ calculations, if all of us make efforts to reduce contact between people by at least 70% and if possible 80%, then in two weeks the increase in infections will peak out and we can start to reduce it.”
Additionally, the government approved an emergency economic stimulus package that worth JPY 108.2T. That equals to 20% of Japan’s economy output. Direct fiscal spending would amount to JPY 39T, around 7% of the economy.
UK Cabinet Office Minister Michael Gove told LBC radio today that Prime Minister Boris Johnson is “not on a ventilator no” in ICU. Nevertheless, “the prime minister has received some oxygen support and he is kept under, of course, close supervision” for coronavirus treatment.
Meanwhile, Foreign Secretary Dominic Raab to deputise for Johnson. Raab said, “The government’s business will continue. The focus of the government will continue to be on making sure that the prime minister’s direction, all the plans for making sure that we can defeat coronavirus and can pull the country through this challenge, will be taken forward.”
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Canada lost one million jobs, unemployment rate jumped to 7.8%
Canada employment contracted -1011k in March, or -5.3%. Employment rate dropped 3.3% to 58.5%, lowest since April 1997. The contraction in employment was also larger than any of the three significant recessions since 1980.
Unemployment rate surged from 5.6% to 7.8%. The 2.2% rise was the largest one-month increase since comparable data became available in 1976.
Full release here.