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RBA kept cash rate at 0.25%, very large economic contraction expected in Q2

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    ActionForex
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    RBA left cash rate unchanged at 0.25% as widely expected. It also reaffirmed the 0.25% target for 3-year government bond yield with asset purchases. The central bank also said that it “will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”

    RBA also said noted there is “considerable uncertainty” about the near-term outlook of the economy. Much depends on the successful of coronavirus containment and the length of social distancing. Nevertheless, “a very large economic contraction” is expected in Q2 and unemployment is expected to rise to its “highest level for many years”.

    Full statement here.

    Australia AiG services index dropped to 38.7, lowest since 2009

      By
      ActionForex
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      Australia AiG Performance of Services Index dropped from 43.0 to 38.7 in March. That’s the lowest level since March 2009 and the fourth month of contracting results. AiG said, “the services sector is now entering a difficult period of pandemic-related closures and adjustments from a base already weakened by summer’s bushfire crisis and by longer-term factors”.

      “Restrictions on human movement and gatherings means closures for many businesses in hospitality, retail, transport, recreation, personal services, education and even community services. Businesses that remain open face falling sales and increasing operational restrictions.”

      New York Fed: Consumers see chance of job loss jumped

        By
        ActionForex
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        The March consumer expectations survey by the New York Fed showed that perceived chance of losing they job jumped to series high. Expected growth in household income and spending decline sharply. Meanwhile, inflation uncertainty increased in both horizons.

        The mean perceived probability of losing one’s job in the next 12 months increased 4.7 percentage points to 18.5%. The reading is a new series’ high and 4.3 percentage points above the 12-month trailing average.

        Median household income growth expectations dropped sharply to 2.1%, 0.9 percentage point below its 12-month trailing average. Median household spending growth expectations declined to 2.3%, 0.9 percentage point below its 12-month trailing average.

        Median inflation expectations at the one-year horizon were unchanged at 2.5% but decreased at the three-year horizon to 2.4% in March from 2.6% in February. There was a large increase in median inflation uncertainty—or the uncertainty expressed by each respondent regarding future inflation outcomes—at the one-year horizon, and a moderate increase at the three-year horizon.

        Full release here.

        Gold resumes rebound, heading back to 1700, but no break expected

          By
          ActionForex
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          Gold is lifted by return of risk appetite today, as DOW is current up over 1000 pts. The break of 1644.67 resistance suggests resumption of whole rebound from 1451.16. Further rise should now be seen to 61.8% projection of 1451.16 to 1644.67 from 1567.78 at 1687.36.

          However, recent price actions from 1703.28 high are seen as a medium term consolidation pattern, that corrects whole up trend from 1160.17. Hence, we won’t expect a firm break of 1703.28 for now. Instead, another fall should be seen to extend the consolidation. Break of 1567.78 will turn near term outlook bearish for 1451.16.

          Abe to announce Japan style lockdown in seven prefectures tomorrow

            By
            ActionForex
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            Japanese Prime Minister Shinzo Abe indicated that he could formally announce a month-long state of emergency as soon as on Tuesday. The seven prefectures include Tokyo, Osaka, Kanagawa, Saitama, Chiba, Hyogo and Fukuoka. Though, he insisted that “we are not changing Japan’s policy, but strengthening it and asking for full cooperation.”

            “Japan won’t, and doesn’t need, to take lockdown steps like those overseas,” he added. “Trains will be running and supermarkets will be open. The state of emergency will allow us to strengthen current steps to prevent an increase in infections while ensuring that economic activity is sustained as much as possible.”

            Additionally, Abe is planning to boost virus testing capacity to 20,000 a day, with increased number of hospital beds and ventilators. There will also be cash handouts of JPY 200m to small and midsize businesses.

            Germany said to start exiting lockdown on April 19

              By
              ActionForex
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              Reuters reported today that the German Interior Ministry is already drafting a plan to end lockdown and return the country to normal lift, starting April 19. The document assumed that the coronavirus pandemic will last until 2021. But with proper measures, the average number of people infected by one person could be limited below one.

              the plan is backed by vigorous mechanism that track more than 80% of people with whom an infected person had contacted, and quarantine them. People will be orders to wear masks in public transport and factories and public buildings. Social-distancing measures will remain in place. Events and parties will be forbidden. But shops and schools could reopen while border controls could be relaxed.

              Separately, government spokesman said “even if some people are demanding it, the government can’t yet give an exit day, a firm date from which everything will be different and the measures relaxed.”

              UK PMI construction dropped to 39.3, even more severe impact in coming months

                By
                ActionForex
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                UK PMI Construction dropped to 39.3 in March, down from 52.6, indicating the steepest contraction output since April 2009. Employment dropped at the fastest pace since September 2010. Business expectations also slumped to lowest since October 2008.

                Tim Moore, Economics Director at IHS Markit: “The closure of construction sites and lockdown measures will clearly have an even more severe impact on business activity in the coming months. Survey respondents widely commented on doubts about the feasibility of continuing with existing projects as well as starting new work. Construction supply chains instead are set to largely focus on the provision of essential activities such as infrastructure maintenance, safety-critical remedial work and support for public services in the weeks ahead.”

                Full release here.

                Eurozone Sentix investor confidence slumped to -42.9, recession will go deeper an dlonger

                  By
                  ActionForex
                  -

                  Eurozone Sentix Investor Confidence dropped to -42.9 in April, down from -17.1. That’s the lowest level on record. Current Situation index dropped from -14.3 to -66.0, also a record low and the largest decline on record. Expectations index, however, improved from -20.0 to -15.8. Sentix said Eurozone economy is in a “deep recession”, which will “go much deeper and longer”.

                  It also said, “the corona virus is keeping the global economy in a stranglehold: without exception, all regions of the world are in a deep recession. Never before has the assessment of the current situation collapsed so sharply in all regions of the world within one month”.

                  Germany Investor Confidence dropped from -16.9 to -36.0, lowest since 2209. Germany Current Situation dropped from -13.3 to -59.3, lowest since 2009. Germany Expectations improved from -20.5 to -9.0. US Investor Confidence dropped from 0.2 to -39.1, lowest since 2009. US Current Situation dropped from 17.8 to -59.0, lowest since 2009. US Expectations dropped from -16.0 to -16.5, lowest since October 2019.

                  Full release here.

                  Consumer confidence in UK had record drop after coronavirus lockdown

                    By
                    ActionForex
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                    In an interim COVID-19 flash report, Gfk said UK consumer confidence index has dropped sharply by -25pts to -34, between March 16 and 27. That’s the biggest fall since record began in January 1974.

                    Joe Staton, GfK’s Client Strategy Director, says: “Our COVID-19 ‘flash report’ shows a dramatic result with consumer confidence falling off the cliff in the last two weeks of March. The last time we saw such a decline was during the 2008 economic downturn. Our falling confidence in our personal financial situation and the wider economy reflects the new concern for many across the UK. Despite record grocery sales, and recent peaks for purchases of freezers, TVs and home office equipment as people prepared for a long period in the home, the Major Purchase Index is down 50 points – a stark picture for some parts of the retail industry in the short to medium term.”

                    Full release here.

                    RBNZ Orr will keep monetary support going for as long as necessary

                      By
                      ActionForex
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                      RBNZ Governor Adrian Orr said in a article said the central bank recognized the “threat of COVID-19 to our collective well-being “. It will “keep monetary support going for as long as necessary through QE and other tools.”

                      He also noted that there are “some very hard yards ahead” while “some businesses will fail, unemployment will rise”. But “many firms will make it through this period through working with their bankers and their own team, and understanding and utilising the Government’s significant and expanding support packages”

                      He urged New Zealanders to “support each other, think beyond just the next six months or more, and visualise the role you can and will play in the vibrant, refreshed, sustainable, inclusive New Zealand economy.

                      Spain PM Sanchez: Virus doesn’t respect borders, nor should financing mechanisms

                        By
                        ActionForex
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                        Spanish Prime Minister Pedro Sanchez urged Europe to “build a wartime economy and promote European resistance, reconstruction and recovery” as the country became the most coronavirus infected country in the continent. Total confirmed cases surged pass 131k, taking over Italy’s near 129k. There were 12,641 deaths recorded, comparing with Italy’s 15,887.

                        In a piece in Guardian, Sanchez said Europe “must start doing so as soon as possible with measures to support the public debt that many states, including Spain, are taking on. And it must continue to do so when this health emergency is over, to rebuild the continent’s economies by mobilising significant resources through a plan we are calling the new Marshall plan and which will require the backing of all of the EU’s common institutions.”

                        “In the coming months, the EU member states will inevitably take on greater volumes of debt to deal with the consequences of what is not just a health crisis, but an economic and social crisis,” he added. “That is why the response cannot be the same as that envisaged for asymmetric economic shocks, such as a financial or banking crisis in a single state or group of states. If the virus does not respect borders, then nor should financing mechanisms.”

                        US ISM non-manufacturing dropped to 52.5, supplier deliveries surged

                          By
                          ActionForex
                          -

                          US ISM Non-Manufacturing Composite dropped to 52.5 in March, down from 57.3, but beat expectation of 48.0 and stayed in expansionary region. Looking at some details, business activity/production dropped -0.8 to 48.0. New orders dropped -10.2 to 52.9. Employment dropped -8.6 to 47.0.

                          Similar to ISM manufacturing, supplier deliveries jumped 9.7 to 62.1, holding the headline index up. Comments from respondents include: “Supplier capacity and shipping has been slowed due to the coronavirus” and “Global supply chain disruptions caused by COVID-19 concerns and the number of manufacturers reliant upon China for raw materials, parts and components.”

                          Full release here.

                          US NFP dropped -701k, unemployment surged to 4.4%

                            By
                            ActionForex
                            -

                            US non-farm payroll employment dropped -701k in March. Two-thirds of the drop occurred in leisure and hospitality. Notable declines also occurred in health case and social assistance, professional and business services, retail trade, and construction.

                            Unemployment rate jumped from 3.5% to 4.4%. That’s the largest over-the-month increase since January 1975. Labor force participation rate dropped -0.7% to 62.7%. Average hourly earnings rose 0.4% mom.

                            Full release here.

                            Eurozone retail sales rose 0.9%, EU sales rose 0.8%

                              By
                              ActionForex
                              -

                              Eurozone retail sales grew 0.9% mom in February, versus expectation of 0.1% mom. The volume of retail trade increased by 2.4% for food, drinks and tobacco and 0.2% for non-food products, while automotive fuels fell by 0.1%.

                              EU retail sales grew 0.8% mom. Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Estonia (+4.4%), Latvia (+3.5%) and Portugal (+3.0%). Decreases were observed in Ireland (-2.7%), Slovenia (-1.8%), Croatia and Poland (both -0.2%).

                              Full release here.

                              UK PMI composite finalized at 36.0, almost certain to experience a deep contraction in Q2

                                By
                                ActionForex
                                -

                                UK PMI Services was finalized at 34.5 in March, down from February’s 53.2. It’s the worst reading since survey began in 1996. PMI Composite was finalized at 36.0, lowest since series began in 1998.

                                Tim Moore, Economics Director at IHS Markit: “”With the UK economy now almost certain to experience a deep contraction in the second quarter of the year, perhaps the most important aspect of the Services PMI to watch for hopeful signs will be any recovery in the business expectations sub-index from the record low seen in March.”

                                Full release here.

                                Eurozone PMI composite finalized at 29.7, GDP contracting near to -10% annualized

                                  By
                                  ActionForex
                                  -

                                  Eurozone PMI Services was finalized at 26.4 in March, down from February’s 52.6. PMI Composite was finalized at 29.7, own from February’s 51.6. that’s the biggest single monthly fall, as well as a survey record low. Looking at some member states, Germany PMI Composite dropped to 35.0, France to 28.9, Spain to 26.7, Italy to 20.2, all record lows.

                                  Chris Williamson, Chief Business Economist at IHS Markit said: ” The data indicate that the eurozone economy is already contracting at an annualised rate approaching 10%, with worse inevitably to come in the near future… No countries are escaping the severe downturn in business activity, but the especially steep decline in of Italy’s service sector PMI to just 17.4 likely gives a taste of things to come for other countries as closures and lockdowns become more prevalent and more strictly enforced in coming months… The ultimate economic cost of the COVID-19 outbreak cannot be accurately estimated until we get more clarity on the duration and scale of the pandemic.”

                                  Full releaes here.

                                  ADB slashes China’s growth forecast to 2.3% in 2020, but rebound expected next year

                                    By
                                    ActionForex
                                    -

                                    The Asian Development Bank slashed China’s growth forecast to just 2.3% in 2020 on coronavirus pandemic. Though, it expects a strong bounce back of 7.3% in 2021. ADP noted warned that a new round of domestic infection of further global spread could “increasingly dampen investor sentiment, consumer spending, credit sustainability, and overall economic activity”. Revival of trade conflict with the US is another risk.

                                    For Asia, growth in 2020 will slow to 2.2%, down from 2019’s 5.2%, then bounces back to 6.2% in 2021. Excluding Taiwan, Hong Kong, South Korea and Singapore, developing Asia is forecasts to grow 2.4% in 2020, then rebounds to 6.7% in 2021.

                                    Australia AiG construction dropped to 37.9, retail sales rose 0.5%

                                      By
                                      ActionForex
                                      -

                                      Australia AiG Construction Index dropped to 37.9 in March, down from 42.7. That’s the lowest level since May 2013. Across the four construction sectors, the house building sector indicated modest growth for a fourth consecutive month (trend). Contractions in the apartment and commercial construction sectors were steeper (a lower index result), while the contraction in engineering construction activity eased slightly in March.

                                      Retail sales rose 0.5% mom in February. “Retailers reported a range of impacts from COVID-19 in February” said Ben James, Director of Quarterly Economy Wide Surveys, “with increases in food retailing slightly offset by falls in more discretionary spending.”

                                      China Caixin PMI services recovered to 43, situation requires policymakers to cut GDP growth target

                                        By
                                        ActionForex
                                        -

                                        China Caixin PMI Services recovered to 43.0 in March, up from 26.5. PMI Composite rose from 27.5 to 46.7, second lowest reading in 11 years. Caixin said that business activity and new work both declined at slower rates, but employment fell at quickest pace on record. Output charges also cut at fastest rate since April 2009.

                                        Zhengsheng Zhong, Chairman and Chief Economist at CEBM Group said: “The recovery of economic activity remained limited in March, although the domestic epidemic was contained. In the first two months this year, China’s value-added industrial output and services output dropped 13.5% and 13% year-on-year, respectively.

                                        “Estimates suggest their declines haven’t been as steep in March and the country’s first-quarter GDP is likely to have dropped significantly. Such a situation requires policymakers to cut this year’s GDP growth target and step up countercyclical efforts to support areas like consumption and infrastructure, particularly given the accelerated contraction in the service sector job market.”

                                        Full release here.

                                        Japan PMI services dropped to 33.8, GDP contracting at 8% annualized rate

                                          By
                                          ActionForex
                                          -

                                          Japan PMI Services dropped to 33.8 in March, down from 46.8. The index was close to record low seen in February 2009 (33.7). PMI Composite dropped to 36.2, down from 47.0. Markit said that output fell at near record pace as coronavirus pandemic hits demand. Employment declined as operating requirements slumped. Also, business activity was expected to fall sharply over the coming 12 months.

                                          Joe Hayes, Economist at IHS Markit, said, latest data showed that the economic impact from coronavirus pandemic “has become widespread”. The sharp fall signals “how aggressive and sudden the drop in activity has been”. The combined manufacturing and services PMI already point to “GDP contracting at an annual of around 8%”. If the outbreak were to escalate in Japan, Q2 GDP could be “poised for an annual decline in excess of 10%”.

                                          Full release here.

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