By Lorcan Roche Kelly
After yesterday’s dismal PMI numbers, there was more data this morning showing the fierce hit to economic activity. In Germany business confidence dropped to a record low, according to the Ifo Institute’s monthly survey. U.K. retail sales suffered their biggest fall ever in March, while sales of alcohol jumped by the largest amount since the Office of National Statistics started tracking the number in 1988. Yesterday’s jobless claims number suggest U.S. unemployment is already close to 20%. That’s encouraging lawmakers to already start working on the next stimulus package from Washington before the ink is dry on the $484 billion package passed by the House yesterday. European leaders endorsed a short-term 540 billion-euro ($580 billion) plan to support businesses while disagreements remained over a longer-term rebuilding program.
Treasury Secretary Steven Mnuchin says he expects the U.S. economy to start reopening in May and June, with a strong rebound in output in the third and fourth quarter. He’s also considering the creation of a government lending program for U.S. oil companies that have been devastated by the collapse in crude prices. One of the options on the table is for the administration to take equity stakes in exchange for some loans, according to a person familiar with the matter. A Treasury Department statement published late yesterday said the government could accept debt instruments or other financial interests in companies that tap bailout money.
The coronavirus outbreak, while trending lower in much of Europe, is still showing worrying signs of resilience in the face of social distancing measures leading to increased worries of a second wave of infections should restrictions be lifted too early. Germany saw its largest jump in new cases and deaths in nearly a week, while Russia also reported an increase. Spain reported the lowest number of deaths in nearly five weeks. Drugmaker Gilead Sciences Inc.’s shares dropped after a summary of a Chinese trial of its Covid-19 drug appeared to show it was a failure. President Donald Trump said he disagreed with the decision by Georgia’s governor to start reopening the state this week.
The mounting evidence of the size of the global economic decline is renewing pressure on equities. Overnight the MSCI Asia Pacific Index fell 0.7% while Japan’s Topix index closed 0.3% lower. In Europe, the failure of EU leaders to agree a wider stimulus package and more disappointing economic data helped push the Stoxx 600 Index 0.4% lower by 5:50 a.m. Eastern Time. S&P 500 futures also pointed to a drop at the open, the 10-year Treasury yield was at 0.607% and oil, for once, was broadly unchanged.
March durable goods orders are expected to show a plunge of 12% when the number is published at 8:30 a.m. University of Michigan sentiment for April is forecast to show another drop at 10:00 a.m. President Trump will sign the aid bill passed by Congress yesterday with drafting of the next stimulus measure getting underway as soon as today. Verizon Communications Inc. and American Express Co. are among the companies announcing results.