EU clears 50 billion pound UK ‘umbrella’ scheme to support economy By Reuters


© Reuters. FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels

BRUSSELS (Reuters) – The European Commission said on Monday it had approved a 50 billion pound ($61.5 billion) British “umbrella” scheme to support companies affected by coronavirus outbreak.

The approval is in line with modified EU rules allowing a temporary and limited amount of aid to businesses facing a sudden shortage of liquidity. The British aid would take the form of grants, equity injections, tax advantages and loans.

Britain left the European Union at the end of January, but continues to be subject to EU rules for a transition period set to last until the end of 2020.

With the coronavirus lockdown ravaging European economies, the bloc has stepped up calls for London to extend that time to allow the sides to agree on a new trade partnership after talks came to a virtual halt as capitals switched focus to fighting the pandemic.($1 = 0.8135 pounds)

British Prime Minister Boris Johnson, who has previously repeatedly ruled out such a possibility, was in hospital in London for tests on Monday suffering persistent coronavirus symptoms.

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Hong Kong business activity slumps further in March as virus pummels economy By Reuters


© Reuters. A general view of Hongkong International Terminals as part of the Kwai Tsing Container Terminals in Hong Kong

HONG KONG (Reuters) – Business activity in Hong Kong deteriorated further in March, a private survey showed on Friday, as demand, output and confidence plunged amid the deepening coronavirus pandemic.

While the adjusted IHS Markit headline Hong Kong Purchasing Manager’s Index (PMI) edged up to 34.9 in March, from 33.1 in February, it still signaled the second-sharpest deterioration of private sector conditions in the city since July 1998, when the survey began.

The 50-mark separates growth from contraction on a monthly basis.

“Key sectors of the economy such as retail, travel and tourism were decimated by the global coronavirus outbreak. Business activity across Hong Kong continued to contract at a severe pace in March, as new sales plummeted further,” said Bernard Aw, principal economist at IHS Markit.

Hong Kong’s small, open economy, which was already in recession, has been hit from all sides by the health crisis, particularly in the retail and tourism sectors. Retail sales fell by a record 44% in February from a year earlier. [nL4N2BM07S]

The trade outlook is also grim for the bustling port as increasing health lockdowns in many parts of the world crush global demand. While China’s factories are gradually returning to work, growth is still well below usual levels and new orders from the mainland remain close to the record low seen in February.

With orders drying up, companies continued to cut back production, though the survey’s output gauge ticked up to 26.0 after plummeting to 22.5 in February. New orders also showed another severe contraction.

“The average PMI for the first quarter suggests that the Hong Kong SAR economy had fallen deeper into recession. There are also concerns that the downturn will worsen in the second quarter as more drastic anti-virus measures may be taken worldwide,” said Aw.

Business confidence, a forward-looking subcomponent in the survey, fell to its second-lowest since the data were first available in April 2012, with 59 percent of the survey respondents predicting lower output over the next 12 months due to uncertainties over the economic impact of the virus.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Virus Lockdowns Confront Billions Working in the Shadow Economy By Bloomberg


© Reuters. Virus Lockdowns Confront Billions Working in the Shadow Economy

(Bloomberg) — How do governments control activity in an economy they never really controlled in the first place? That’s an urgent question being asked for those who run the $35 trillion developing world as the coronavirus takes hold.

From the slums of Manila to remote villages in Colombia, some 2 billion people ply their trades in a barely-regulated and untaxed informal economy. The effort to contain the spread of a disease that’s so far infected around a million people may soon hinge on places hamstrung by weak institutions, constrained resources, and corruption.

“How can I make a living if everything stops?” asked Caetano Sousa do Nascimento, 50, who makes about $11 on a good day selling home-made coconut candies on the outskirts of Brasilia, eking out a living in the informal economy like some 40 million other Brazilians. “People need to go back to their lives. Shutting down everything is not the solution.”

Emerging nations, home to more than 90% of the world’s informal employment, are increasingly shutting the lights on a vital hive of activity that’s disproportionately vulnerable to the disease, least prepared to survive a long cutoff and, crucially, for the most part out of reach of government support programs. An International Monetary Fund working paper estimated the average size of the shadow economy for 158 countries during 1991-2015 at 31.9% of official output. If this ratio held up in 2019, it would mean informal sectors accounted for nearly $30 trillion.

Across the developing world, the plight of informal workers is made worse by a combination of crowded slums, large families living together in small dwellings, and an absence of testing.

New hotspots for the coronavirus are appearing in places like Guayaquil, a tropical city in Ecuador that was taken over by the army last week. The intensifying economic emergency that portends prompted the Group of 20 nations this week to switch to the need to assist developing nations. During a virtual meeting Tuesday, G-20 finance ministers and central bankers said they’d look to address debt vulnerabilities in emerging economies, allowing them to focus their efforts on coping with the threat.

Lacking a financial safety net and with little access to health care, the quandary facing India’s informal workforce of 450 million people is one of the starkest examples of how social inequality threatens to undermine global efforts to contain the virus.

Most of these men and women work for, on average, as little as $2 a day. They don’t have the option to work from home, take time off or avoid public transportation to practice social distancing.

Yet India’s informal sector — from roadside food vendors and migrant workers on construction sites to landless laborers working in agriculture or running small shops in the countryside — contributes half of its almost $3 trillion gross domestic product. It employs more than 90% of the total workforce, according to a government estimate.

With train and bus services largely suspended, migrant workers have begun walking hundreds of kilometers to get back to their villages, while police and vigilantes at roadblocks have been beating people who venture out in violation of the curfew.

Small traders in Nigeria were bracing this week for a lockdown on its two biggest cities, Lagos and Abuja. Africa’s most populous nation surpassed India as the country with the largest number of people living in extreme poverty in 2018, and the size of its informal sector is estimated at as high as 65% of the economy.

Usman Saleh, a trader at Abuja’s Wuse market, had just taken delivery of two truckloads of fresh strawberries worth $5,100 when he heard the government would close all businesses. The fruit will probably go to waste, he said, and losing the money could end up ruining his business.

“What am I going to do now?” he asked. “I can’t store this much in my freezer, I simply don’t have the capacity.”

Seeking Relief

Organizations representing millions of informal workers have begun to advocate for a share of the massive stimulus packages being rolled out.

A collection of 10 organizations in South Africa, representing nearly 5 million workers, have called on the government to establish a “living cash grant” that would allow informal workers to be able to self-isolate without suffering economic hardship. The groups also called for the mass provisioning of masks and gloves, as well as soap and hand sanitizer in public places with lots of informal work.

Much of the Indonesian government’s early initiatives to deal with the pandemic have been targeted to relieve the stress on the informal sector. It provides for 56% of people with jobs — about 70 million — with little or no safety net, leaving them severely exposed in an economic crisis.

But unlike more advanced economies that are better able to target and compensate workers for lost wages, developing countries will struggle to throw informal workers a lifeline, according to Priyanka Kishore, head of India and Southeast Asia at Oxford Economics in Singapore.

“If it’s a large informal sector, I’m very concerned about a prolonged lockdown,” Kishore said.

“Clearly, the challenge is targeted measures — because you need to target the most vulnerable now,” she said. “The larger the share of that part in your economy, the more social pain you’ll see in terms of malnutrition — or deaths.”

Nowhere is the challenge greater than in Africa, where the informal economy accounts for more than 85% of employment, according to an International Labor Organization report. The president of Benin, which depends almost entirely on smuggling goods to and from neighboring Nigeria, said this weekend that it can’t even afford a lockdown.

Getting Pushback

Benin is an exception. Most governments are moving to tighten the screws — even though locking down parts of the economy usually hidden from view may trigger defiance and backfire.

South Africa, the country with the highest inequality in the world, last week deployed the army to enforce a national 21-day lockdown. Aid for the informal sector has been slow to come, with the government rolling out a stimulus package that largely ignored the hundreds of thousands of people who earn their incomes as hair dressers, street hawkers or food sellers.

“Many African governments have taken a copy-and-paste model from Spain and Italy and applied it here, but if you carry on with a lockdown for more than 21 days the impact will be too severe and people will end up ignoring it,” said GG Alcock, a South African who’s written several books about the informal sector.

“The relief measures that are being considered are ignoring a whole part of our economy,” he said.

Violence, Tensions

Hundreds of Moroccans protested the enforcement of emergency measures, marching and belting out religious chants a day after a lockdown was implemented in Fes, Tetouan and Tangier.

The North African kingdom, where 60% of the workforce has no health insurance, is enforcing tight restrictions on movements in public areas that emptied out the traditionally bustling souks and streets. Anger erupted even after authorities promised small stipends to informal breadwinners in a country where the shadow economy is estimated at over a third of GDP.

“The lockdown creates a tough situation for the whole North Africa region because occupying the street is the main feature of a heavy informal economy,” said Rachid Aourraz, an economist at Rabat-based MIPA think tank.

Hard to Afford

Across the world in Colombia, the government is trying to enforce a lockdown until mid-April, but it’s meeting resistance from workers who live hand-to-mouth.

The nation’s vast informal labor force has been swollen in recent years by nearly 2 million migrants fleeing Venezuela’s economic collapse. Most are undocumented, and the mass shutting of restaurants, hair salons and other businesses leaves many of them penniless and facing eviction.

In some parts of rural Colombia the state barely exists, and the rules are set by private armies financed by cocaine.

“In countries with large informal economies, a complete lockdown may just force you into closer proximity with someone who could infect you,” said Kishore of Oxford Economics. “And if cases are not coming under control despite these lockdowns, then the lockdown will continue, compounding the economic and social pain.”

 





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Boom in Denmark’s economy may be replaced by 10% contraction, central bank says By Reuters


© Reuters. Denmark’s Central bank sign is seen on a bank’s headquarters in Copenhagen

By Jacob Gronholt-Pedersen and Stine Jacobsen

COPENHAGEN (Reuters) – A boom in Denmark’s economy may be replaced by a contraction of as much as 10% this year as the coronavirus outbreak hits the Nordic economy, the country’s central bank said on Wednesday.

The bank, which had previously forecast 1.5% GDP growth in 2020, however said that strong public finances put Denmark in a favorable position to get the economy back on track.

Its latest projection is more pessimistic than that of economists at the country’s biggest banks, as the central bank warns the export-driven economy will continue to suffer from weak demand from abroad even after Danish society reopens.

“The boom in the Danish economy has come to an abrupt end in early 2020,” the central bank said in a statement.

Depending on the depth and length of the crisis, the economy may contract between 3% and 10% this year, with its main scenario forecasting a 5% contraction, it said.

In comparison, economists at Danske Bank and Nordea say they expect the Danish economy to fall 2.5% and 3%, respectively, this year.

“In Denmark, our starting point for getting the economy back on track when the outbreak subsides and the measures are rolled back is strong. But it is going to hurt, before we get there,” central bank governor Lars Rohde said.

The Nordic country has reported 90 coronavirus-related deaths, but saw the number of hospitalizations of corona patients fall on Tuesday for the first time.

The country’s Prime Minister Mette Frederiksen said on Monday that the government may gradually lift a lockdown after Easter if the number of coronavirus cases and deaths remain stable.

The government has announced economic aid packages to the businesses struggling from a lockdown that will cost the state more than 60 billion Danish crowns ($8.8 billion).

“The rescue packages adopted by the Danish parliament are helping to buoy up firms and employees,” says Rohde. Still, the central bank projects that one-third of private jobs in Denmark will be affected by the lockdown.

A recovery of the economy is highly dependent on developments abroad, the central bank warned.

“Once the economic restrictions are phased out, more conventional fiscal stimulus will probably be required to underpin demand,” said Rohde.

With public debt at around 33% of GDP, much lower than the OECD average, Denmark has room to finance support for its businesses.

The central bank has significantly raised the target for government bond issuance this year and has moved forward an auction for a new 30-year bond, which will be held later on Wednesday.

As a result of increased financing needs, the central said it expects public debt to increase to more than 40% of GDP this year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Pence says virus taskforce soon to deliver recommendation on whether to re-open economy By Reuters


© Reuters. Vice President Pence addresses coronavirus task force daily briefing at the White House in Washington

(Reuters) – Vice President Mike Pence, heading the Trump administration’s response to the coronavirus outbreak, said on Saturday that he would deliver a recommendation to the president on whether to re-open the U.S. economy in the coming week.

Pence told the Fox News Channel that the taskforce he heads would base its decision on data and scientific advice.

“Ultimately the president will make a decision that he believes in the best interest of the American people,” he said.

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How to safely ‘reopen’ the consumer-driven U.S. economy By Reuters



WASHINGTON (Reuters) – President Donald Trump said this week he hopes to “reopen” the U.S. economy by Easter Sunday, which is April 12, despite a worsening coronavirus outbreak across the country.

State and city governments, however, have ultimate power under the U.S. Constitution for the welfare of citizens, and any “shelter-in-place” orders they issue take precedent to what Trump says from the White House.

Because consumer spending on everything from dining out to buying cars contributes about two-thirds of U.S. gross domestic product, the economy won’t truly “reopen” until consumers are confident they won’t catch the highly-infectious coronavirus when they venture from their homes, or carry it to others, experts say.

Here are two views on the process for reopening the economy:

RICHMOND FEDERAL RESERVE BANK PRESIDENT TOM BARKIN

“What we are doing is making a very real call to shutter larger parts of our economy. And the key thing is how long does it last and are we ready to return.

That depends on availability of tests at scale – that feels like weeks not days – and it depends on us having a protocol so restaurants can tell patrons it is safe to eat and airlines can tell passengers it is safe to fly … I think it is important to get enough tests out so that people can feel secure … and without that it will linger longer and longer.

A good analogy is 9/11. The question was ‘Is it safe to fly?’ We made significant investments in the TSA (Transportation Security Administration) system. It was very messy for a while. You had to get the TSA deployed at scale. Once you could tell yourself you could fly again, American commerce could start to come back.”

OXFORD ECONOMICS CHIEF U.S. ECONOMIST GREGORY DACO

“The old normal won’t be accessible until we have a vaccine that reassures people, or proper containment of the virus via a much more severe lockdown.

In terms of what’s needed, it is actually pretty simple. You need to expand testing and ensure that people are moving as little as possible. If you could wave a magic wand, you would ask everyone to stay in place until we can test everyone, and (until) everyone suspected of being sick is put in isolation.

Then in two to three weeks the virus would be contained. Travel could resume, we could get a gradual resumption of activity the summer. You need that strict lockdown.

Barring that, uncertainty and the fear factor and the economics of sudden stops remains in full display. We’ll have to pump massive amounts from the Fed and fiscal spending to prevent the economy from entirely collapsing, and the cost is going to be massive.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Lower sovereign yields to stay as global economy in recession: Reuters poll By Reuters


© Reuters.

By Rahul Karunakar and Hari Kishan

BENGALURU (Reuters) – Major government bond yields will trade near their current lows in the coming year, foreshadowing a deep recession driven by the coronavirus pandemic, according to fixed-income analysts in a Reuters poll who said the bias was for them to drift lower.

As global share markets crashed, traders and investors fled headlong to the safety of bonds to hedge the economic trauma from the coronavirus, pushing sovereign bond yields to record lows earlier this month.

That comes despite most central banks stepping up efforts by cutting rates and announcing unprecedented easing in emergency moves.

But since then, bond markets have also been highly erratic, as trading books were damaged from orders in markets falling to a trickle, driven by a lack of liquidity.

Still, a majority of analysts, after expecting higher yields for years, have thrown in the towel and said the most likely path over the next three months was to stay around current levels and be range bound, or fall further.

That is driven by predictions the global economy was already in a recession, according to a majority of analysts, similar to economists’ expectations in a separate Reuters poll published on Friday. [ECILT/WRAP]

“The recent sell-off in U.S. Treasuries and (German) Bunds is more about a generalised rush for cash than about supply fears. For now, collapsing growth, low inflation and mega-easy monetary policy warrant low yields,” noted analysts at Societe Generale (PA:).

“Volatility and liquidity were the key drivers of Treasuries, with the monetary bazooka and expectations of a large fiscal package doing little to assuage fears. We expect Treasury yields to decline as the Fed and global central banks engage in QE and other extraordinary measures to provide stimulus.”

Even the U.S. bond market, the most liquid in the world, ceased to function earlier this month, as traders sold off any asset in their possession to make up for losses elsewhere and to stock up on cash, particularly dollars.

While the Federal Reserve has announced enormous stimulus measures, financial markets have not budged.

The U.S. 10-year Treasury yield fell to 0.3% on March 9, a record low.

A separate Reuters poll of economists showed the longest U.S. expansion on record has come to an end and there was a 80% chance of a U.S. recession this year. [ECILT/US]

“We don’t know how deep this is…the Fed is just pulling out all the stops throwing everything in, including the kitchen sink, and we’re going to see some efforts from Washington. It is not going to prevent things from getting worse; at best it may sort of lessen the damage. But we still have to go through it in the near-term,” said Scott Brown, chief economist at Raymond James.

“There’s a lot of second and third round effects, when people start losing their jobs or they are not spending…and this really gets to the unwieldy problem with the forecast.”

The U.S. two-year, 10-year yield curve, which is closely watched as a recession indicator and flattened as far as 2 basis points earlier this month, was expected to steepen during the coming year to more than 50 basis points, which is just about double the size of a typical central bank rate change.

That part of the yield curve was briefly inverted in late August and early September.

While have risen by about 50 basis points from their record lows, they were still one full percentage point lower than where they started the year.

The consensus now is for the 10-year yield to rise 45 basis points to 1.25% in a year from around 0.8% on Tuesday. That median expectation was the lowest seen in Reuters poll records going as far back as 2002.

Just three months ago yields were expected to be around 2.0% in 12 months’ time and at nearly 3.0% a year before that – which was not predicted by any analyst in the latest poll for the coming year.

“I’m not forecasting that the 10 year yield is going to get back to 3%, because we’re not forecasting growth even when we’re past this virus time period to rebound much more than 2% in the United States and we’re not expecting inflation to take off either,” said James Orlando, senior economist at TD Economics.

Yields on 10-year German Bunds, UK Gilts and Japanese government bonds (JGBs) were forecast to be around 10 basis points up or down from their current levels, suggesting any rise or fall for these securities would be limited.

Yields for benchmark U.S., Germany and UK bonds could drop to as low as 0.50%, -0.70% and 0.30%, respectively, in the next three months, according to the median view.

(Polling by Manjul Paul, Sumanto Mondal and Khushboo Mittal; Editing by Ross Finley and Chizu Nomiyama) OLUSECON Reuters US Online Report Economy 20200325T002723+0000





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Virus Walloped U.S. Economy in March, IHS Markit Gauge Shows By Bloomberg


&copy Bloomberg. An American flag hangs above an assembly line in Fort Worth, Texas. Photographer: Luke Sharrett/Bloomberg

(Bloomberg) — The global health crisis dealt a swift, painful blow to the U.S. economy in March, with a gauge of activity at service providers and manufacturing contracting the most on record.

The IHS Markit composite index of purchasing managers tumbled 9.1 points to 40.5, marking the steepest drop in data back to October 2009, the group reported Tuesday. The plunge mirrors the rapid deceleration in other nations as the coronavirus tightens its grip on the global economy and financial markets.

“The survey underscores how the U.S. is likely already in a recession that will inevitably deepen further,” Chris Williamson, chief business economist at IHS Markit, said in a statement. “The March PMI is roughly indicative of GDP falling at an annualized rate approaching 5%, but the increasing number of virus-fighting lockdowns and closures mean the second quarter will likely see a far steeper rate of decline.”

The IHS Markit gauge of services slid 10.3 points to 39.1 in March. The median projection in a Bloomberg survey of economists called for a decline to 42.

With services comprising almost 90% of the U.S. economy, the slump in the index highlights the extent of the hit to the nation’s output as retailers, restaurants and other service providers shut down in an effort to contain the outbreak. Similar measures for Japan, Germany, the U.K., France and Australia were also at all-time lows.

The economic stoppage and social distancing is also starting to put U.S. manufacturing on its heels and threatens to become an even bigger drag in coming months.

While registering a smaller setback than the services gauge, the IHS Markit index of U.S. manufacturing dropped in March to 49.2, the weakest since August 2009. Readings below 50 indicate contraction. Factory orders shrank at the fastest pace since then as well.

As businesses close their doors and the economy grinds to a halt, millions of Americans are being dismissed and filing for unemployment insurance. The IHS Markit employment gauges for both services and manufacturing contracted in March.

“Jobs are already being slashed at a pace not witnessed since the global financial crisis in 2009 as firms either close or reduce capacity amid widespread cost-cutting,” Williamson said.

(Adds graphic)

©2020 Bloomberg L.P.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Surveys show coronavirus pandemic savaging global economy By Reuters


2/2
© Reuters. A man stands next to shelves empty of fresh meat in a supermarket, as the number of worldwide coronavirus cases continues to grow, in London

2/2

By Marius Zaharia

HONG KONG (Reuters) – Evidence of the devastation wreaked on the global economy by the coronavirus pandemic mounted on Tuesday as activity surveys for March from Australia and Japan showed record falls, with surveys in Europe and the United States expected to be just as dire.

After an initial outbreak in China brought the world’s second largest economy to a virtual halt last month, an ever growing number of countries and territories have reported a spike in infections and deaths in March.

Entire regions have been placed on lockdown and in some places soldiers are patrolling the streets to keep consumers and workers indoors, halting services and production and breaking down global supply chains.

Mirroring the emptying of supermarket shelves around the world, indebted corporates have rushed into money markets to hoard dollars, with a global shortage of greenback funding threatening to cripple firms from airlines to retailers.

“The coronavirus outbreak represents a major external shock to the macro outlook, akin to a large-scale natural disaster,” analysts at BlackRock (NYSE:) Investment Institute said in a note.

Purchasing Managers’ Index (PMI) surveys from Japan showed the services sector shrinking at its fastest pace on record this month and factory activity contracting at its quickest in a decade.

Services PMI slumped to a seasonally adjusted 32.7 from February’s 46.8 and manufacturing PMI fell to 44.8 from a final 47.8 last month. The 50 mark separates growth from contraction.

The survey results were consistent with a 4% contraction in the economy in 2020, Capital Economics senior economist Marcel Theliant said. The likely postponement of the Tokyo Olympics is expected to deal a heavy blow to the world’s third largest economy.

In Australia, the CBA Services PMI fell to a record low of 39.8 as restaurants, cafes and tourism were hit hard by travel bans and cancellations of events and concerts.

A separate analysis of card spending data by Commonwealth Bank of Australia (AX:) showed shopping outside of grocery, alcohol and healthcare was bleak. A weekly consumer confidence gauge by ANZ-Roy Morgan plunged to 30-year lows at 72.2 points.

Later on Tuesday, the euro zone composite PMI is expected to come in at 38.8, the lowest since early 2009. U.S. manufacturing and services PMIs are also expected at multi-year lows of 42.8 and 42.0, respectively.

INFINITE STIMULUS

With most asset markets tanking, global central banks have been rolling out extraordinary measures on an almost daily basis to stop the rot.

In its latest drastic step, the Federal Reserve on Monday promised bottomless dollar funding.

For the first time, the Fed will back purchases of corporate bonds, backstop direct loans to companies and “soon” will roll out a program to get credit to small and medium-sized business. It will also expand its asset purchases by “as much as needed.”

The Fed last week slashed borrowing costs to zero and took other emergency steps to keep the commercial paper, Treasury and foreign dollar funding markets functional.

Still, some analysts say infinite monetary policy easing may not be enough and fiscal steps are crucial. The latest U.S. effort on that front remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

Finance and monetary leaders from the world’s 20 largest economies agreed on Monday to develop an “action plan” to respond to the pandemic that the IMF now expects to trigger a global recession, but offered no specifics.

“For the U.S. economy to be able to come out of the current crisis and the ongoing recession relatively unscathed, more radical policy interventions will be needed in the next few weeks,” Anna Stupnytska, global head of macro and investment strategy at Fidelity International said.

Speculation is mounting that data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

Goldman Sachs (NYSE:) warned the U.S. economy could contract by an annual rate of 24% in the second quarter, two-and-a-half times greater than the previous biggest contraction in the period after World War Two.

INVESTORS UNCONVINCED

Asia is also easing monetary conditions across the board, with the Thai central bank expected to join regional peers in cutting rates on Wednesday.

With the Bank of Japan running out of ammunition, the pressure is on the government, which is looking into offering cash payouts to households as part of a package that could be worth more than $276 billion.

The Reserve Bank of Australia has flooded the system with nearly A$65 billion since March 12. It has also purchased A$9 billion in government bonds since launching its “unlimited” quantitative easing program on March 20.

The Australian government also announced a stimulus package of A$66.1 billion on top of the A$17.6 billion flagged earlier this month.

New Zealand said on Tuesday that retail banks will offer a six-month principal and interest payment holiday for mortgage holders and small business customers whose incomes have been affected by the economic disruption from COVID-19.

“Despite aggressive moves by central banks, investors remain unconvinced that any of these actions will be enough to stave off the ill effects from (the virus),” ING Asia economist Prakash Sakpal said.



Virus had ‘eye-popping’ impact on China’s economy: Beige Book By Reuters


© Reuters. FILE PHOTO: People wearing face masks walk inside an office building at the Lujiazui financial district in Pudong

BEIJING (Reuters) – China’s economy suffered through an “eye-popping” first quarter as a coronavirus epidemic hammered business activity, with deterioration even as firms were supposed to be going back to work, a private survey showed on Tuesday.

After surveying thousands of Chinese firms, China Beige Book International (CBB) suggested that “a 10-11% GDP contraction in the first quarter is not unreasonable.”

Indicators in the survey “continued to deteriorate even into mid-March when most firms were re-opening and supposedly ‘back to work,'” a statement from the U.S.-based consultancy said.

Private-sector analysts are slashing their growth forecasts for China to lows not seen since the Cultural Revolution ended in 1976 as the coronavirus epidemic led to widespread travel curbs and halted production in the world’s second-largest economy. The respiratory disease has killed more than 3,200 people and infected over 81,000 on the Chinese mainland.

New local infections in China have fallen sharply but China’s recovery now depends on other factors, CBB said.

“A few weeks ago, a V-shaped recovery in China wasn’t outlandish. With the COVID-19 virus spreading quickly, return-to-normalcy is looking more implausible by the day,” the statement said.

“Even if China can, its partners can’t – one by one, they are shutting down, for weeks or perhaps months. The China recovery story is no longer just about domestic resilience, but also factors beyond Beijing’s control.”

CBB warned that global markets do not seem prepared for the full extent of China’s first quarter weakness.

In addition, Beijing may be unwilling to admit through official statistics just how bad the economic impact of the virus was, the statement said.

“Investors may therefore be severely overestimating the extent of China’s recovery and hence the extent to which China can cushion a global downturn.”

Almost three quarters of executives interviewed said earnings had decreased in the first quarter, with the service sector hardest hit. Almost half of business-to-business firms reported a fall of more than 10% in sales volume in the first quarter.

Most analysts now expect China’s first quarter to contract, with estimates revised after dismal activity data for the first two months of the quarter.

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