Markets poised for Opec decision as US jobless data looms

US jobless claims surged by 6.6 million last week

NEWSFLASH: More than 6 million Americans signed on for jobless benefit last week, laying bare the impact of the Covid-19 outbreak on the US economy.

The initial jobless claims figure, just out, shows that 6.6 million people across the US filed for unemployment support in the week to Saturday 4 April.

That is compared to estimates for around 5 million job losses. It nearly matches the jump logged in the previous week when 6.65 million people filed initial claims.

That bring the total jobless claims for the last 3 weeks to around 16 million.

ECB minutes show reservations about stimulus measures

Minutes from the European Central Bank’s emergency meeting on 18 March show there were some hesitations around plans to scrap previous stimulus rules, as it set out to buy €1.1 trillion worth of debt this year to help struggling firms and governments.

It had been a notable u-turn for the ECB, which less than a week earlier had agreed to a relatively small increase in asset purchases while the central bank boss Christine Lagarde was widely seen as playing down the crisis. (You’ll remember that she argued it was not the central bank’s job to “close spreads.”)

The minutes from the 18 March meeting explain:

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, the outlook for the euro area economy and, hence, ultimately the ECB’s price stability objective.

Reservations were, however, expressed by some members with regard to the proposed communication on the issue share and issuer limits. It was recalled that these limits were one of the safeguards to ensure that the Governing Council acted within its mandate.

The head of the International Monetary Fund has warned that all but a handful of the organisation’s 189 member states will suffer falling standards of living this year as a result of the worst global economic crisis since the 1930s.

Kristalina Georgieva said the sudden onset of the Covid-19 pandemic meant the IMF’s new forecasts for the world economy were going to be grim when released next week – and there was a risk that the impact could be even worse than currently expected.

In a speech designed to set the scene for next week’s (virtual) spring meeting of the IMF, Georgieva said:

Just three months ago, the IMF was predicting that the global economy would grow by 3.3% this year, but Georgieva said:

Covid-19 has disrupted our social and economic order at lightning speed and on a scale that we have not seen in living memory. The virus is causing tragic loss of life, and the lockdown needed to fight it has affected billions of people.

There is no question that 2020 will be exceptionally difficult. If the pandemic fades in the second half of the year – thus allowing a gradual lifting of containment measures and reopening of the economy – our baseline assumption is for a partial recovery in 2021. But again, I stress there is tremendous uncertainty around the outlook: it could get worse depending on many variable factors, including the duration of the pandemic.