KITCO NEWS/Anna Golubova

Gold prices up 1% as U.S. manufacturing PMI drops to 11-year lows

April 23, 2020

“Gold prices edged up to daily highs after the release of preliminary manufacturing and service-sector sentiment data. The flash U.S. manufacturing Purchasing Managers Index for April dropped to 36.9, marking an 11-year low, research firm IHS Markit reported. The April number missed market’s expectations of a reading of 38.0. ‘Manufacturers recorded the sharpest fall in sales since the depths of the financial crisis in early-2009,’ the HIS Markit’s news release stated. ‘Private sector firms in the U.S. signalled an unprecedented decline in business activity in April, with manufacturing and service sector companies registering marked contractions of output amid the outbreak of coronavirus.’

The service sector saw the worst of it as the PMI reading fell to 27.0 in April, marking the quickest contraction on record. ‘Services companies registered the steepest rate of decline in the survey’s history,’ the report said. ‘The cancellation and postponement of orders led firms to reduce their workforce numbers at a rate far exceeding anything seen previously over the survey history at the start of the second quarter.’”

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MARKET WATCH/Mark DeCambre

Gold prices aim for 2 straight days of gains, briefly rising above $1,750

April 23, 2020

“Gold futures headed higher Thursday as tightening supplies for the commodity and worries about the economic impact of the COVID-19 pandemic and rising tensions in the Middle East buoyed bullion. ‘In a direct opposite to the glut in the oil market, physical gold is seeing a shortage and so the price on the nearest to deliver futures contract is experiencing sporadic $50+ surges in premiums relative to spot,’ wrote Albert Edwards, global strategist at Société Générale.

BofA Global Research notes that exchange-traded funds in metals have increased their holdings in silver, viewed as an industrial and precious metal, and gold, which has helped to lift both prices.

‘In our view, non-commercial market participants have increased their exposure to silver for the same reason as market participants boosted gold holdings: concerns over ultra-loose monetary policy and rising central bank balance sheets,’ wrote analysts. Gold prices held onto their gains after weekly labor-market data showed another 4.4 million people filed for unemployment for the week ended April 18, bringing the total claims over the past month to 26 million since the coronavirus began.”

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BARRON’S/Lisa Beilfuss

4.4 Million More Seek Unemployment Benefits. Virus’s Toll Is 26 Million Jobs.

April 23, 2020

layoffs continue“The ranks of newly unemployed Americans have swelled to more than 26 million as the coronavirus crisis continues to stall almost all nonessential business , a report from the Labor Department showed Thursday. In the week ending April 18, a seasonally adjusted 4.4 million workers applied for unemployment benefits. While that is down from 5.2 million a week earlier , the latest figure shows layoffs continue to mount as businesses across the country stay closed and Americans stay home. Those laid off since the virus began to spread meaningfully in the U.S. and lockdowns began amount to roughly 16% of the U.S. workforce.

For perspective, before the virus struck, just over a million workers applied for unemployment benefits in a typical five-week period. In the worst such span during the Great Recession, it was less than four million. In states including Michigan, Kentucky, and Rhode Island, more than a quarter of the workforce has now filed for jobless benefits … While some economists say the worst may be over in terms of the sheer weekly number of layoffs, the impact will be lasting. Job losses of this magnitude translate to an unemployment rate of 18.3%, though the official unemployment rate won’t reflect that because people are only counted as unemployed if they are actively seeking work, which is currently difficult in many industries, said Heidi Shierholz, director of policy at the Economic Policy Institute and former chief economist at the Labor Department.”

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BLOOMBERG/Eliza Winger and Tom Orlik

High-Frequency Metrics Give a Better Picture of This Recession

April 23, 2020

restaurat bookings“Traditional indicators are no match for this fast-paced, virus-induced recession, which is why Bloomberg Economics have assembled an alternative set of high-frequency metrics. Since mid-March, 22 million displaced workers have filed for unemployment benefits, at a pace averaging 5.5 million per week. The more than 40 percentage-point drop in the Mortgage Bankers Association’s Purchase Applications index signals that housing won’t be spared in this recession. Data from the Moovit Public Transit Index show ridership in the three largest U.S. cities down substantially from the level before the virus outbreak.

The lockdowns are having a devastating impact on the restaurant industry, as shown in data from the OpenTable restaurant booking app. The Consumer Comfort index, which is based on Americans’ views on economic conditions, tumbled to 45 in the latest reading, indicating a sharp decline in sentiment. The oil rig count has dropped more than 24% since the beginning of January as prices for crude cratered. Output of raw steel has plunged 34% since the beginning of January, weighed down by idled plants and slumping demand.”

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CNBC/Jesse Pound

Leon Cooperman says crisis will change capitalism and taxes have to go up

April 23, 2020

shaking money from a man's pockets“Billionaire investor Leon Cooperman told CNBC that the coronavirus crisis will likely change capitalism forever and that taxes will need to be raised soon. ‘When the government is called upon to protect you on the downside, they have every right to regulate you on the upside,’ Cooperman said. ‘So, capitalism is changed.’ The chairman and CEO of Omega Family Office said the country is shifting to the left and that taxes will have to go up regardless of who wins the presidential election. ‘Quickly if Biden wins, slowly if Trump wins, but taxes have to go up. So, things like carried interest, capital gains taxes, the ability to roll over real estate sales tax free, all that stuff is going to have to be eliminated. For the good, by the way,’ Cooperman said.

The billionaire said last week that the U.S. government should not let companies go bankrupt due to economic destruction caused by the coronavirus pandemic. Some of the provisions in the CARES Act directed at major companies, including a program for airlines, included restrictions on stock buybacks and executive pay for those that accepted the money. Cooperman previously supported higher tax rates but strongly opposed the idea of a wealth tax, such as that proposed by Sen. Elizabeth Warren during the Democratic primary … Cooperman said that he was optimistic that the parts of the economy could begin to reopen in May but that he expected the overall recovery to be slow.”

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THE WALL STREET JOURNAL/Paul Hannon

Europe Suffers Record Collapse in Economic Activity

April 23, 2020

global chart“Business activity in Europe and Japan collapsed in April as governments tightened restrictions on movement and social interaction aimed at limiting the spread of the coronavirus, according to surveys of purchasing managers. The surveys suggest governments have effectively closed parts of the economy where face-to-face interaction is unavoidable—such as restaurants and barbers—and activity has tumbled in parts of the economy less directly affected. The drop in services sector activity is unprecedented in the history of the surveys, even in the wake of the global financial crisis.

According to data firm IHS Markit, the composite Purchasing Managers Index for the eurozone—a measure of activity in the private sector—fell to 13.5 in April from 29.7 in March. A reading below 50.0 indicates activity has fallen. The April reading was a record low. The lowest level reached in the wake of the global financial crisis was 36.2 in February 2009. ‘April saw unprecedented damage to the eurozone economy amid virus lockdown measures coupled with slumping global demand and shortages of both staff and inputs,’ said the chief economist at IHS Markit. In the U.K., the composite PMI fell to 12.9, a record low, from 36.0 in March. Germany fell to 17.1 from 35.0 in March … The declines were larger than expected, suggesting economic contractions in the 2nd quarter of 2020.”

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