REUTERS/Brijesh Patel

Gold ticks higher as coronavirus worries deepen, Fed minutes eyed

April 8, 2020

“Gold edged higher on Wednesday as the rising coronavirus death toll hammered risk sentiment, while investors await the release of the U.S. Federal Reserve’s policy meeting minutes for clues on further stimulus measures. Spot gold ticked up 0.1% to $1,650.40 per ounce by 1030 GMT, after climbing to its highest since March 10 on Tuesday, at $1,671.40. U.S. gold futures rose 0.1% to $1,685.90. ‘Gold is relatively stable, the market is quite anxiously waiting for OPEC meeting results, which could go either way. On the other hand, we cannot say the pandemic in Europe and the U.S. have finished yet, there is still uncertainty,’ said Bank of China International analyst Xiao Fu.

‘People are also waiting for FOMC minutes to see whether there will be any indication for next round of stimulus, we’re in extremely volatile times and there could be some policy surprises.’ European stock markets snapped a two-day rally, as the coronavirus death toll rose in some of the worst-hit parts of the continent. More than 1.38 million people have been reported infected by the novel coronavirus across the world and 81,451 have died, according to a Reuters tally.”

THE WALL STREET JOURNAL/ Harriet Torry and Anthony DeBarros

WSJ Survey: Coronavirus to Cause Deep U.S. Contraction, 13% Unemployment

April 8, 2020

high odds“The coronavirus pandemic will cause a severe economic contraction, 14.4 million job losses and a spike in the unemployment rate this spring, with an economic recovery starting the second half of the year, economists forecast in a Wall Street Journal survey. Business and academic economists in this month’s survey expect, on average, that the unemployment rate will hit 13% in June this year, and still be at 10% in December. The jobless rate was 4.4% in March. Relative to February 2020, they expect employers to cut 14.4 million jobs overall, with about a third of economists predicting the labor-market’s low point will be in May this year.

Economists predict gross domestic product will contract at an annual rate of 25% in the second quarter. That is a sharp downgrade from the March survey of economists, when they expected GDP to shrink just 0.1% from April to June. ‘This is the worst external shock in anyone’s living memory; it is as if a meteor hit the Earth and now, we have to put it back on its axis,’ said Grant Thornton economist Diane Swonk. Still, nearly 85% economists expect the economic recovery will start in the second half of the year.”

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MARKET WATCH/William Watts

Coronavirus stock-market volatility is creating the largest daily price swings since 1929 crash

April 8, 2020

two charts“Talk about a tough trading environment. Analysts at Bespoke Investment Group, as illustrated in the tweet below, noted Tuesday that the S&P 500 index’s average absolute daily percentage change over the past five weeks has been plus or minus 4.8% — a historic achievement. ‘That’s higher than we saw at the height of the financial crisis, after the 1987 crash, and in the late stages of the Great Depression. The only time the S&P’s average daily move over a five-week period was greater was after the Crash of 1929,’ the analysts said in a note.

Stocks ended slightly lower Tuesday, but only after erasing large early gains that saw the Dow Jones Industrial Average and the S&P 500 post their biggest blown gains since October 2008. Wild intraday swings in both directions lead to what some investors have described as ‘treacherous’ conditions. Elevated volatility is also a characteristic of bear markets, which often produce rip-roaring short-covering rallies but remain in a downtrend. Further illustrating the degree of daily price swings, the S&P 500 ended a 12-day streak of 1% moves up or down, the Bespoke analysts noted. That comes on the heels of a 13-day streak of 1% moves that ran from March 2 to March 18. A 13-day run is longer than anything seen during the 2008 financial crisis and just two shy of the 15 straight days of plus or minus 1% moves seen in October 2002 at the lows of that bear market, they said, observing that the only other period with a longer streak of 1% daily moves came during the Great Depression of the 1930s. ‘Looking at this another way, in the last five weeks (25 trading days) the S&P 500 has seen a 1% move 24 times,’ they said.”

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Coronavirus fallout: One-third of Americans missed rent payments in April

April 8, 2020

a house on a stack of money“As the novel coronavirus slows the U.S. economy, many renters — now unemployed — wondered how they would pay April rent. New data shows that one-third of Americans did not pay April rent before the due date. As the novel coronavirus pandemic causes mass layoffs and financial disruption, 31% of U.S. renters did not pay April rent on time, up from 19% a month earlier and 18% in April 2019, according to a new report by the National Multifamily Housing Council (NMHC) based on 13.4 million rentals. Among U.S. renters, only 69% paid April rent on time.

‘I started worrying when restaurants and public spaces started shutting down. I know it was necessary, but, man, it’s painful… When our tenants started getting laid off, I knew we had a huge problem,’ said Granger MacDonald, a Kerrville, Texas landlord with over 4,500 units. Renters are particularly exposed to financial risk during the pandemic. Renters tend to have lower income and less stable jobs than homeowners, contributing to some 35% who have lost income due to COVID-19, according to a March 31 survey of 500 renters by St. Louis-based listing website Clever. Forty-five percent of renters do not have enough savings to cover rent payment for a single month.”

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THE NEW YORK TIMES/by Raymond Zhong and Vivian Wang

China Ends Wuhan Lockdown, but Normal Life Is a Distant Dream

April 8, 2020

standing alone in a field outside a city“China on Wednesday ended its lockdown of Wuhan, the city where the coronavirus first emerged and a potent symbol in a pandemic that has killed tens of thousands of people, shaken the global economy and thrown daily life into upheaval across the planet. But the city that has reopened after more than 10 weeks is a profoundly damaged one, a place whose recovery will be watched worldwide for lessons on how populations move past pain and calamity of such staggering magnitude.

In Wuhan, sickness and death have touched hundreds of thousands of lives, imprinting them with trauma that could linger for decades. Businesses, even those that have reopened, face a wrenching road ahead, with sluggishness likely to persist. Neighborhood authorities continue to regulate people’s comings and goings, with no return to normalcy in sight. Chinese authorities sealed off Wuhan, an industrial hub of 11 million people, in late January, in a frantic attempt to limit the outbreak’s spread. At the time, many saw it as an extreme step, one that could be tried only in an authoritarian system like China’s. But as the epidemic worsened, governments around the world enacted stringent restrictions on their citizens’ movements … the full measure of the sacrifice such policies entail — in jobs and income lost, in lives disrupted — might first be taken in Wuhan.”

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Deutche Welle/Business News

Economic researchers see Germany head toward deep recession

April 8, 2020

big factory“In their latest regular report on the state of the economy, Germany’s leading institutes said Wednesday the coronavirus pandemic was triggering a full-blown recession in Europe’s powerhouse. The researchers agreed that gross domestic product (GDP) would dip by 4.2% this year due to the virus-induced lockdown. The experts said economic output was likely to have shrunk by 1.9% in the first three months of the year alone, with the Federal Statistics Office (Destatis) expected to come up with a concrete figure for Q1 on May 15. More alarming, though, will be the toll that COVID-19 is expected to take on the economy in the second quarter. The research institutes on Wednesday predicted a GDP slump by 9.8%, emphasizing that this would be the sharpest decline ever recorded in the country since quarterly national accounts became available in 1970.

The expected Q2 decrease would be more than twice as steep as the decline during the global financial crisis in the first quarter of 2009, as the Munich-based ifo institute noted in its press release. “The recession is leaving very clear marks on the labor market and the government budget,” the head of Forecasts at ifo, Timo Wollmershäuser, warned. ‘At its peak, the unemployment rate will jump to 5.9% this year, and the ranks of short-time workers will swell to 2.5 million year over year.’ The institutes pointed out that the measures taken to weather the crisis would lead to a record combined deficit of €159 billion ($173 billion). Gross debt is expected to rise to 70% of GDP in 2020.”

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