REUTERS/Asha Sistla

Gold slips as virus panic offsets U.S. stimulus hopes

March 24, 2020

“Gold prices retreated from a two-week high hit earlier on Wednesday as concerns about a sharp rise in coronavirus infections outweighed expectations of a $2 trillion U.S. government stimulus package to soften the economic fallout.  Spot gold, which rose as much as 5% on Tuesday, was down 0.4% at $1,604.28 per ounce at 1242 GMT, having earlier risen as high as $1,635.79.

‘The U.S. stimulus had a huge positive impact initially but it was always questionable whether that would be sustainable in an environment of rapidly rising coronavirus cases,’ OANDA analyst Craig Erlam said. ‘The big downside risk (in gold) remains the potential for those sharp sell-offs in equity markets to be repeated, especially following yesterday’s huge rally.’ U.S. Senate majority leader Mitch McConnell said the fiscal stimulus package, expected to be worth $2 trillion, had been agreed upon and would be put to a vote later on Wednesday. European stocks were choppy again on Wednesday with bourses across the region wiping off most of their early morning gains.  The world has been reeling from the impact of the virus, which has infected nearly 421,000 people.”

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CNBC/Lauren Hirsch and Leslie Josephs

White House and Senate strike deal on historic $2T coronavirus stimulus bill

March 25, 2020

ben franklin in surgical mask“The White House and Senate leaders reached a deal early Wednesday on a massive $2 trillion relief bill — said to be the largest rescue package in American history — to combat the economic impact of the coronavirus outbreak. ‘At last we have a deal,’ Senate Majority Leader Mitch McConnell said after 1:30 a.m. ET from the floor of the Senate. Efforts to pass the measure have taken on urgency as hospitals, companies, states and individuals have all pleaded for needed resources to battle the pandemic.

‘In effect, this is a war-time level of investment into our nation,’ said McConnell, who promised the bill would rush financial assistance to Americans through direct checks to households, enhanced unemployment insurance, hundreds of billions of dollars in loans to small businesses, and more resources for hospitals. The Senate has yet to release the final terms of the deal. An earlier draft would provide cash payments of up to $1,200 for individuals, $2,400 for married couples and $500 per child, reduced if an individual makes more than $75,000 or a couple makes more than $150,000. The draft language also stipulated a $350 billion fund for small businesses to mitigate layoffs.”

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MARKET WATCH/Lina Saigol and Ryan Weeks

Gold-buying app sees 718% spike in volume as coronavirus volatility drives investors to havens

March 25, 2020

GLINT credit card“Gold-buying apps, which allow customers to buy and use the precious metal for everyday spending, are seeing record volumes as investors flock to the safe-haven commodity amid violent market swings on fears of a coronavirus recession. British-based startup Glint Pay Services, which operates in the U.S., the U.K. and Europe, said it had seen a 718% increase in clients purchasing gold over the last five weeks as volatility has swept through markets.  ‘Sales are going through the roof,’ Jason Cozens, founder and CEO of Glint told MarketWatch. ‘We are breaking records everyday.’ The average gold purchase per customer has increased in the last five weeks to £2,739 from £1,373, Cozens said.

Founded in 2018, Glint allows customers to buy and sell, and spend their physical gold instantly through a debit card linked to the Mastercard network and via multicurrency app. ‘Customers can buy as little as 1 cent of gold to more than $1 million and use it to buy anything from a coffee to a car,’ Cozens said. ‘Gold is the ultimate form of money.’ To date, Glint, has more than 74,000 app downloads, ‘tens of thousands of registered users’ and more than £69 million in transacted volume. It has plans to launch the app in Asia. The company will roll out person-to-person payments to clients within the next couple of months so that everyone can send gold in lieu of currency payment ‘as easily as sending a text,’ Cozens said. Gold trading volumes at Goldex are also soaring, up 125% in 2020 compared with last year, and in a month-to-month comparison to March 2019 the amount of gold buys and sells has increased by a staggering 1,600%.”

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THE VERGE/Russell Brandom

Relaxing isolation rules won’t help the economy, say economists

March 25, 2020

One woman alone on street in mask“As the COVID-19 pandemic stretches into its second month and shows no signs of slowing, President Trump has pushed to relax the restrictions on travel and movement that are the best hope for controlling the disease. ‘We have to get our country back to work,’ Trump said in a town hall on Tuesday. ‘This cure is worse than the problem. Many people — in my opinion, more people — are going to die if we allow this to continue. Our people have to go back to work.’ He named Easter Sunday, April 12th, as an end date for the restrictions.

But there’s a problem with trying to restart the economy by relaxing containment restrictions: economists say it won’t work. The economy can’t recover until the pandemic is under control, says Maurice Obstfeld, a professor at the University of California, Berkeley and former chief economist at the International Monetary Fund. ‘Before we restart economic activity, we have to stabilize the level of infections,’ Obstfeld tells The Verge. If we move too soon, he worries we would see a new surge in infections, ‘causing even more damage to the economy than if we confronted the health crisis decisively now.’”

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BLOOMBERG/Brian Chappatta

A Rent Wipeout Could Ignite a Mortgage Crisis

March 25, 2020

Closed until March 28 sign“The rent is too high. And that’s causing consternation across Wall Street desks still traumatized by the 2008 financial crisis. As the days go by in an unprecedented shutdown of the U.S. economy to slow the coronavirus outbreak, any amount of rent looks increasingly difficult to cover for a wide swath of Americans, from recently fired service workers to local small-business owners. Unfortunately for those most affected, these payments can’t simply be wiped out — at least, not without dire repercussions. My Bloomberg Opinion colleague Noah Smith wrote a column this week arguing that people need a break on all sorts of debts. But when it comes to rent, there’s pretty much no way around people eventually paying what they owe, ideally with the help of the U.S. government, or else risk ‘turning a health crisis into a banking crisis.’

This, more or less, is the catastrophic ‘domino effect’ that real-estate investor Tom Barrack, chief executive officer of Colony Capital Inc., warned about this week. Simply put, if commercial tenants don’t pay rent because of a lack of cash, then property owners might be squeezed and default on their mortgage payments. The same goes for homeowners. That could bring the problem squarely onto the balance sheets of large U.S. banks, which will suffer steep losses on loans. As more details emerge about the carnage across the $16 trillion U.S. mortgage market, it’s clear that the complex web of financial obligations tied to real estate could again be the flashpoint that leads to a financial crisis without some sort of intervention.”

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YAHOO FINANCE/Edmund Heaphy

Coronavirus pushes eurozone to largest plunge in business activity ever

March 24, 2020

European union flags“Business activity in the eurozone plunged at the fastest pace ever in March, as the 19-member common currency area contended with the spiralling impacts of the coronavirus pandemic. A closely watched survey by IHS Markit found that the economy suffered an unprecedented collapse in activity, with the sector’s purchasing managers’ index reading coming in at 31.4, far below analyst expectations. PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction. The contraction in March is larger than that seen during the peak of the financial crisis, which saw the index hit 36.2 in February 2009.

The bloc’s services sector was ‘especially hard hit,’ IHS Markit said, pointing to the fallout for consumer-facing industries such as travel, tourism, and restaurants. Business activity in the services sector fell to 28.4 from 52.6 in February — the lowest reading ever recorded. ‘Business activity across the eurozone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis,’ said Chris Williamson, chief economist at IHS Markit. ‘Steep downturns were seen in France, Germany and across the rest of the euro area as governments took increasingly tough measures to contain the spread of the coronavirus.’ The manufacturing sector, meanwhile, saw its largest monthly contraction since April 2009.”

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