REUTERS/Harshith Aranya

Gold slips but heads for biggest weekly gain since 2008

March 27, 2020

“Gold eased on Friday after five straight days of gains, but was still set for its largest weekly rise since December 2008 on safe haven demand as the coronavirus led to a surge in U.S. jobless claims and wreaked havoc on the global economy. Autocatalysts platinum and palladium, meanwhile, were poised for their biggest weekly gains on record, as a lockdown in major producer South Africa stoked supply worries. Spot gold had fallen 0.6% to $1,620.07 per ounce by 1226 GMT.

‘There’s some profit-taking after a strong rally,’ Bank of China analyst Xiao Fu said. ‘There’s still interest in gold as an inflation hedge and as a safe-haven. Over the medium to long term, these two properties will be enhanced.’ ‘Very short term, there is significant uncertainty in terms of liquidity, and how people are responding to the policy measures.’ Gold has gained about 8% so far this week supported by the biggest-ever jump in U.S. weekly jobless claims, and the U.S. Fed’s unprecedented economic stimulus measures. European stocks fell, in a sign that traders were focusing more on the outbreak than on policy. The U.S. dollar was set for its biggest weekly fall in over a decade.”

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Dow tumbles more than 1,000 points as U.S. tops China in coronavirus cases

March 27, 2020

American flag with blots“U.S. stock indexes opened sharply lower Friday morning a day after the Dow Jones Industrial Average and S&P 500 booked their best three-day win streaks since the 1930s.  Investors are worried that there are now more cases of COVID-19 reported in the U.S. than in China, while awaiting the likely passage of an economic rescue bill in the House later Friday after the Senate approved the key piece of legislation late Wednesday.

The Dow Jones Industrial Average headed 1,069 points, or 4.8%, at 21,486, the S&P 500 index lost 109 points, or 4.2%, at 2,520, while the Nasdaq Composite Index headed 3.8% points, or 3.9%, lower at 7,502. On Thursday, the Dow marked its best three-day gain since 1931, while it was the best such gain for the S&P since 1933. For the week, the Dow is on track to book a 14% gain, the S&P 500 is headed for a weekly rise of 11%, the Nasdaq Composite Index was more than 10%. Since their peaks, the Dow still stands 26% below its record high, the S&P 500 is down 25% from its Feb. 19 peak and the Nasdaq Composite Index is off 24% from its recent all-time high.”

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CNBC/Fred Imbert

US consumer sentiment falls to lowest level in more than 3 years

March 27, 2020

Consumer sentiment since 1980“U.S. consumer sentiment fell to a three-year low as the coronavirus outbreak ramps up, according to data from the University of Michigan.  The index of consumer sentiment dropped to 89.1 in March — its lowest level since October 2016 — from 101 in February. Economists polled by Dow Jones expected consumer sentiment to fall to 90. March’s decline in sentiment was the fourth-largest in nearly 50 years, according to Richard Curtin, chief economist for the Surveys of Consumers.

‘The extent of additional declines in April will depend on the success in curtailing the spread of the virus and how quickly households receive funds to relieve their financial hardships,’ Curtin said. ‘Mitigating the negative impacts on health and finances may curb rising pessimism, but it will not produce optimism.’ ‘There is no silver bullet that could end the pandemic as suddenly as the military victory that ended the Gulf war,’ he added.”

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BLOOMBERG/Jinshan Hong and Lin Zhu

The Second Virus Shockwave Is Hitting China’s Factories Already

March 26, 2020

Inside Chinese factory“Since last week, emails from foreign clients have been flooding into export manager Grace Gao’s in-box, asking to delay orders already made, putting goods ready to be shipped on hold until further notice, or asking for payment grace periods of up to two months. Gao’s firm, Shandong Pangu Industrial Co., makes tools like hammers and axes, 60% of which go to the European market. As the virus ravages the continent from Spain to Italy, the shutdowns there are cutting off orders to Chinese factories just as they were beginning to get back on their feet. It’s a story playing out across the country. ‘It’s a complete, dramatic turnaround,’ lamented Gao, estimating sales in April to May will plunge as much as 40% from last year. ‘Last month, it was our customers who chased after us checking if we could still deliver goods as planned. Now it’s become us chasing after them asking if we should still deliver products as they ordered.’

This emerging pattern poses a grave risk to the chances the world’s second-largest economy can repair the damage from the closures in February to curb the virus. Even as policy makers including Premier Li Keqiang talk up a recovery and roll out support measures, economists continue to cut their growth forecasts. ‘It is definitely the second shock-wave for the Chinese economy,’ said Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. The global spread of the virus ‘will affect China manufacturing through two channels: disrupted supply chains and declining external demand.’”

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Fed’s Kaplan Sees Big Hit to Economy 2nd Quarter, Path of Recovery Uncertain

March 27, 2020

Fred Kaplan“Federal Reserve Bank of Dallas President Robert Kaplan warned Friday that the economy’s recovery from the severe blow dealt by the coronavirus could take some time and will be surrounded by uncertainty. Speaking in an interview on Bloomberg TV, Mr. Kaplan said U.S. gross domestic product could shrink by around 20% in the second quarter, on an annualized basis. ‘We are going to climb out of this, it’s just a question of fast do we go again, from walking to running to sprinting, and we are still trying to come to grips with that question,’ Mr. Kaplan said.

He said the Federal Reserve’s unprecedented actions were more ‘more relief than stimulus’ and were taken to keep the economy from falling apart during the shutdown. He called the current downturn a ‘self-mandated recession’ aimed at reducing the spread of the coronavirus.  Against estimates from the St. Louis Fed that have pointed to a massive surge in unemployment to levels beyond those seen in the Great Depression, Mr. Kaplan said he’s not expecting that sort of scenario. ‘You could see the unemployment rate peak in the low-to-mid teens, but we would expect that would quickly decline, we would hope to 7% or 8% by the end of the year,’ Mr. Kaplan said.  He also said with demand falling through the floor and oil in a dramatic oversupply situation, it is also likely there will be a rise in deflationary forces. All of this will be hard to navigate.”

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REUTERS/Gabriela Baczynska and Balazs Koranyi

We need to act, ECB’s Lagarde tells feuding EU on coronavirus rescue: sources

March 27, 2020

ECB's Lagarde“European Central Bank chief Christine Lagarde urged wrangling EU leaders to act more decisively to cushion the economic hit of the coronavirus pandemic, three sources familiar with the matter said on Friday, as the bloc feuds over how far to go. The European Union’s southern states were left fuming after the bloc’s 27 national leaders failed to agree on more support for their economies, which have been battered by the disease, in a six-hour call Thursday.  Lagarde told the call that ‘further action is required’, stressing the need for urgency and telling the leaders that the EU was being too slow to respond to the crisis, said the people who were briefed on the discussions.

She warned of forecasts of a deep recession and the cost of complacency. It was the second such call by Lagarde to European policymakers this week, after she made a similar case to the euro zone finance ministers on Monday.  In the call on Thursday, Germany and the Netherlands came out forcibly against a push by Italy, Spain, Portugal, France and others to issue joint bonds, an echo of the bloc’s feuds during the 2008-12 eurozone debt crisis. ‘If we don’t respect one another and if we don’t understand that in the face of a common challenge we must have the capacity to respond to it together, no one has understood anything about what Europe is all about, Portugal Prime Minister Antonio Costa said after the leaders’ call ended up late on Thursday night. In the absence of agreement, the leaders gave their finance ministers two weeks to work out a way forward, but EU diplomats said it would be hard for the ministers to agree given that how deeply split their bosses.”

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