Europe
This afternoon we got further evidence of the economic devastation being wrought by this pandemic, with the release of yet another set of awful weekly jobless claims from the US, as well as the latest employment data from Canada.
Just over three weeks ago we saw a record 3.3m US citizens file for weekly jobless claims, a record number. Since then we’ve seen two successive numbers in excess of 6.5m, meaning that up until now 16.7m US citizens have lost their jobs.
With next week’s claims also set to be included in the next US payrolls report, the US economy is now facing the prospect of seeing the loss of over 20m jobs in the space of a month.
At the same time Canada also released its own monthly jobs report where we saw over 1m Canadians leave the labour force, sending the unemployment rate up from 5.6% to 7.8%.
Despite the dire nature of these numbers, stock markets have taken another leap higher, however this had more to do with the actions of the US Federal Reserve, who took the opportunity, at precisely the same time as these jobs’ numbers dropped, to announce a new $2.3trn program to support Main Street.
The Main Street Program, as it has been termed, will make 4-year loans to companies with less than 10k workers, $2.5bn in revenue and in good financial health before the crisis. Both principal and interest will be deferred for 1 year.
These loans will be made through ordinary banks with the Fed buying up to 95% of the loan. Any firms taking advantage of the loans will have to make a “reasonable effort” at retaining workers and payroll. The Fed also said it would make every effort to assist households and employers of all sizes at the local as well as state level, as part of the Cares Act.
The upshot of today’s actions has been to see markets here in Europe finish the week on their highs as central banks start to move into the role of not only lender of last resort, but banker of last resort, as well as implement policy hand in glove with the US Treasury. Today’s momentum has seen the FTSE100, FTSE250 and German DAX all reach their best levels in almost four weeks.
With the Bank of England also moving in that direction with the implementation of its new “ways and means” financing of the UK government, you can almost hear the sounds of the helicopter blades starting to speed up, as the evidence of the coronavirus crisis starts to make its presence felt.
All of this extra stimulus has helped overshadow the fact that there is little likelihood in the short term that the current lockdown measures will be lifted. The continued rise in the death toll, in the UK as well as across Europe suggests restrictions are likely to remain in place, at least until the end of the month.
One of the best performers on the London market today has been Just Eat (LON:JE) Takeway, after the company reported that Q1 orders had risen 50% as a result of the lockdown. The company said it had seen thousands of new restaurants added to its books as the food industry struggles to adapt to the changes being wrought by the current lockdown. A wider concern is how the business, hygiene checks all of these new restaurants to ensure that they comply with standard food and hygiene ratings. Today’s numbers don’t include how well the UK business has done.
Drinks giant Diageo (LON:DGE) announced that it would be cancelling the final part of its share buyback program, as it updated shareholders about the current trading environment. The interim dividend will still be paid but the company is taking steps to boost its liquidity by completing the issuance of new sterling and euro bonds of £1.9bn. The company said that a lot of its global business had been adversely affected by the various lockdowns and social distancing measures, but was seeing a pickup in China. The company also said it was contributing to the task of fighting coronavirus by donating alcohol to make more than 8m bottle of sanitiser for front line health care workers. The company also pulled its guidance for 2020.
Betting giant Flutter Entertainment, owners of Paddy Power and Betfair have said that they will be paying their dividend, however it will be in the form of ordinary shares, as opposed to cash.
US
US markets took their cues from the actions earlier today by the Federal Reserve to backstop Main Street and the new $2.3trn aid package for small businesses, putting US stocks on course for the best weekly gains since 2009.
The S&P500 has managed to reverse 50% of its declines from the record highs set earlier this year.
The latest US weekly jobless claims rose by 6.6m, with last week’s claims being adjusted up to 6.8m.
Disney shares have pushed higher on the open after the company said that new Disney+ TV subscriptions had passed the 50m mark, as it looks to take on the likes of Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) in the streaming market. A market that is becoming very popular right now in these testing times.
Starbucks (NASDAQ:SBUX) also said that it expected Q2 earnings to decline by 46%, as same store sales fell 3% in March, with a 70% decline in the last week of the month.
FX
The US dollar has come under further pressure this afternoon in the wake of the Fed’s actions earlier today, to help backstop the US economy, trading near to its lowest levels this week.
The greenback has lost the most ground against the Australian dollar this week, while the Canadian dollar has underperformed on account of its own dreadful employment numbers, though the loonie is still up on the week, helped in some respects by the firmer oil price.
The pound has continued to hold up despite the latest economic data showed the UK economy underwent a mild contraction in February of 0.1%, due to the widespread flooding throughout the country which would have significantly impacted economic activity. This morning’s announcement by the Bank of England that it would temporarily directly fund the UK government’s short-term spending plans in order to meet its day to day funding needs did raise a few eyebrows about monetary financing, however it isn’t anything the central bank hasn’t done before. It did something similar in 2008 at the height of the financial crisis.
Commodities
It’s been all eyes on OPEC+ today as rumours swirl about the likelihood of a production cut, and who is likely to bear the brunt of any reductions. Oil prices have remained fairly steady heading into the weekend, despite today’s awful jobs numbers, and what they are likely to mean for future consumption trends.
Gold prices have jumped sharply again, heading back towards their recent highs, as it looks to close in on $1,700 an ounce.
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