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Stock markets make historic gains as US and G7 pledge coronavirus fightback - as it happened

This article is more than 4 years old
 Updated 
Tue 24 Mar 2020 13.55 EDTFirst published on Tue 24 Mar 2020 03.39 EDT
An unusually quiet St David’s shopping centre in Cardiff, United Kingdom.
An unusually quiet St David’s shopping centre in Cardiff, United Kingdom. Photograph: Polly Thomas/Getty Images
An unusually quiet St David’s shopping centre in Cardiff, United Kingdom. Photograph: Polly Thomas/Getty Images

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Key events

Eurozone business activity collapses as Covid-19 pandemic rages

NEWSFLASH: Eurozone economic output is slumping this month, at a rate that far exceeds the worst moments of the financial crisis or the euro debt crisis.

Data firm Markit’s monthly survey of purchasing managers, just released, has crashed to its lowest level since it was created in 1998 -- at just 31.4.

That’s a dramatic slump from February’s 51.6 -- showing “an unprecedented collapse in business activity” (echoing what we’ve already heard from France and Germany) [reminder: anything below 50 = contraction].

Europe’s services sector was especially hard hit, especially consumer-facing industries such as travel, tourism and restaurants. But factories are also shrinking sharply, due to weak demand and restrictions on workers’ travel.

  • Flash Eurozone Services PMI Activity Index(2) at 28.4 (52.6 in February). Record low (since July 1998).
  • Flash Eurozone Manufacturing PMI Output Index(4) at 39.5 (48.7 in February). 131-month low.
  • Flash Eurozone Manufacturing PMI (3) at 44.8 (49.2 in February). 92-month low

COVID-19 caused the largest collapse in business activity ever recorded in the eurozone, according to our data. The Composite Output PMI fell to 31.4, falling over 20 points and signalling a quarterly contraction of approximately -2%. More: https://t.co/hKFPEEwKhI pic.twitter.com/kT7tGWLN9p

— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020

Eurozone bosses are also extremely gloomy about the future, and slashing their workforces in response. Markit says:

Expectations of future output also deteriorated markedly to reach an all-time low, with record degrees of pessimism about the year ahead seen in both manufacturing and services.

The unprecedented slumps in demand and business sentiment prompted the largest monthly cull in staffing levels since July 2009.

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Germany heads for steep recession

Germany’s service sector has also contracted extremely sharply this month.

Data firm Markit reports that its flash Germany Services PMI Activity Index has slumped to just 34.5, from 52.5 in February - a record low.

Factory output also contracted again, with the manufacturing PMI sliding to 45.7 from 48.0 (further away from the 50-point mark showing stagnation).

German PMIs consistent with GDP contraction of over 8% annualised. Manufacturing PMI comes out *6 points* above consensus, but once again due to supply-side disruptions (delivery times).
Markit: "the situation is much worse than the headline PMI suggests". pic.twitter.com/KUF3Ut2GXL

— Frederik Ducrozet (@fwred) March 24, 2020

Phil Smith, Principal Economist at IHS Markit, says Germany is heading for a deep recession:

“The unprecedented collapse in the PMI underscores how Germany is headed for recession, and a steep one at that. The March data are indicative of GDP falling at a quarterly rate of around 2%, and the escalation of measures to contain the virus outbreak mean we should be braced for the downturn to further intensify in the second quarter.

The service sector has so far borne the brunt of the government’s measures to stem the spread of COVID-19, with activity falling to the greatest extent in almost 23 years of data collection, and at a rate that already far surpasses anything seen even during the depths of the global financial crisis.

Smith also warns that the manufacturing sector is probably worse than today’s report suggests -- because long delivery times and low stock levels boost the PMI (because they typically show a strong economy).

French PMI slumps at a record pace

Good grief! France’s economy is shrinking at an alarmingly fast rate, as the coronavirus outbreak hurts businesses badly.

The latest survey of French purchasing managers shows that activity shrank at a record pace in March (the survey goes back to the late 1990s).

Overall new orders placed with French businesses fell at the fastest pace in the series history too, with services firms particularly badly hit. This forced firms cut their staff numbers for the first time in nearly three and-a-half years, at the fastest rate since April 2013

This dragged the Flash France Composite Output Index down to just 30.2 in March, from 51.9 in February - a record low. Anything below 50 shows a contraction.

The service sector was particularly badly hit too:

  • Flash France Services Activity Index at 29.0 in March (52.6 in February), series low
  • Flash France Manufacturing Output Index at 35.6 in March (49.0 in February), 132-month low
  • Flash France Manufacturing PMI at 42.9 in March (49.7 in February), 86-month low

It’s an extremely worrying sign for France’s economy, and the wider economy.

French PMI: there's no word for that. 😱 pic.twitter.com/5x6wSFo3zG

— Frederik Ducrozet (@fwred) March 24, 2020

France services sector PMI plunges below GFC levels according to @IHSMarkitPMI (preliminary data).#Covid19 #recession pic.twitter.com/iWco6LTxdn

— Marc Brütsch (@MarcBruetsch) March 24, 2020

Gove: Sports Direct will not be opening.

It appears that Sports Direct has been forced to abandon its attempt to defy the government’s lockdown, and keep its stores open.

Cabinet Office minister Michael Gove just told the BBC Today Programme that the government has made it clear that this decision was wrong.

Management have got the message, and Sports Direct stores will not be open, he insisted.

Michael Gove says on Radio 4’s Today: “the management of that store have got the message and Sports Direct will now not be open.”

The message should not have been necessary. Mike Ashley was prepared to put lives at risk - workers and customers - for money. Disgusting.

— George Caulkin (@GeorgeCaulkin) March 24, 2020

Michael Gove says the government told Sports Direct not to open stores and Mike Ashley has now agreed.

— Jim Waterson (@jimwaterson) March 24, 2020

Clearly the government wasn’t convinced by SPD’s argument that the public needed to nip to the high street to buy home gym equipment....

UK stock market opens higher

In a welcome relief to investors, Britain’s stock market is rebounding from Monday’s rout.

The blue-chip FTSE 100 has jumped by almost 4% in early trading, up 199 points at 5190 (last night it closed at its lowest point since 2011).

The London Stock Exchange itself is the top riser (+10%), followed by life insurance and financial services group Prudential (8.3%), and cruise operator Carnival (9%) (whose cruises are currently mothballed).

The FTSE 250 index of mid-sized companies has also bounced, up nearly 3% at 13,504.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, warns that the markets are pinning their hopes on a US stimulus deal -- where there’s still conflict on Capitol Hill.

Investors have their hopes tied to the $2-trillion rescue package that needs to get signed by the Congress, yet apparently there are controversies among policymakers on how to spend this money.

House Speaker Nancy Pelosi says the help is destined to corporations first, not workers and their families. While spending on climate change related issues are said to pull politicians apart and prevent the deal from getting signed. Yet a delayed deal is damaging for both parties, especially now that the coronavirus-induced lockdowns accelerate across the United States as well.

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A currency trader in Seoul, South Korea, today Photograph: Lee Jin-man/AP

Asia-Pacific stock markets have rallied overnight, despite the dire PMI reports from Japan and Australia.

All the main indices have rebounded from Monday’s slump, led by Japan and South Korea.

  • Japan’s Nikkei: up 7.1%
  • South Korea’s KOSPI: 9%
  • China’s CSI 300: up 2.7%
  • Australia’s S&P/ASX 200: +4%

Asian stocks bask in their best day in four years buoyed by the Fed's unprecedented bond buying program https://t.co/xnXflim7oJ pic.twitter.com/oKuITwtqsL

— Bloomberg (@business) March 24, 2020
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Australia’s economy is also having a torrid month.

The Australian Services PMI, released today, has slumped to a record low of 39.8 as restaurants, cafes and tourism were hit hard by travel bans and cancellations of events and concerts.

That shows a very sharp contraction.

Flash #PMI data indicated business activity across #Australia private sector fell at a steeper rate in March, led by a sharp fall in services activity as COVID-19 hits demand. Read more: https://t.co/sTGq4z87dX pic.twitter.com/Tciyp8Xy1S

— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
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Japanese PMIs show economic slump

Japan’s economy has suffered a slump in activity this month, according to the latest purchasing managers survey.

Activity at Japanese services sectors shrank at the fastest pace since at least 2007 in March, while factories contracted at the fastest rate since the aftermath of Lehman Brothers’ collapse.

It’s a clear sign that Japan’s economy is weakening fast, and of course they’re not alone!

Reuters has the details:

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 44.8 from a final 47.8 in February, its lowest since April 2009.

The au Jibun Bank Flash Japan Services PMI index slumped to a seasonally adjusted 32.7 from the previous month’s 46.8, its lowest since the start of the services sector survey in September 2007.

#Japan's economic downturn deepens drastically in March, dragged down by a sharp contraction in the service sector, according to #PMI data as #coronavirus outbreak led to plummeting tourism, event cancellations and supply chain disruptions. Read more: https://t.co/t8fIv8YsoD pic.twitter.com/2UUJKAN9i7

— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020

Japan services PMI is in full financial crisis territory, worse than during the 2011 earthquake and Fukushima nuclear disaster, and this is a country that's less visibly impacted by coronavirus now than any other large advanced economy in the world. pic.twitter.com/THy3OYoUsK

— Mike Brrrrrd (@Birdyword) March 24, 2020

The agenda: UK and eurozone PMIs to show economic slump

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

With Britain now in lockdown, we’re about to learn how badly the coronavirus has hurt the UK economy. And it’s going to be grim.

A new survey of purchasing managers at service sector firms and factories across the country is going to show just how badly exports and output have fallen this month, and how many firms have slashed jobs.

These PMI surveys are designed to give a really up-to-date healthcheck on what’s happening in the economy right now. But of course, we already know that self-isolation measures to slow Covid-19 are having a chilling impact on growth.

So the UK ‘composite PMI’, which covers much of the economy, is certain to tumble into contraction territory (below 50 points).

The eurozone PMIs are likely to show an even more painful contraction, as lockdowns in Italy, France, Spain and Germany have already hurt businesses badly.

With factories and services firms in Asia also badly hit by Covid-19, and American cities now enforcing lockdowns, a global recession in 2020 looks inevitable.

Last night, the International Monetary Fund warned that it could be worse than 2008.

IMF Kristalina Georgieva said:

First, the global economic outlook for 2020 is expected to be negative. We will face recession at least as bad as during the global financial crisis or worse, but we expect recovery in 2021.

First, the global economic outlook for 2020 is expected to be negative. We will face recession at least as bad as during the global financial crisis or worse, but we expect recovery in 2021. Countries should undertake more bold fiscal actions. (2/4) https://t.co/Ek1DT1ZpSQ

— Kristalina Georgieva (@KGeorgieva) March 23, 2020

Third, many countries are turning to the IMF for financial assistance. To date, we have received close to 80 requests and we stand ready to deploy all our US$1 trillion lending capacity. (4/4) https://t.co/Ek1DT1ZpSQ #COVID19 #coronavirus pic.twitter.com/0bPD9V7iyC

— Kristalina Georgieva (@KGeorgieva) March 23, 2020

Also coming up today

Global stock markets are expected to rebound today, after slumping yesterday.

Investors have had time to digest the latest extraordinary action from the US Federal Reserve (unlimited money printing until morale improves), and are still hoping American politicians will agree a stimulus package.

European Opening Calls:#FTSE 5166 +3.45%#DAX 9101 +4.12%#CAC 4056 +3.61%#AEX 441 +4.16%#MIB 16315 +4.85%#IBEX 6499 +4.32%#OMX 1340 +3.72%#STOXX 2575 +3.59%#IGOpeningCall

— IGSquawk (@IGSquawk) March 24, 2020

Non-essential UK retailers will be shutting their doors today - it’s your last chance to buy a meaty, or vegany, treat from Greggs, or a new outfit from

But essential services will continue to operate..... which (believe it or not) Sports Direct believes it qualifies for as a ‘sports and fitness retailer’.

WH Smith is also “positioning itself to government as an essential retailer”, as it sells newspapers and magazines.

We’ll keep an eye on whether these arguments holds water through the day....

The agenda

  • 9am GMT: Eurozone composite ‘flash’ PMI for March: expected to slump from 51.6 to 38.8
  • 9.30am GMT: UK composite ‘flash’ PMI for March: expected to slump to 45.1 from 53.0
  • 1.45pm GMT: US composite ‘flash’ PMI for March
  • 2pm GMT: US New Home sales for February

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