Major stock markets retreat awaiting ‘ugly’ US jobs fallout

March 26, 2020: European and leading Asian stock markets were back in the red Thursday as investors once again focussed on the devastating economic fallout the coronavirus pandemic is expected to wreak.

        After a sharp contraction in growth for Singapore — whose economy is viewed as a barometer for the health of global trade — all eyes were on upcoming US jobless claims data, which is expected to show a massive rise.

The dollar was down sharply against its main rivals ahead of the figures, forecast by analysts to be considerably “ugly”.

Federal Reserve Chairman Jerome Powell on Thursday said the US central bank would continue to “aggressively” pump liquidity into the economy while acknowledging there would be a sharp downturn.

                  His comments came as G20 leaders were to hold a summit by teleconference, with hopes they would provide a united front after the group of leading economies was accused of being too slow to address the crisis.

                  The coronavirus will push Britain and the euro area into recession this year, with their economies expected to shrink by as much as two percent, the international ratings agency S&P Global warned on Thursday.

                  “Fiscal stimulus to the tune of just under $3 trillion from Germany and US brought two days of blockbuster rallies” for stock markets, noted Fiona Cincotta, the analyst at City Index trading group.

                  “However, momentum has faded as traders question how quickly the measures can be implemented and as the reality of the economic hit starts to show through in the data.”

                  Around 1115 GMT, London's benchmark FTSE 100 stocks index was down 1.4 percent.

                  In the eurozone, Frankfurt shed 2.1 percent, Paris lost 1.9 percent, Milan gave up 0.8 percent and Madrid dropped 1.4 percent.

                  “There are some nerves before the release of what are likely to be very high US weekly jobless claims,” noted Jasper Lawler, head of research at traders London Capital Group.

                  “US jobless insurance claims are expected to skyrocket this week. Many businesses will have had to make layoffs to survive the impact of travel restrictions and stay-at-home orders.

                  “The consensus estimates is for a whopping 1.5 million weekly jobless claims. If we see a number above two million, markets will start clamouring for the next government or central bank bailout,” Lawler added.

                  CMC Markets analyst Michael Hewson said the figures “could well be extremely ugly” and warned some estimates had put them at around the four-million mark.

                                                – Singapore contracts –   

                  In Asia on Thursday, Tokyo's main stocks index ended down 4.5 percent after surging by almost one fifth over the previous three days, while Hong Kong shed 0.7 percent and Shanghai eased 0.6 percent. Singapore lost more than one percent as the city-state said its economy contracted sharply owing to virus fallout.

                  Compared with the previous quarter, GDP dived 10.6 percent, as all sectors of the economy were battered.

                  “Singapore has kicked off the rounds of shockingly poor data,” said Cincotta.

                  “The GDP contracted at an annualised rate of 10.6 percent, the fastest rate of contraction in over a decade.

                  “This is merely giving us a taste of what's to come. The job market across the globe is about to turn very ugly,” she added.

                  Despite the Singapore update, other Asian stock markets rose, notably those playing catch up after being closed Wednesday.

                  Investors breathed a sigh of relief that US senators had finally passed a gargantuan stimulus package for the world's top economy after being delayed by wrangling over details.

                  The unprecedented $2 trillion US stimulus — described by Senate Majority Leader Mitch McConnell as a “wartime level of investment” — helped spur a surge across global equities earlier in the week.

                  – Key figures around 1115 GMT –

                  London – FTSE 100: DOWN 1.4 percent at 5,611.54 points

                  Frankfurt – DAX 30: DOWN 2.1 percent at 9,672.27

                  Paris – CAC 40:  DOWN 1.9 percent at 4,349.36

                  Milan – FTSE MIB: DOWN 0.8 percent at 17,105.31

                  Madrid – IBEX 35: DOWN 1.4 percent at 6,848.00

                  EURO STOXX 50: DOWN 2.0 percent at 2,743.22

                  Tokyo – Nikkei 225: DOWN 4.5 percent at 18,664.60 (close)

                  Hong Kong – Hang Seng: DOWN 0.7 percent at 23,352.34 (close)

                  Shanghai – Composite: DOWN 0.6 percent at 2,764.91 (close)

                  New York – Dow: UP 2.4 percent at 21,200.55 (close)

                  Euro/dollar: UP at $1.0965 from $1.0883 at 2230 GMT

                  Dollar/yen: DOWN at 109.87 yen from 111.20 yen

                  Pound/dollar: UP at $1.1962 from $1.1890

                  Euro/pound: UP at 91.64 pence from 91.51 pence

                  Brent North Sea crude: DOWN 1.1 percent at $27.08 per barrel

                  West Texas Intermediate: DOWN 2.8 percent at $23.80 per barrel

AFP/APP

Posted on: 2020-03-26T17:18:00+05:00

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