Market Commentary & Outlook during the pandemic.
The pullback in the US economy has been confirmed again last week. Existing home sales fell 8.5% m/m even though self-distancing protocols were only imposed by some states in mid-March. Home sales will certainly fell in April when almost every state shutdown large part of their economies. Initial jobless claims continued to move higher, indicating the impact of the crisis on the labor market. For the week ending on April 18th, 4.4 million people filed for unemployment benefits, taking the total number to over 26 million since mid-March. However, initial jobless claims have decreased since the beginning of the month. This week, Q2 GDP and ISM Manufacturing for April will be the key drivers. Analysts expect Q2 GDP growth to take a hit, predicting a 3.7% fall q/q.
The House of Representatives passed a $484 billion spending bill, of which $320 billion will go towards replenishing the Payroll Protection Program (PPP), as well as to provide further funding for coronavirus testing and hospitals. The next step for Congress is to provide aid to state and local governments, which will likely face resistance from the policymakers.
In Europe, EU leaders signed off on a €480 billion emergency rescue package and agreed on the need for a “recovery fund” to offset the economic shock caused by the coronavirus pandemic. However, they stayed divided over the size of such a fund and whether it would hand out grants or loans. Eurozone business activity collapsed in April to a record low amid widespread business closures. The flash IHS Markit Eurozone PMI composite output index fell to 13.5 from 29.7 in March. IHS Markit said the data suggest that the Eurozone economy would shrink at a quarterly rate of about 7.5%,
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