Key Points From This Week
Fed Announces Uncapped QE Program
The Federal Reserve stepped up its fight against the economic threat from COVID-19 this week. Following recently cutting rates to record lows of 0.25% and announcing a $ 750 billion QE program, the Fed announced this week that it will now be running unlimited QE. This is an unprecedented step for the Fed and means that purchases of bonds and assets will n longer be capped but instead continued as necessary. The Fed will now also be purchasing corporate bonds for the first time.
US Death Toll Passes 1000, Global death Toll Passes 20K
The spread of COVID-19 is demanding an even greater response from countries as the global death toll moved past 20k this week. China has announced that it will now temporarily suspend entry from all foreigners as it fights to control the virus. Outside of China the virus is still spreading rapidly. Spain has now surpassed China to mark the second highest death toll from the virus, behind Italy. In the US deaths passed 1000 this week. In the UK, the death toll slowed midweek, dropping by 50% before increasing dramatically on Thursday with 113 deaths (the highest one day increase for the UK)
BOE Warns of UK Recession
Following two unscheduled rate cuts and the restarting of QE this month, the BOE kept rates on hold at its March meeting. However, the BOE struck a very concerned tone and warned of the risk of a serious economic downturn as a result of the economic disruption caused by COVID-19, supporting expectations of further easing.
Equities Markets Recover
Equities markets finally started to recover this week. On the back of a month of heavy sales, global indices started to pick up as the market reacted to the latest instalments of central bank easing. Huge new additions to QE from the ECB, BOJ, BOE and the Fed has helped lift sentiment and for now, equities are back in demand.
Key Events Next Week
The latest Chinese manufacturing data will be closely watched next week. The sector fell to its lowest level on record last month as a result of the nationwide lockdowns in place in response to COVID-19. This reading is likely to report further weakness given that restrictions are only just starting to ease in parts of China.
The latest US manufacturing data will also be a key release next week. The prior month’s reading managed to just remain in expansionary territory at 50.1. However, given that this reading will better cover the period affected by COVID-19, a drop into contractionary territory is expected, in line with what we have seen in the UK and Eurozone.
US Labour Reports
The labour reports on Friday (NFP, average hourly earnings and the unemployment rate) will also be a key release next week. With jobless claims this week soaring over the 3 million mark, the NFP
Keep An Eye On
Donald Trump has said that he will reassess the lockdowns in place in the US next week saying that he wants to get America open for business again as soon as he can. However, with the death toll still surging there and health experts warning against ending the lockdown, it would appear premature for such an announcement. Much attention remains on the situation in the UK, if the death toll continues to rise over coming days, the PM has warned that he could be forces to take further measures.
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