Covid-19 crisis pushes US jobless claims above 40m - as it happened
Rolling coverage of the latest economic and financial news, after US data showed another 2.1 million workers filed for unemployment benefits last week
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ING's chief international economist James Knightly cautions that despite the relative drop in US jobless claims, further hiring will be constrained by social distancing restrictions.
Social distancing will limit the ability of many retail, restaurant and leisure firms to open properly and they may find it isn't economically viable to do so with the constraints currently being placed on them - such as limiting customer numbers.
Other businesses in various sectors may find that demand doesn't return as quickly as hoped and may need to adjust employment levels in the months ahead.
The national average weekly unemployment payment for recipients is nearly $1,000 and there are many industries in which this is substantially above what an employee could ordinarily receive in wages. In fact a paper from the University of Chicago estimates that 68% of benefit recipients are actually receiving a higher income as a result.
Many businesses will not be able to pay enough to compete with this, so while this additional payment is good news for individual incomes and cash flow, it may have the negative effect of hampering small businesses re-opening/recovery effort.
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The Nasdaq has bucked the trend and fallen at the open.
Here's how Wall Street opened the session:
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America cities and towns are dealing with some of the highest unemployment rates since the Great Depression.
Our team has put together a photo gallery capturing the reality on the ground:
Related: US unemployment hits 40m - in pictures
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US GDP for Q1 may have been revised down to -5%, but like most economies hit by the virus, the worst is yet to come.
Here's what the revised Q-1 US #GDP contraction looks like in the context of recent economic history.
The Q-2 number, likely to be in the minus 30-40% range, will involve yet another re-scaling of a y axis for an economic series in this #COVID19 world.#economy #markets #growth pic.twitter.com/XqM5mSWhuN
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The staggering job losses mark a grim milestone in the economic crisis that has gripped the US since the coronavirus triggered widespread shutdowns and stay-at-home orders in an effort to halt the spread of the deadly pandemic, my colleague Lauren Aratani writes.
Related: US job losses pass 40m as coronavirus crisis sees claims rise 2.1m in a week
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S&P 500 futures have extended their gains after the release of the GDP and jobless figures.
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While US jobless figures are incredibly high, the number of claims are starting to ease compared to a few weeks ago, as Bloomberg highlights on this handy chart:
U.S. weekly jobless claims drop to 2.1 million https://t.co/tykP7xcXXN pic.twitter.com/jFpCFFT4RY
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More data out of the US, with first quarter GDP shown to have contracted by -5.0%.
That is worse than forecast, with economists predicting that the reading would remain unchanged from preliminary estimates of -4.8%.
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Dataflash: Fresh data shows US jobless claims rose another 2.1 million in the week ending 23 May.
It means more than 40 million Americans have now filed for unemployment insurance after losing their jobs over the past 10 weeks during the coronavirus crisis.
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ING economist Carsten Brzeski says German inflation is likely to fall further over the coming months:
The drop in prices for consumer goods witnessed in many regional states suggests that a lack of demand, as well as an attempt to get rid of the goods piled up during the lockdown, have put downward pressure on inflation.
Looking ahead, there could be a more structural problem for inflation statistics. If consumer behaviour were to change structurally after an end to the lockdown measures, at least for a while, the basket measuring consumer price inflation might have to be adjusted, or at least taken with a pinch of salt.
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Holger Zschaeitz, reporter for Germany's Welt, points out that inflation is now at its lowest level in four years:
#Germany's annual inflation drops to 0.6% in May, lowest since 2016 as expected. pic.twitter.com/cIuGRJS374
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Dataflash: Preliminary CPI data out of Germany shows consumer prices rose 0.6% year-on-year, compared to 0.9% in April.
Adjusted figures, which make it comparable to other EU countries, shows inflation only rose 0.5% year on year, compared with 0.8% a month earlier.
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Nissan has confirmed it will not close its Sunderland manufacturing plant, instead shutting a factory in Barcelona as the Japanese carmaker seeks to cut 2.3bn in costs worldwide.
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Virgin Media is to disappear from the high street after deciding its network of more than 50 retail stores will stay shut once the coronavirus pandemic lockdown ends.
The cable and TV company, which operates 53 stores in the UK, is offering the 341 affected staff the opportunity to move to newly created roles.
We are focused on delivering the service customers want, in the ways they want it and at a time and place that suits them.
By creating new jobs in our most popular care and sales channels, we will be better able to provide our customers with the top service and support they rightly expect while retaining our talented workforce.
Related: Virgin Media to disappear from UK high street
12.22pm BST
EasyJet has been pushed out of the top 10 performers on London's blue chip index, as pharma stocks like Hikma and AstraZeneca push ahead. It comes as AstraZeneca tests one of its diabetes drugs as a treatment for Covid-19.
However, the budget airline is still trading higher by over 3%, as investors seem to welcome its cost cutting measures given the coronavirus crisis.
One possible silver lining for shareholders is that the crisis provides airlines with a chance to reset their costs structures.
Airlines can renegotiate with airports and other suppliers, as well as reducing headcount and agreeing reductions in staff pay. That would make the surviving airlines leaner and more efficient than they were previously, even if social distancing measures prevent them from exploiting this in the near term.
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If you have all but given up using cash over the crisis, you are not alone. Mastercard has found that two thirds of all transactions and now being made using contactless payments.
The shift to contactless has been accelerating over the past few years in the UK and it is clear that this rate of adoption has increased in recent months.
12.01pm BST
More on Debenhams:
Reuters cites one source as saying that 160 jobs have been axed from Debenhams' merchandising department and a similar number from its buying division. Others have been axed from design and HR.
11.53am BST
Newsflash: Department store Debenhams has cut hundreds" of head office staff, according to Reuters which is citing sources.
It comes just weeks after Debenhams announced it would close a further five department stores, putting 1,000 jobs at risk.
11.43am BST
Time for a market update.
All major stock markets across Europe are continuing to trade in positive territory, though not as strongly as earlier this week.
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HSBC and Standard Chartered are two of the worst performing stocks on the FTSE 100 today.
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Newsflash: RBS is to refund customers 2.2m after failing to alert new adult account holders that they were about to dip into unauthorised overdrafts.
The Competition and Markets Authority said there were effectively two breaches:
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Dataflash: Eurozone consumer confidence somewhat improved in May (though it's all relative at this point).
The European Commission said consumer sentiment came in at -18.8 this month, slightly better than the -22 reading in April.
9.53am BST
Pret a Manger will reopen a further 204 of its shops for takeaway and delivery on 1 June, taking the number its has reopened to 300.
The coffee and sandwich chain is reopening branches in towns and cities including Bath, Bournemouth, Newcastle, Exeter and Liverpool, for the first time since they temporarily closed in March.
Hello again
On Monday we'll have 300 shops reopened for takeaway and delivery across the UK, including in Newcastle, Liverpool and Bath. Find out where we're reopening: https://t.co/b78ccbb1lK
A huge thank you to our amazing teams.
With love,
Pret pic.twitter.com/I4nCXBJSih
It's going to continue to be tough for Pret in the months ahead, and I'd like to thank our team members who are returning to work and making reopening possible.
9.44am BST
The Office for National Statistics has issued its latest Covid-19 economic indicators linked to the coronavirus outbreak.
Here are some of the main stats from surveys collected earlier this month, laying bare the cash squeeze many businesses are facing:
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The British Airline Pilots' Association (BALPA) union has hit out at easyJet's job cut announcement this morning.
BALPA said the airline has not discussed its plans with the union and would need a lot of convincing" that easyJet needs to make such dramatic cuts.
easyJet staff will be shocked at the scale of this announcement and only 2 days ago staff got a good news' message from their boss with no mention of job losses, so this is a real kick in the teeth. Those staff have taken pay cuts to keep the airline afloat and this is the treatment they get in return.
easyJet has not discussed its plans with BALPA so we will wait and see what impact there will be in the UK. But given easyJet is a British company, the UK is its strongest market and it has had hundreds of millions in support from the UK taxpayer, I can safely say that we will need a lot of convincing that easyJet needs to make such dramatic cuts.
9.17am BST
The owner of the Daily Mail, the i and Metro said that its portfolio of titles saw print advertising revenues plunge by 70% in April and May as the coronavirus lockdown hammers the newspaper industry.
Daily Mail & General Trust, which also owns Mail Online and the Mail on Sunday, said that total revenues across its consumer media division were down a third in April.
9.03am BST
More news from the travel sector this morning, this time from Stagecoach.
The bus and train operator has set its earnings guidance for the year to 2 May 2020 to between 12.5p and 14.0p. (We've asked for the previous guidance but are waiting for confirmation)
We see a lasting effect of the COVID-19 pandemic on travel patterns with an acceleration in trends of increased working from home, shopping from home, telemedicine and home education. We anticipate that it will be some time before demand for our public transport services returns to pre-COVID levels and we are planning for a number of scenarios.
8.35am BST
On top of job cuts, EasyJet intends to reduce costs by revising its contracts with airports and ground handling, reassessing what it spends on maintenance, as well as renegotiating what it spends on marketing, my colleague Joanna Partridge writes.
The airline also gave details of new onboard safety measures ahead of flights resuming on 15 June, including the mandatory wearing of face masks. The company's fleet has been grounded since 30 March.
Related: EasyJet plans to cut up to 30% of staff because of Covid-19 crisis
8.19am BST
EasyJet chief executive Johan Lundgren has been speaking to journalists this morning to explain the rationale behind its Covid-19 strategy.
He said the budget airline has no plans to raise equity today, but will keep that option on the table if needed.
We realise that these are very difficult times and we are having to consider very difficult decisions which will impact our people, but we want to protect as many jobs as we can for the long-term.
We remain focused on doing what is right for the company and its long-term health and success, following the swift action we have taken over the last three months to meet the challenges of the virus. Although we will restart flying on 15 June, we expect demand to build slowly, only returning to 2019 levels in about three years' time.
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EasyJet is among the biggest risers on the FTSE 100, having started the session around 4.2% higher before falling back to around 2.6%.
We'll see whether investors will continue to buy in to the companies plans throughout the session.
8.03am BST
Investors in Europe are again shrugging off tensions in Hong Kong, extending an upward run on stocks since Tuesday.
Here's now major indices have opened:
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Good morning and welcome to our rolling coverage of the world economy, the financial markets, eurozone and business.
EasyJet has laid out fresh cost cutting plans that will involve axing up to a third of its 15,000-strong workforce in response to the Covid-19 crisis. EasyJet said its fleet will also involve 51 fewer aircraft than expected by year-end 2021.
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