FTSE 100 enjoys biggest weekly gain since 2009 as Fed unleashes $2.3tn stimulus – as it happened

Kalyeena Makortoff and Jasper Jolly

from on 2020-04-09 17:30 (#51XQ7)

Rolling coverage of the latest economic and financial news as oil prices swing on production cut hopes and EU nears rescue deal

6.30pm BST

The Federal Reserve's $2.3tn stimulus plan will surely go down as the biggest financial intervention in history. And it has helped financial markets to strong gains.

Here are some of the highlights from another dramatic day in the business world:

5.49pm BST

Brent crude futures prices are now back up by 4% on the day, as hopes rise once more that a production cut will be forthcoming.

5.20pm BST

The dance towards an oil production cut continues.

Russia's wealth fund head has told Reuters that Saudi Arabia and Russia have overcome their differences - but that it is very important that countries outside the Opec+ cartel (such as the US, Canada and Brazil) share the pain.

OPEC, Russia and other allied producers, a grouping known as OPEC+, are considering cutting their oil output by more than 12m barrels per day and want other producers to contribute cuts of 5m, an OPEC+ source said on Thursday.

5.07pm BST

Dominic Raab, standing in for Boris Johnson, is giving the government's daily briefing.

Johnson remains in intensive care.

5.05pm BST

There is a lot going on in markets today: while the Eurogroup wrangling nears its end and markets digest the Federal Reserve's massive stimulus, the oil price surge has pretty much reversed.

Brent crude futures prices are now only up by 1.2% today, at $33.23 per barrel. They broke through the $36 mark barely 90 minutes ago.

4.54pm BST

EU finance leaders are "very close" to a deal, says Eurogroup president Mirio Centeno. Remember, there is a500bn (438bn) in economic aid on the table.

There are some very pointed references to the need to compromise to get the rescue package through in Centeno's video message. He said:

We either sink or swim together. This is a true emergency. This is global.

We are very close to an agreement. I trust - I still trust - that this time we will ALL rise to the occasion. And show the necessary spirit of compromise, which is the bedrock of our Union #Eurogroup #COVIDaf1/419 pic.twitter.com/C6TVYSbIET

4.50pm BST

That final bump (with markets closed tomorrow, Good Friday) means that the FTSE 100 has enjoyed its best week since the global financial crisis a decade ago.

The FTSE 100 gained 2.9% today*, closing at 5,842.66 points, the final figures show. That's a weekly gain of 7.8%, the biggest since January 2009.

4.42pm BST

London's O2 arena, once known as the Millennium Dome, is to be turned into a training facility for NHS staff working at the new Nightingale field hospital set up nearby.

The 20,000 seater stadium, which was due to host acts including Snoop Dogg, the Pussycat Dolls and Whitesnake, will be used as an educational training facility. No patients will be treated on site.

4.36pm BST

European stock markets have just closed - with the Fed's huge stimulus package (I believe Jerome Powell said there were nine separate programmes) buoying shares.

The FTSE 100 has provisionally gained 2.8% to reach 5,837 points.

4.33pm BST

Budget airline easyJet has said it has agreed with Airbus to defer the delivery of 24 planes as it tries to placate its largest shareholder's demand they cancel the orders.

Our industry is facing unprecedented challenges which require unprecedented action. As we have consistently said, we remain completely focused on improving short term liquidity and reducing expenditure across the business. Today I am pleased to announce that we have agreed with Airbus to amend our delivery schedule by deferring the purchase of 24 aircraft, providing a significant boost to our cash flow and a vast reduction to our near-term capex programme.

In addition, we have 24 leases up for renewal over the next 16 months, which gives us another level of flexibility to respond to future demand.

4.15pm BST

The euro has risen to its highest level today after Germany's finance minister, Olaf Scholz, said it appeared that the EU would reach a deal on an economic support package.

EU finance ministers had reconvened today after failing to agree a deal on Tuesday in 16-hour talks. A dispute between Italy and the Netherlands over possible debt sharing had held up agreement.

German Finance Minister Olaf Scholz on todays Eurogroup meeting: "It looks like an agreement is possible today."

3.58pm BST

Here is a flavour of the big jump in oil prices in recent minutes.

Brent crude futures prices, the North Sea oil benchmark, rose to almost $36 per barrel, slightly below their highest level since the crisis hit Europe in the middle of March. Prices have fallen as low as $33 per barrel today.

3.52pm BST

Oil prices have surged after reports that a production cut is imminent. Brent crude futures prices have risen by as much as 10%.

Here's the Reuters report on the potential deal:

OPEC and other oil producers will debate on Thursday oil cuts as big as 20m barrels per day, equivalent to about 20% of global supplies, one OPEC source and a Russian source told Reuters.

"That is a global deal," the OPEC source said.

3.47pm BST

And on the perils of the video conference (with which I'm sure many people can identify):

Jerome Powell sums up the reality of working from home: pic.twitter.com/lDHAU9NOjs

3.40pm BST

And that's the end of Powell's Q&A session via a Zoom video conference. Some reactions, highlights and comments from social media.

There is "no limit" on the length of the Fed's support for the economy, so long as they stay within the law:

FED'S POWELL SAYS THE FED CAN KEEP PROVIDING SUPPORT TO ECONOMY AS LONG AS NEEDS ARISE, NO LIMIT TO HOW LONG THEY CAN DO IT

#Fed Chair #Powell: "We'll be in no hurry to pull back [policy support] and we will gradually wind down [measures] when the economy returns to health."

"Return to normal will be gradual"

"I do think it's time to have a serious public conversation and a lot of analysis" about reopening, Fed Chair Powell says. "We need to have a plan, nationally, for reopening the economy." https://t.co/uUWb1EghYK pic.twitter.com/d7QWIhqrlX

Powell: "If the gov't continues to give people the support they need ...if people stay home and stay healthy until it's appropriate to go back to work...there's every reason to think we can be back on the road to recovery fairly quickly."

3.32pm BST

Q: Are you confident we can get through this?

Powell: This is going to be and is a very difficult time for many people. People are getting sick, laid off. I don't want to diminish the suffering.

3.30pm BST

Q: How will the economy be different post-crisis?

Powell: Our intense focus is on the near term, but behaviour won't change quickly. That process will be gradual and tentative. I don't know if there will be broader changes.

3.29pm BST

Q: Are you worried about the Federal Reserve making decisions on who can borrow and who can't?

Powell: We can only use our extraordinary powers with the consent of the (elected) Treasury secretary.

3.26pm BST

Q: What will make them start considering pulling back loans?

Powell: We will wait until the recovery is more robust.

We'll be in no hurry to pull back on our asset purchases or these programmes.

3.24pm BST

Q: Does the US economy reopening by the end of May seem right to you?

Powell: That is a judgement for health officials, but it is time to have a national conversation on that.

We all want to avoid a false start.

3.23pm BST

Q: Does the mortgage market need more support?

Powell: The mortgage market is very important and we are watching carefully.

We will be watching that carefully.

3.22pm BST

Q: Why has the Fed not directed banks to suspend dividends and buybacks?

Powell: Dividends are perfectly normal in our capitalist system.

I don't think that step is appropriate at this time.

3.20pm BST

Q: What are your priorities for the rest of the money earmarked for Fed use?

Powell: Investors all over the world have struggled to assess what the coronavirus meant for the economy, moving to safer investments. That made many parts of the capital markets stopped functioning.

3.18pm BST

Q: Do we have to do more on the fiscal policy front to respond to the crisis?

Powell: We are not responsible for fiscal policy and won't give advice.

This is what the great fiscal power of the United States is for, to protect these people.

3.17pm BST

Q: How does the Fed action help small businesses?

Powell: The most important thing small business owners can do is stay home, stay healthy so we don't get another outbreak.

3.15pm BST

Q: What about the risk of higher inflation from QE?

Powell: Previous rounds of QE have not resulted in inflation.

It is not a first order concern for us today that too-high inflation is coming. [...]

One thing I don't worry about is inflation right now.

3.13pm BST

Q: Is there a limit on quantitative easing and loans?

Powell: We do this with consent of government. We are looking for places that are important to the real economy, to people's lives.

We can keep doing that as long as those needs arise. [...]

There's no limit on how much of that we can do.

3.12pm BST

The second quarter will be very weak, Powell says.

He expects a big fall in GDP and big increases in unemployment.

3.10pm BST

Here is the link to Jerome Powell's full speech.

Here's his message of hope at the height of the crisis.

None of us has the luxury of choosing our challenges; fate and history provide them for us. Our job is to meet the tests we are presented. At the Fed, we are doing all we can to help shepherd the economy through this difficult time. When the spread of the virus is under control, businesses will reopen, and people will come back to work. There is every reason to believe that the economic rebound, when it comes, can be robust. We entered this turbulent period on a strong economic footing, and that should help support the recovery. In the meantime, we are using our tools to help build a bridge from the solid economic foundation on which we entered this crisis to a position of regained economic strength on the other side.

3.09pm BST

Powell says:

There is every reason to believe the economic rebound, when it comes, should be robust.

3.07pm BST

Powell says:

3.05pm BST

Powell says:

3.04pm BST

This is a different kind of crisis to previous ones because it is first and foremost a public health issue.

The Federal Reserve governor is awed by the emergency services.

3.02pm BST

Fed chair Jerome Powell is about to speak on the crisis via a webinar. Watch it here.

Here's a breakdown of the Fed's measures announced today (press release here) as part of its new $2.3tn stimulus package:

2.55pm BST

Scottish businesses are on the brink of collapse, costing thousands of jobs, because ministers in Edinburgh have failed to give them the same emergency funding as firms in other parts of the UK, Nicola Sturgeon has been warned.

Jackson Carlaw, the Scottish Tory leader, said the Scottish government had not matched the grants given to English firms, where a business gets 25,000 for every premises forced to shut during the lockdown.

That puts any firm in Scotland with more than one outlet at a huge disadvantage compared to those in England and Wales. Businesses on our high street are dealing with the reality not the theory of this crisis.

So every penny is being passed on, but we're trying to do that in as fair a way as possible, that captures and provides assistance to as many businesses as possible. I'm acutely that there will be further support that businesses require in the period to come.

2.49pm BST

More from the NIESR report predicting a 15-25% contraction in UK GDP in the second quarter.

Here they explain how they came to their conclusion around such an unprecedented decline in productivity:

At present there is little reliable data to gauge the likely scale of economic contraction experienced so far. Surveys carried out in March report record contractions in activity, and with large parts of the economy closed an unprecedented decline in output is widely expected.

To provide a benchmark for future official data releases, we have calibrated the possible pace of decline largely by informed guesses on the scale of decline in the different industrial sectors of the economy assuming a shorter and a longer lockdown period.

2.38pm BST

Back home, the National Institute of Economic and Social Research (NIESR) says the UK could end up seeing GDP contract by as much as 25% in the second quarter.

OUT NOW: A once in a century event - Our latest #NIESRGDP Tracker suggests that the UK economy could now see growth decline by 5% in the first quarter of 2020, and if a #lockdown continues, by around 15% to 25% in the second quarter - Read here in full https://t.co/LcuMw4mItZ

2.34pm BST

US stocks opened in positive territory, as investors took comfort in the Fed's latest stimulus measures.

Here's how we're looking at the open:

2.21pm BST

My colleagues Dominic Rushe and Michael Sainato have more details on the US labor department's data:

Layoffs that started in the restaurant and leisure industries have now spread to include manufacturing, construction and even healthcare.

That wasn't in our control. This is literally in our control. We are deliberately shutting down the economy.

2.11pm BST

If the numbers alone don't grab you, this chart illustrates just how unusual the current jobless claims figures really are.

Another shockingly large increase in US unemployment insurance claims in the most recent week...

6.61 million pic.twitter.com/V9WCOZuiXm

1.58pm BST

Cumulative jobless claims for the past three weeks are now above 16 million.

Politico's chief economic correspondent Ben White notes that it puts the US unemployment at around 14%:

The claims number over the last three weeks suggest the unemployment rate is RIGHT NOW at about 14%, higher than the 10% peak of the Great Recession. The key imperative now is getting cash to businesses and individuals FAST and the pace of rehiring after this is all over.

1.55pm BST

The stimulus package has helped push US futures positive territory, despite the dismal jobless figures:

1.50pm BST

And just as the US jobless claims were likely to roil markets, the American central bank has announced new stimulus measures aimed at small businesses and municipalities across the country.

That's worth a whopping $2.3tn.

Our country's highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus.

The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.

1.38pm BST

Worth noting, too, that estimates for US jobless claims covering the previous week have been revised higher from 6.65 million to 6.87 million (I've revised that in the post below)

1.31pm BST

NEWSFLASH: More than 6 million Americans signed on for jobless benefit last week, laying bare the impact of the Covid-19 outbreak on the US economy.

The initial jobless claims figure, just out, shows that 6.6 million people across the US filed for unemployment support in the week to Saturday 4 April.

1.23pm BST

Minutes from the European Central Bank's emergency meeting on 18 March show there were some hesitations around plans to scrap previous stimulus rules, as it set out to buy a1.1 trillion worth of debt this year to help struggling firms and governments.

It had been a notable u-turn for the ECB, which less than a week earlier had agreed to a relatively small increase in asset purchases while the central bank boss Christine Lagarde was widely seen as playing down the crisis. (You'll remember that she argued it was not the central bank's job to "close spreads.")

There was unanimous agreement that bold and decisive action was needed to counter the serious risks posed by the rapidly spreading coronavirus for the monetary policy transmission mechanism, the outlook for the euro area economy and, hence, ultimately the ECB's price stability objective.

Reservations were, however, expressed by some members with regard to the proposed communication on the issue share and issuer limits. It was recalled that these limits were one of the safeguards to ensure that the Governing Council acted within its mandate.

Account of the monetary policy meeting of 18 March 2020 https://t.co/eAW5IhBH57

1.05pm BST

The head of the International Monetary Fund has warned that all but a handful of the organisation's 189 member states will suffer falling standards of living this year as a result of the worst global economic crisis since the 1930s.

Kristalina Georgieva said the sudden onset of the Covid-19 pandemic meant the IMF's new forecasts for the world economy were going to be grim when released next week - and there was a risk that the impact could be even worse than currently expected.

Today we are confronted with a crisis like no other.

Covid-19 has disrupted our social and economic order at lightning speed and on a scale that we have not seen in living memory. The virus is causing tragic loss of life, and the lockdown needed to fight it has affected billions of people.

There is no question that 2020 will be exceptionally difficult. If the pandemic fades in the second half of the year - thus allowing a gradual lifting of containment measures and reopening of the economy - our baseline assumption is for a partial recovery in 2021. But again, I stress there is tremendous uncertainty around the outlook: it could get worse depending on many variable factors, including the duration of the pandemic.

12.33pm BST

Executives at insurer Prudential are the latest to take a pay cut due to coronavirus outbreak.

(Though by the looks of it, some of the sacrifices aren't exactly huge...)

12.05pm BST

The odds of the US entering a recession is now 100%, according to a model put together by Bloomberg Economics.

It would confirm the end of the US economy's longest-running expansion on record.

America looks starkly different from just a month ago. More than 11,000 in the country have died from Covid-19, while the number of infected was approaching 400,000 on Tuesday, the highest reported total worldwide. Social gatherings have been curbed and a majority of Americans have been directed to stay home. Restaurants, hotels, factories and a variety of other businesses have closed their doors.

The sudden stop in activity has many forecasters predicting the economy will experience its largest-ever contraction in the second quarter, and some analysts project about 20 million people will have lost their jobs by July.

11.45am BST

Market jitters ahead of the US weekly jobless figures have caused the US dollar index to drop by around 0.16%.

But the dollar's loss has been the pound's gain, helping push cable to a one week high:

11.23am BST

Without a deal between Moscow and Riyadh at today's Opec+ meeting, oil prices could fall to $10 per barrel, according to some US shale producers.

It's a strong warning from US energy executives who spoke to the FT () ahead of Thursday's meeting:

If Opec and Russia do not agree a deal, oil prices will sink to $10 a barrel and US output will be almost halved - from 13m b/d to 7m, said Scott Sheffield, head of Permian producer Pioneer Natural Resources, one of Texas's leading shale companies.

A deal would restore prices to $35 or more, but the producers would still struggle and the US would lose 3m b/d of supply, Mr Sheffield said.

10.57am BST

For anyone craving new shows to binge under lockdown, Virgin Media is temporarily giving customers free access to more Sky channels.

Our media business correspondent Mark Sweney has the details:

Virgin Media is giving all TV customers access to 11 Sky channels for free until 9 May. Shows include Ballers and Grey's Anatomy. Follows opening up of 18 channels with shows incl. Gavin & Stacey, War of the Worlds and Gold Rush until 2 May.

10.42am BST

US stock futures suggest we won't see the same market rally experienced by major indexes on Wednesday (when both the S&P and Dow closed higher by more than 3%).

10.26am BST

British companies have scrapped 25bn of shareholder payouts, or one-third of the dividends, expected by investors during the rest of 2020, as they attempt to preserve cash during the coronavirus crisis.

An unprecedented number of firms, representing 45% of Britain's biggest public companies, have already axed their scheduled investor payouts or are due to do so, according to the financial data firm Link Group.

10.07am BST

Around 1 in 4 Americans have either lost their jobs or taken a pay cut due to the coronavirus lockdown.

That's according to a survey by CNBC released ahead of this afternoon's weekly jobless figures, which are expected to show another 5 million having claimed unemployment assistance. That would bring the three week total to 15 million.

1 in 4 Americans have either lost their job or had pay cut from coronavirus shutdowns according to a survey. https://t.co/iXF7CR0asK pic.twitter.com/VNObGNrmNQ

9.49am BST

Earlier this morning we got a readout of the UK GDP figure for February, and it makes for worrying reading.

While the UK economy expanded 0.1% over the three months to February, on a monthly basis, there was actually a 0.1% contraction following a rise in both December and January .

The hope had been that improved business and consumer confidence resulting from reduced uncertainties after December's election - reinforced by the UK leaving the EU with a deal on 31 January - would fuel a clear pick-up in economic activity early on in 2020.

However, while confidence did pick up markedly, this failed to translate into significantly improved economic activity.

The economy obviously took a very substantial hit in March as the coronavirus outbreak increasingly impacted, with mounting restrictions on people's movements and business activity, culminating in the lockdown on 23 March.

EY ITEM Club suspects the UK economy saw a substantial contraction in March (possibly up to 5%), resulting in GDP contraction of around 1.3% in the first quarter.

9.22am BST

Time to check in on oil prices, which are up more than 3% or $1 per barrel at $33.87.

There's some hope that the virtual meeting of Opec+ producers doesn't result in demands for a significant cut in US shale output, in exchange for a cut in production by feuding oil giants Russia and Saudi Arabia. (It would risk compounding the economic pain caused by the coronavirus outbreak across the US.)

The market appears to be running on the view that OPEC is willing to give the US pass as members have by now come to the realisation the risk of credibility loss outweighs any semblance of saving face at this point.

However , the more important outcome from these meetings will be signalling constructive supply-side behaviour as the global economy and oil demand recover from the pandemic. A reliable agreement would imply front-loading cuts and an orderly ramp-up over the [second half of 2020] when the virus passes.

8.47am BST

Meanwhile, former Greek finance minister Yanis Varoufakis has contrasted the UK's direct financing arrangement with the EU's failure (so far) to reach a deal on a coordinated coronavirus rescue package.

The Bank of England just announced it will finance the gvt directly. Meanwhile in the eurozone the tragi-comedy of errors, also known as the Eurogroup, will reconvene tonight to proclaim that the crisis is SO urgent that it will do NOTHING of macroeconomic significance.

8.42am BST

There is understandably some surprise over the extension of the government's overdraft, given that Bank of England governor Andrew Bailey batted away suggestions that the facility would be used in light of the outbreak.

There was also Bailey's interestingly times op-ed in the FT at the start of the week, which quashed speculation as to whether the Bank would use monetary financing to directly fund the UK government.

Bailey on a call with journalists on the 18th March: the ways and means facility is an historical relic.
Bailey in an FT op-ed on 6th April: we won't use monetary financing.
Bank today: ok, just a bit of monetary financing via the ways and means facility. But it'll be temporary.

How significant is it that BoE will be able to lend money directly to Govt? On one hand it's not unprecedented: happened in 2008 & it's only for technical cash flow reasons. On other hand, it further muddies the waters of whether money is being printed to keep the govt solvent

The distinction between monetary (eg BoE) & fiscal (eg gilt auctions) financing of govt already a grey area. Esp when BoE is buying 200bn gilts. BoE insists it decides that independently. That's a fig leaf of sorts. Important. But a fig leaf. And the leaf keeps getting smaller.

8.15am BST

You can read the full story on the government's emergency borrowing facility here:

8.13am BST

The Treasury has announced it is to extend its overdraft facility at the Bank of England in a fresh sign of the mounting financial pressure on the government caused by the Covid-19 enforced lockdown of the economy.

Amid growing speculation that the quarantining will be extended next week, the Treasury said it needed extra firepower to support its cashflow and to ensure financial markets ran smoothly.

As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from Covid-19.

Any use of the W&M facility will be temporary and short term. As well as temporarily smoothing government cashflows, the W&M facility supports market function by minimising the immediate impact of raising additional funding in gilt and sterling money markets.

8.03am BST

And European markets, which closed in the red last night, have taken their cues from Wall Street after both the Dow and S&P closed +3.4% higher.

7.50am BST

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

Investors have more than enough on their plate on the last day before the Easter long weekend.

The sharp rise in unemployment levels across the world is a clear and present concern for some in the markets, who take the not unreasonable view that markets are underestimating the economic damage that is about to be unleashed on the US and the global economy.

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