Global economy to suffer worst peacetime slump in 100 years, OECD says - as it happened

Kalyeena Makortoff

from on 2020-06-10 14:00 (#54HAQ)

Rolling coverage of the latest financial news, as the OECD projects a 6% contraction for the global economy in 2020

3.00pm BST

2.37pm BST

Wall Street has edged higher at the market open, helping the Nasdaq hit a record high (remember it hit 10,000 for the first time ever yesterday, so it wasn't a huge feat to beat that level again today)

2.27pm BST

Neil MacKinnon, global macro strategist at VTB Capital, says the US Fed is unlikely to forecast GDP growth above 2.5% for 2021 when it releases projections later today:

It is unlikely that the FOMC's GDP forecast will be much higher than 2.5%, as the Fed can explain such a modest increase in the light of a wide output gap that will take time to recover.

A much stronger GDP growth forecast would certainly come to the attention of bond investors, who might think that this would mean a faster-than-expected normalisation of policy.

1.59pm BST

More comments being reported from Andrew Bailey:

After the doom and gloom of the OECD report, Bailey has said that there will be elements of a faster-than-usual economic recovery as the government lifts Covid-19 restrictions. He adds that we are seeing elements of that recovery starting already.

1.53pm BST

Bank of England governor Andrew Bailey is speaking at a private event as part of the World Economic Forums' Great Reset Dialogue" series.

Thankfully Reuters has a view of what's being said.

1.40pm BST

US CPI dipped 0.1% month on month in May, worse than economist forecasts for a flat reading.

That's the third straight month of declines and follows a 0.8% fall in April which was the biggest decline on record since December 2008.

1.33pm BST

Worse than Italy. Worse than Spain. Britain has already had more deaths from Covid-19 than any other European country. Now it faces the possibility of a second embarrassment: the deepest recession of any nation in the developed world, writes our economics editor Larry Elliott.

There's not much in it, according to the latest forecasts from the Organisation for Economic Cooperation and Development. Italy and Spain are also propping up the league table put together by the Paris-based thinktank. A lot can happen between now and the end of 2020, a year that has not yet reached its mid-point.

1.13pm BST

Stocks are on a bit of a rollercoaster ride today, with the FTSE 100 edging back into positive territory to trade up 0.1%

US futures are also showing some green shoots just a little over an hour before Wall Street opens for trading.

US Opening Calls:#DOW 27308 +0.11%#SPX 3217 +0.28%#NASDAQ 10031 +0.65%#RUSSELL 1511 +0.09%#FANG 4131 +1.48%#IGOpeningCall

1.10pm BST

Oil prices are continuing their downward slide, with Brent crude down 1.8% and WTI slumping 2.2%.

While oil prices had climbed since the initial OPEC+ production cut agreement in April (as well as the recent easing of lockdowns) the long road to recovery from Covid-19 appears to weighing on the minds of investors.

The global economy is still in a precarious position. The dip in oil prices in recent days most likely reflects the end of the price boost that came from the initial economic re-opening.

The global economy is now settling in for a long, slow recovery process, which we only expect to pick up in late 2021, assuming a Covid-19 vaccine becomes available then.

12.56pm BST

Boris Johnson has further quashed any hopes of pubs and the wide hospitality industry re-opening this month, saying at PMQ's that the government was sticking to its plan to hold out until at least 4 July.

You'll remember that there were rumours that there might be an early re-opening of beer gardens around 22 June.

12.32pm BST

The US dollar is trading at three-month lows ahead of the conclusion of the US Fed meeting later today.

The economic projections will be particularly instructive in the context of whether Fed policymakers believe a v-shaped recovery is likely, and whether they think the worst is behind the US economy.

We've already seen more details this week of the Main Street Lending program, however it will be on how the Fed intends to manage the recovery process that will be of most interest.

12.12pm BST

Prime Minister Boris Johnson is currently facing Labour leader Kier Starmer at PMQs.

You can follow those proceedings at our politics live blog here:

11.58am BST

Speaking of Germany, there are reports that the country's finance minister Olaf Scholz is mulling a larger-than-expected extra budget that will involved taking on 50bn worth of fresh debt to fund a coronavirus stimulus package.

The cabinet is planning to pass a second supplementary budget on 17 June, according to Reuters, which is citing an unnamed senior official with knowledge of the discussions.

11.50am BST

After a relatively positive start to the session, it's a sea of red across European stocks.

Germany's XETRA DAX is logging the worst losses, down -9%.

11.40am BST

The UK government has weighed in on the OECD forecasts (but failed to address the fact that the UK is likely to suffer the worst Covid-19 damage among its peers).

Chancellor of the Exchequer, Rishi Sunak, said:

In common with many other economies around the world, we're seeing the significant impact of coronavirus on our country and our economy. I've been clear that our top priority has always been to support people, jobs and businesses through this crisis- and this is what we've done.

The unprecedented action we've taken to provide lifelines that help people and businesses through the economic disruption will ensure our economic recovery is as strong and as swift as possible.

11.28am BST

And if you've forgotten about the looming Brexit transition period deadline:

The OECD has said that if the UK fails to strike a trade deal with the EU by the end of 2020 or put in place alternative arrangements, Brexit threatens to have a strongly negative effect on trade and job in the UK. That's being reported by Reuters.

11.17am BST

Sir Martin Sorrell is fond of coining a phrase to describe the shape of an economic recovery and his latest prediction is that the world is likely to emerge from the coronavirus pandemic in a reverse square root", Mark Sweney writes.

Sorrell, who famously labelled last decade's advertising recession as bath shaped", said that while industry sectors will have their own recovery shapes - V, U, L and even a chair" - the overall global economy is likely to reset at a lower level.

11.04am BST

There has been a surge in the number of people looking for a place to rent in London and the home counties since the UK housing market reopened about a month ago, my colleague Julia Kollewe writes.

The lettings market has bounced back faster than the home sales market, according to the upmarket estate agent Knight Frank. It says that the number of valuation appraisals for lettings properties jumped to a record high in the week to 6 June, and was 19% above the five-year average. The weekly number of tenants looking to move was 40% above the five-year average.

We expect demand to get even stronger when there is more certainty around how universities will be teaching their courses next year.

Those announcements will make a huge difference and demand will be bolstered further as companies reactivate relocation plans that are currently on hold.

10.35am BST

An interesting graphic by our team showing how the UK's economy is on track for the worst performance among its peers:

10.24am BST

Sidenote for all your Bank of England geeks: chief economist Andy Haldane has been re-appointed for another three year term on the rate-setting Monetary Policy Committee.

He first joined the MPC in June 2014.

Haldane re-appointed pic.twitter.com/FbAAz6wtOq

10.15am BST

Don't expect much fanfare on Wall Street at the start of trading.

US futures are showing the S&P down 0.1% and the Dow down 0.2%.

10.10am BST

The dismal OECD forecasts have hit UK stocks.

The FTSE 100 and more domestically-focused FTSE 250 have reversed their gains and are now down around 0.3% each.

9.48am BST

Even the first line of the OECD report makes for grim reading:

The COVID-19 pandemic is a global health crisis without precedent in living memory. It has triggered the most severe economic recession in nearly a century and is causing enormous damage to people's health, jobs and well-being.

9.23am BST

Our #EconomicOutlook focuses on two equally likely scenarios:

1 The virus recedes and is brought under control
2 A second outbreak hits before the end of 2020, triggering a return to lockdowns

Discover our GDP projections by country https://t.co/HLrGXh0cRN #COVID19 pic.twitter.com/FNJtrMk2E1

9.21am BST

(Just a quick note to say that if anyone was patiently waiting for our post on German unemployment or Eurozone PMI data as outlined in the agenda this morning, it actually isn't due today but was out last week. Apologies. The agenda has since been updated)

9.14am BST

Britain's economy is likely to suffer the worst damage from the Covid-19 crisis of any country in the developed world, according to a report by Organisation for Economic Co-operation and Development, Phillip Inman writes.

A slump in the UK's national income of 11.5% during 2020 will outstrip the falls suffered by France, Italy, Spain and Germany, the Paris-based thinktank said.

9.10am BST

You can watch the live OECD press conference here:

WATCH NOW | The global economy faces a tightrope walk to #recovery: Our Secretary-General @A_Gurria & Chief Economist @LauBooneEco present the latest OECD #EconomicOutlook https://t.co/8yKFkPn8XD https://t.co/UK5jXQMEf4

9.09am BST

OECD forecasts are out and it's not a pretty picture.

UK GDP is expected to be -11.5% and as low as -14% if there's a second wave of the outbreak.

OECD forecasts 6% slump in global economy, and 7.6% slup in event of second wave.

Bigger decline than World Bank's -5.2% projection yesterday

8.47am BST

The US secretary of state, Mike Pompeo, has criticised the British bank HSBC for supporting China's move to end Hong Kong's autonomy, calling it a corporate kowtow".

Pompeo said the US was ready to assist Britain with whatever it needed after Beijing reportedly threatened to punish HSBC and break its commitments to build nuclear power plants in the country if the UK did not allow the Chinese technology firm Huawei to build its 5G network.

The CCP's browbeating of HSBC, in particular, should serve as a cautionary tale. Just last week, the bank's Asia-Pacific CEO, Peter Wong, a member of the Chinese People's Political Consultative Conference, signed a petition supporting Beijing's disastrous decision to destroy Hong Kong's autonomy and to break commitments made in an U.N.-registered treaty.

That show of fealty seems to have earned HSBC little respect in Beijing, which continues to use the bank's business in China as political leverage against London.

8.21am BST

Let's catch up with some of the Chinese inflation data released overnight which has also weighed on Asian stocks.

Both the consumer price index and producer price index figures pointed to a drop in demand last month.

China was ground-zero for the outbreak of the coronavirus crisis, but it also appears to be leading the global recovery. Auto sales data looks to be strengthening, and with some factory levels almost back to pre-pandemic levels there is a real hope that the worst is in the rear-view mirror.

Its role at the heart of the global economy has meant that Chinese inflation has historically acted as an indicator for other countries. It remains to be seen whether that's still the case in this new environment, where local effects will play a more prominent role in the basket of goods.

8.07am BST

The owner of dozens of magazines including The Week, Minecraft World and Viz has put a quarter of its UK staff into a redundancy consultation process as the coronavirus crisis hammers the publishing industry, the Guardian's Mark Sweney writes.

Dennis Publishing, the company founded by the late media entrepreneur Felix Dennis, has begun a consultation process with 122 of its approximately 480 UK staff. The company is understood to be seeking to cut just over half of those staff involved in the consultation.

The impact of Covid-19 has been significant for the publishing sector.As a result, this week we will begin a redundancy consultation process here in the UK.

We are fully committed to supporting employees in impacted groups throughout this period and ensuring that this process is fair and transparent.

8.03am BST

European stock markets are open for trading.

While we're nowhere near some of the gains we've seen in recent weeks, all major indices are in positive territory:

7.58am BST

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

Market headlines were dominated last night by news that the Nasdaq hit 10,000 for the first time and that US stocks had actually logged gains for 2020 overall.

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