Lenders asked to scrap cash bonuses for 2020 in order to help ease the impact of financial turbulenceBritain’s largest banks have agreed to scrap nearly £8bn worth of dividends in light of the coronavirus crisis, giving banks an additional cushion to weather an economic downturn.The Bank of England has also ordered lenders to cancel plans for cash bonuses for executives, as it asked financial institutions to boost their strength ahead of a likely recession.Related: UK payday lenders start suspending new loans in Covid-19 crisis Continue reading...

Britain’s stock market has posted its biggest quarterly slump since Black Monday, as the coronavirus forces UK into a deep recession

Speed of US stock market fall outstrips even 1929 Wall Street crash, reflecting global scenarioThe FTSE 100 has posted its biggest quarterly fall for more than three decades amid the financial panic caused by the coronavirus, as the economic costs of the global health pandemic continue to mount.The leading index of UK company shares plunged by 25% in the three months to the end of March, the biggest quarterly contraction in London-listed share values since the aftermath of Black Monday in October 1987.Related: The stock markets have rallied, so is peak panic over?Related: China gets mixed results in its attempt to lift lockdown Continue reading...

In the past fortnight an optimism of sorts has returned but the rebound rests in part on some pretty heroic assumptionsAt the end of the first quarter of the year, stock market investors are counting their losses. The FTSE 100 index has fallen 25% since the turn of the year, its worst single quarter since 1987. The financial crisis of 2008, around the collapse of Lehman Brothers, ran for several quarters and should still be considered more severe. But, whatever your yardstick, 2020 so far has been brutal for equity investors, which includes most people with a pension plan.Narrow your focus to the last couple of weeks, however, and the picture looks different. You could almost believe normal life has returned. The FTSE 100 overall has risen in seven of the last nine trading days, and in eight of the last 12. And, if you caught the bottom, congratulations: you could have made about 16% in three days.Related: Coronavirus pandemic has delivered the fastest, deepest economic shock in history Continue reading...

Across the world, Covid-19 has triggered community action on a vast scale. It’s a powerful riposte to both government and private money

The Dutch-led opposition to a ‘coronabond’ to raise funds for nations hardest-hit by the pandemic is self-defeating

Contrary to what Donald Trump would like to believe, such a pandemic was predicted last yearEvents like the Covid-19 pandemic, the US housing-market crash of 2007-09 and the terrorist attacks of 11 September 2001, are often called “black swans”. The term is meant to suggest that no one could have seen them coming. But, in fact, these episodes each involved known unknowns, rather than what the former US secretary of defence Donald Rumsfeld famously called “unknown unknowns”.After all, in each case, knowledgable analysts were aware not only that such a thing could happen but also that it was likely to happen eventually. Although the precise nature and timing of these events were not predictable with high probability, the severity of the consequences were. Had policymakers considered the risks and taken more preventive steps in advance, they might have averted or mitigated disaster.Related: Coronavirus forces economics profession to leave comfort zone | Mohamed El-Erian Continue reading...

Rolling coverage of the latest economic and financial news

Rich countries urged to help emerging economies cope with coronavirus ‘financial tsunami’

The left hopes coronavirus will lead to change, but it’s far from certain

Starling says peak supermarket shopping due to coronavirus was two weekends ago

Brent crude likely to continue slide as Riyadh faces off with Russia and US

People earning less than $75,000 will receive a one-time cash payment – but data shows the money won’t last very long

For years there has been a stubborn reluctance to adopt a more multidisciplinary approachWith the coronavirus devastating one economy after another, the economics profession – and thus the analytical underpinnings for sound policymaking and crisis management – is having to play catchup. Of particular concern are the economics of viral contagion, of fear and of “circuit breakers”. The more that economic thinking advances to meet changing realities, the better will be the analysis that informs the policy response.That response is set to be both novel and inevitably costly. Governments and central banks are pursuing unprecedented measures to mitigate the global downturn, lest a now-certain global recession gives way to a depression (already an uncomfortably high risk). As they do, we will likely see a further erosion of the distinction between mainstream economics in advanced economies and in developing economies.Related: Coronavirus pandemic has delivered the fastest, deepest economic shock in historyThe risk that the financial system will reverse-infect the real economy and cause a depression is too big to ignore Continue reading...

Analysts say unemployment could also double in deepest recession since financial crisis

Last week’s meeting of leaders was supposed to help. Instead it turned out to be a complete car crashEurope is being ravaged by the coronavirus pandemic. There have been more than 10,000 deaths in Italy. In the grimmest of league tables, Spain comes second. Normal life has been suspended across the continent and the hit to the economy is immense. France’s output is running at two-thirds of what it was last year. Germany has abandoned fiscal rectitude and – along with the rest – adopted a “whatever it takes” approach.Border controls have been erected to stop the flow of people even though this contravenes one of the founding principles of the single market. Rules on state aid to struggling companies have been relaxed. The European Central Bank has embarked on a gigantic asset purchase scheme in an attempt to flood the eurozone economy with cheap money. Continue reading...

CEOs, billionaires and advisers have the president’s ear and want people back to work. They are callous – and wrong

Coronavirus could lead to permanent closure of struggling town shops, say analysts

Getting the Bank of England to print money to cover the government’s debts is in principle a good ideaThis is an economic crisis and it’s right that government takes unprecedented steps to compensate employees and the self-employed from huge income hits. But how are we going to pay for these decisions? Eventually taxes will go up, but governments need to raise cash right now as tax revenues fall and spending surges. Luckily, borrowing costs are low, but what happens if financial markets are unable to absorb the huge amounts of extra borrowing?This is a crucial question with which treasuries around the world, and the IMF, are starting to grapple. The gung-ho among you may like the answer of the economist Jordi Galí, who last week called for central banks to print money for government without it ever being paid back. Our view at the Resolution Foundation is that he is right to examine the case for monetary financing (the Bank of England creating money to directly buy government debt). But we don’t agree that the objective is for it to never be repayable – in fact, we argued last week that it’s crucial to stress that any unavoidable monetary financing would be temporary and that the central bank could sell off government bonds when things calm down. We’ve seen unprecedented steps by government to tackle this crisis, with big price tags attached. Unprecedented measures may be needed to pay for them, but we should plan for that with utmost care. Continue reading...

Proponents of modern monetary theory believe that countries can and should keep printing as much money as they needTreasury officials have spent the last couple of weeks asking themselves how much the exchequer should spend fighting coronavirus. Curled up with laptops in the spare room or on the kitchen table, banished from their neoclassical headquarters, they have debated how many borrowed billions ought to be devoted to rescuing companies from bankruptcy and households from destitution.Thinking about what a nation should spend when its income falls off a cliff, and how much it will owe as a consequence, is especially mind-boggling for conservative policymakers emerging from 10 years of austerity. Many have spent their entire careers telling voters that paying back what the country has borrowed is of paramount importance.Is this real money that will eventually need to be paid back? Or can it somehow be left behind by one generation to be written off by the next? Continue reading...

Governments and investors woke up too late to the crisis. Now they are facing the deepest global recession in history

Legal groups across the US are calling on federal and state governments to halt debt collection as it continues unabated

Agency says government borrowing levels are set to rise and outlook remains negative for Britain’s sovereign debt score

As the coronavirus pandemic destroys jobs across Australia, New Zealanders who have lived and worked here for years are finding they have no access to welfare

IMF’s Kristalina Georgieva says world has entered recession ‘as bad or worse’ than 2008-09

Rolling coverage of the latest economic and financial news, as China’s manufacturing sector and UK car makers are hit by the coronavirus

US hedge fund manager’s doom-laden TV appearance about coronavirus crisis sparked frenzied selling

As coronavirus cases continue to rise in the US, the government has advised people to work from home – but it’s not a privilege everyone has

The continent is just weeks behind Europe with Covid-19. If developed nations don’t step in now, we all will pay the price

The chancellor’s hastily arranged scheme delivers equality with employed workers

More than three million Americans lost their jobs last week, the worst ever recorded, as the coronavirus shutdown hits the US economy

Bank says it is too early to tell how severe damage will be as it leaves interest rates on hold

Jobless claims are smashing all known records during this unprecedented crisisCoronavirus – latest updatesAll our coronavirus coverageThe surge in unemployment in the United States caused by the Covid-19 pandemic shatters all previous records. In its time, the world’s biggest economy has seen some savage shake-outs of its labour market but nothing that remotely compares to what has just happened.Jobless claims in the week ending 21 March surged to almost 3.3m, which was double what Wall Street analysts had collectively been expecting. The previous worst total in October 1982 was just one fifth of last week’s level. Continue reading...

Ex-PM at centre of 2008 banks rescue suggests taskforce of leaders and health experts

Agreement reached early on Wednesday will give money to most Americans, small-business loans and help for hard-hit industries

European governments still seem destined to repeat the mistakes made in the financial crisis

$2tn coronavirus rescue deal dwarfs 2008 bailout but there will still be pain

Rolling coverage of the latest economic and financial news, as Treasury and Bank of England demand support for British companies

IMF and World Bank asking countries to agree to requests for forbearance

The US is experiencing an unprecedented rise in unemployment as industries including hospitality and food service grind to a halt

Many self-isolating older people left without trusted news source as presses stop rolling

Thinktank says move could prevent workers from being laid off in coronavirus crisisNext month’s planned increase in the national living wage should be delayed to prevent struggling businesses from laying off workers during the Covid-19 crisis, the Institute for Fiscal Studies (IFS) has said.The thinktank said the above-inflation increase from £8.21 to £8.72 an hour threatened jobs and ran counter to the policies announced by the chancellor, Rishi Sunak, to keep people in work. It said the rate may even need to be cut for the duration of the emergency.Related: Coronavirus benefits, sick pay and lost hours: your rights in the UK Continue reading...

The financial crisis and Great Depression took three years to play out, this crisis has taken three weeks. The Greater Depression beckonsThe shock to the global economy from Covid-19 has been faster and more severe than the 2008 global financial crisisand even the Great Depression. In those two previous episodes, stock markets collapsed by 50% or more, credit markets froze up, massive bankruptcies followed, unemployment rates soared above 10% and GDP contracted at an annualised rate of 10% or more. But all of this took around three years to play out. In the current crisis, similarly dire macroeconomic and financial outcomes have materialised in three weeks.Earlier this month, it took only 15 days for the US stock market to plummet into bear territory (a 20% decline from its peak) – the fastest such decline ever. Now, markets are down 35%, credit markets have seized up and credit spreads (like those for junk bonds) have spiked to 2008 levels. Even mainstream financial firms such as Goldman Sachs, JP Morgan and Morgan Stanley expect US GDP to fall by an annualised rate of 6% in the first quarter and by 24% to 30% in the second. The US Treasury secretary, Steve Mnuchin, has warned that the unemployment rate could skyrocket to above 20% (twice the peak level during the financial crisis).Related: How best to fight the economic impact of the coronavirus pandemic Continue reading...

Facilities thought to be 75% full with Saudi Arabia due to ramp up output as demand falters amid coronavirus shutdownsThe world may soon run out of space to store its extra oil as Saudi Arabia prepares to increase its fossil fuel production even as global demand for energy continues to fall due to the Covid-19 pandemic.Oil storage levels across the world’s storage facilities have climbed to about three-quarters full on average since the January shutdown of major refineries in China’s industrial heartlands to stem the outbreak of the coronavirus. Continue reading...

The president believes the US can be open for business by Easter, but he doesn’t seem to have considered the consequences

Dow Jones has best day since 1933, with Asian and European markets also up, after US move

Measures to ease the impact of coronavirus hold lessons for how we can fight the battle against climate change, argue Colin Hines and Rosamund Aubrey, while Carl Gardner looks at the future of our financial centres

Covid-19 sparks global recession fears but stimulus hopes help stock markets to rebound

Campaigners urge governments to tie any bailouts to aviation and cruise industries to requirements for climate action

The financial meltdown of 2008 failed to provoke a fundamental shift in capitalism. Will this moment be different?