A deep recession in Europe this year seems imminent. The International Monetary Fund (IMF) foresees this based on the latest developments of the coronavirus. According to IMF, the severity of the recession mainly depends on how long the many restrictive measures will remain in force. Every month that large European economies keep their non-vital sectors shut down, their annual gross domestic product (GDP) is likely to shrink by about 3%. IMF fears a global recession at least as severe as during the financial crisis of 2008 or worse.
The economic confidence of businesses and consumers in the eurozone showed a historic decline in March due to the corona crisis. This was reported by the European Commission. This month’s index decreased by 8.9 points to 94.5 points, the sharpest decline since measurements began. The largest drops in confidence in the large eurozone economies were seen in Italy and Germany, and to a lesser extent in France, the Netherlands and Spain.
The activity of the Chinese industry picked up considerably in March, after the strongest contraction ever seen for China’s industry in February, as a result of the corona crisis. As a result, the Chinese economy seems to be recovering slowly from the severe blow caused by the virus outbreak. According to the Chinese Bureau of Statistics, the purchasing managers index, which measures industrial activity, increased to 52 last month, from an absolute low of 35.7 in February. A level of 50 or more indicates growth, including contraction.
The 6M Euribor decreased with 1 basis point to -0.28% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.04% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.
Articles with relevant financial information on the Coronacrisis can be found here: https://zanders.eu/en/news/
According to ING’s investor barometer, the corona crisis has caused Dutch investors’ confidence to fall to its lowest point since November 2012. In almost a month, the barometer fell from 127 to 82 points. At the beginning of March, the average investor expected the AEX at 527 points in June. Two weeks later, the average expectation dropped to 432 points. About 20 percent even expect a score below 425 points.
According to José Ángel Gurría, secretary general of the Organization for Economic Cooperation and Development, each month major economies are in a lockdown, will cause a decline of about 2 percentage points on their annual economic growth. According to Ángel Gurría, many economies are going through a recession and governments should not shun far-reaching crisis measures.
Due to the substantial support package to fight the corona pandemic and the uncertainty about the future trade relationship with the European Union, credit rating agency Fitch has lowered the rating for the United Kingdom from AA to AA-.
The 6M Euribor increased with 3 basis points to -0.27% compared to previous business day. The 10Y Swap decreased with 8 basis points to -0.02% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.
The CPB reported on Thursday that in a worst-case scenario, the Dutch economy will decrease by 7.7 percent as a result of the corona virus. In this scenario, the current restrictions last for six months or more. In the worst case, unemployment will rise to 8.4 percent in 2021, compared to 2.9 percent in February 2020. In the most positive scenario, where the current constraints last three months, the economy will shrink by 1.2 percent and unemployment will rise to 4.0 percent.
New figures from Insee, the national statistics office in France, show that French business confidence fell to 95 points in March, from 105 points in February. Insee further reports that economic production decreased by about a third in March. Consumer spending is also at 65 percent of the normal level.
The Bank of England has decided not to cut interest rates any further. On March 11 and March 19, the UK central bank already cut interest rates by 50 and 15 basis points respectively, to 0.1 percent. In addition, the previously announced 200 billion pounds buy-back program remains unchanged.
The 6M Euribor increased with 1 basis point to -0.30% compared to previous business day. The 10Y Swap decreased with 6 basis points to 0.06% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.
According to Bloomberg, European authorities are considering several measures to assist banks dealing with potential bad loans as a result of the coronavirus. One option under review is to temporarily suspend a portion of accounting rules known as IFRS9. Another possibility under consideration is the extension of a transition period that was agreed before 2018. In short, this implies that banks get more time to comply with capital demands, without cutting dividends to shareholders. EU officials will further discuss the different options this week.
The volume of world trade decreased by 1.2% in January 2020 in comparison to December 2019. This is shown by figures from the Dutch bureau for Economic Policy Analysis (CPB) in the monthly World Trade Monitor. In December the world trade increased, with a revised 0.4%. The CPB emphasizes that the monitor does not show the current situation, but the situation of two months ago. In January, the spread of the coronavirus was still limited and the consequences of the coronavirus unknown.
Fed-president James Bullard of the central bank in St. Louis anticipates millions of unemployed by the coronavirus. Measures to control the spread of the coronavirus in the United States could put up to 46 million Americans out of work in the short term. According to Bullard, the economic shock in the US will be short if policymakers quickly come up with emergency economic aid, such as income support. Earlier this week an agreement was reached in the US on a comprehensive support package.
The 6M Euribor is unchanged at -0.31% compared to previous business day. The 10Y Swap increased with 4 basis points to 0.12% compared to previous business day.
According to market researcher Markit, the economy of the United States and the eurozone have been severely affected by the corona crisis. The Markit composite output index that measures activity for the US industry decreased to 40.5 in March compared to 49.6 in February. The index in the eurozone decreased to 31.4 in March, compared to 51.6 in February.
The governments and central banks of the G7 pledge at all costs to protect the global economy from the negative effects of the new coronavirus. The focus is on fiscal measures such as supporting affected companies and entrepreneurs and promoting liquidity in the financial system. According to the G7, the global economy has become more resilient to shocks compared to the previous financial crisis in 2008.
The U.S. Department of Commerce reported that sales of new homes in the United States decreased by 4.4% on a monthly basis in February. Economists expected a decrease of 1.8%. In January, sales increased by 10.5%.
The 6M Euribor is unchanged at -0.31% compared to previous business day. The 10Y Swap increased with 5 basis points to 0.08% compared to previous business day.
Figures published by Jibun Bank show that the Japanese services sector is impacted severely by the corona crisis. The purchasing managers index for the services sector fell from 46.8 in February 2020 to 32.7 in March 2020. This is the lowest level ever reported. For industry, the purchasing managers index fell from 47.8 in February to 44.8 in March 2020. The composite index of the services sector and industry was reported at 35.8.
In the US, Democratic senators have voted down a sizeable stimulus package for the US economy for the second time in a row. The plans, which are estimated to cost the US government approximately USD 2,000 billion, are said to focus too much on assisting businesses affected by the virus outbreak and too little on supporting families, hospitals and medical personnel. Tonight, a revised version of the support package will be scheduled for another vote.
International Monetary Fund chief Kristalina Georgieva said in a speech that the IMF fears that the corona crisis will cause a recession “at least as severe as the 2008 financial crisis, or worse.” According to the IMF, it is important that countries work together as much as possible to protect their populations and to minimize the economic damage caused by the virus outbreak. The IMF has pledged to arrange approximately USD 1,000 billion in loans to support countries in need.
The 6M Euribor increased with 4 basis points to -0.31% compared to previous business day. The 10Y Swap decreased with 4 basis points to 0.03% compared to previous business day.
According to Rabobank economists, the effect on the Dutch economy may remain limited despite the far-reaching social and economic consequences of the corona crisis. Rabobank economists expect a decline of 0.2% this year. In doing so, they assume that the corona outbreak will come under control during the second quarter, so that the economy can return to normal from the third quarter.
The outlook for US unemployment figures for the next month is ominous. An Oxford Economics survey predicts 10% unemployment in the US by the end of April. That would amount to more than 16 million unemployed. The American Restaurant Association, trade union for the hospitality industry, assumes from 5 million to 7 million unemployed, in the hospitality sector.
Norway’s central bank cuts interest rates again to assist the economy during the corona crisis. Interest rates are reduced by 0.75 percentage points to 0.25 percent, the lowest level ever. The Norwegian central bank also announced an interest rate cut last week.
The 6M Euribor increased with 1 basis point to -0.35% compared to previous business day. The 10Y Swap decreased with 9 basis points to 0.07% compared to previous business day.
Figures published by the German research institute Ifo show that the business climate index in Germany fell from 96.0 in February to 87.7 in March. This is the strongest decline since 1991, bringing the index to its lowest level since the summer of 2009. Normally, Ifo publishes this figure later in the month. A score of 100 is considered neutral, no improvement or deterioration.
Unemployment in the Netherlands fell to 2.9% in February, from 3.0% in January. This follows from figures published by Statistics Netherlands on Thursday. The fall in the unemployment rate is the result of an increasing number of people withdrawing from the labour market, not an increase in the number of jobs. It is the first time since the beginning of the current series of monthly unemployment figures in 2003 that the unemployment rate is less than 3.0%.
Statistics Netherlands also reports that Dutch consumers spent 1.0% more in January 2020 compared to January 2019. In December 2019, the growth in household consumption was 2.9% compared to a year earlier. Statistics Netherlands expects less favourable conditions for consumption by Dutch households as a result of the corona virus in March.
The 6M Euribor increased with 1 basis point to -0.36% compared to previous business day. The 10Y Swap increased with 4 basis points to 0.16% compared to previous business day.
The European Central Bank (ECB) announced after an emergency meeting on Wednesday evening that it is setting up an additional bond-purchase programme worth EUR 750 billion. The program will run until the end of 2020 and can be extended if necessary. Both corporate and government bonds can be purchased within the programme, while it also includes short-term debt from non-financial parties and Greek government bonds. In a statement, President Christine Lagarde emphasized that the ECB has “no limit” when it comes to its commitment to the euro. In addition, she believes that policy makers at the ECB will do whatever is necessary within the limits of their mandate.
Eurostat has announced, based on final figures, that inflation in the eurozone has fallen in February 2020. Inflation reached 1.2% year-on-year, compared to 1.4% a month earlier. The figure corresponded to a provisional estimate. Core inflation, excluding fluctuating energy and food prices, was also 1.2%.
The Japanese government announced that imports decreased by 14% year-on-year in February 2020. Imports of goods from China were halved. Exports decreased by about 1%. According to economists, the figures point to an impending recession in Japan. Significantly declining import and export figures are also expected for the coming months, as more and more regions of the world are experiencing an outbreak of the corona virus.
The 6M Euribor is unchanged at -0.37% compared to previous business day. The 10Y Swap increased with 17 basis points to 0.12% compared to previous business day.
The Turkish central bank decreased the main interest rate due to the impact of the coronavirus. The main interest rate decreases by 1.0% to 9.75%. Special measures will be taken to ensure that Turkish banks always have enough money at hand.
The US-bank Goldman Sachs expects the Chinese economy to decrease by 9% in the first quarter, burdened by the coronavirus outbreak. In a previous forecast, Goldman expected China’s economy to increase by 2.5%. For 2020, the bank expects the Chinese economy to increase by 3%.
The international trade association IATA warns that airlines are running out of cash. According to IATA, three quarters of all airlines have enough cash to continue to pay all unavoidable fixed costs for a maximum of three months. IATA estimates that governments worldwide will have to make additional payments of USD 150 up to 200 billion to absorb shortfalls.
The 6M Euribor increased with 3 basis points to -0.37% compared to previous business day. The 10Y Swap increased with 2 basis points to -0.05% compared to previous business day.
The price of a barrel of Brent oil fell sharply yesterday, from USD 33.85 on Friday to USD 30.05 on Monday as the market closed. This is the lowest level since January 2016. The sharp drop was caused by lower demands from airlines. In addition, the financial director of the Saudi state oil company Saudi Aramco indicated that he is satisfied with an oil price around USD 30.
State planners of the Chinese government stated at a press conference that growth in the Chinese economy is expected to pick up to “normal levels” in the second quarter of 2020. Officials say the Chinese government has enough policy tools to boost economic activity again.
US Treasury Secretary Steven Mnuchin is preparing a major support package to help the US economy get through the corona crisis. He said that after a meeting with the Republican party. The aid package is in addition to the emergency law with corona measures that is already pending Senate approval. According to Republican Marco Rubio, the new measures will mainly support airlines and small businesses.
The 6M Euribor increased with 5 basis points to -0.40% compared to previous business day. The 10Y Swap increased with 2 basis points to -0.07% compared to previous business day.
Consumer confidence in the United States declined in March according to the University of Michigan. The index declined to 95.9 from 101 in February. The indicator fell at a lower pace than economists had expected. They generally expected a score of 95.
The European Commission expects the European Union economy to decrease by about 1 percent this year due to the negative consequences of the corona virus. In February, Brussels expected the EU economy to grow by 1.4 percent this year.
The volume of goods exports in the Netherlands was 3.7 percent higher in January than in the same month a year earlier. This is reported by Statistics Netherlands(CBS). In particular exports of petroleum products and machines grew. The volume of imports was 1.2 percent higher than a year earlier.
The 6M Euribor decreased with 2 basis points to -0.45% compared to previous business day. The 10Y Swap increased with 16 basis points to -0.09% compared to previous business day.
The stock markets worldwide are colored red by the corona virus. The broad S&P 500 index ended up 9.5% lower yesterday, as did the Nasdaq. The Dow Jones even lost 10 percent, the biggest drop since the crash in 1987. The AEX closed on Thursday at 432.1 points, a loss of 10.75%. This means that the price drop is recorded as the second deepest ever.
The markets responded, among other things, to news from the European Central Bank (ECB) that did not lower interest rates on deposits, as expected. Instead, it will increase the bond buying program by € 120 billion until the end of the year. Temporary measures are also being taken to mitigate liquidity problems as much as possible.
US President Donald Trump announced in a speech that the US government has invested $ 50 billion in a government fund for SMEs and that a reduction in income tax is coming. The US central bank will also make extra liquidity available. $ 500 billion is available for this.
The 6M Euribor increased with 1 basis point to -0.43% compared to previous business day. The 10Y Swap increased with 1 basis point to -0.25% compared to previous business day.
US President Donald Trump has announced a travel ban for all European citizens into the United States. The ban will take effect from midnight on Friday and will be valid for a period of 30 days. The measures do not apply to residents of the United Kingdom. Americans can also still enter the US after being thoroughly checked. The measures do not cover freight traffic between Europe and the US.
At a special meeting, the Bank of England announced yesterday to cut its key interest rate by 50 basis points to 0.25%. In addition, the BoE also announced a new financing plan for small and medium-sized businesses. According to the central bank, lower interest rates may support consumer and business confidence as it is under pressure from the corona virus outbreak.
The Agency of the General Treasury of the Ministry of Finance (DSTA) has announced that the Dutch state wants to raise EUR 2 billion to 4 billion next Monday with the reopening of two short-term loans. The first loan runs until May 29, and currently has approximately EUR 2.5 billion outstanding. The second loan matures on August 28, and currently has EUR 1 billion outstanding.
The 6M Euribor decreased with 2 basis points to -0.44% compared to previous business day. The 10Y Swap decreased with 1 basis point to -0.26% compared to previous business day.
The European Union (EU) is committed to use “all available instruments” to limit the effects of the coronavirus, EU-president Michel announced after a conference call with the EU-leaders. European Commission president Ursula von der Leyen stated that an investment fund will be set up of EUR 25 billion, of which EUR 7.5 billion will be available on short notice. In addition, rules concerning state aid and budget deficits will be more leniently applied.
Statistics Netherlands reported that the daily production of the Dutch Industry increased by 0.3% in January 2020 compared to January 2019. The production of machines increased the most, by 15%. For more than half of the enterprise categories production fell in the same time span. Compared to December 2019, production increased by 3.1%.
The Chinese statistics bureau stated that core inflation in China has increased by 1% in February 2020 compared to February 2019, the lowest level since 2010. Especially the coronavirus has influenced the inflation rate, due to a lower demand for goods and services. Food and energy prices are not included in core inflation. Including these categories, inflation was 5.2% on a year-on-year basis, one of the reasons being the increased prices of pork due to the African swine fever.
The 6M Euribor increased with 1 basis point to -0.42% compared to previous business day. The 10Y Swap increased with 6 basis points to -0.25% compared to previous business day.
The International Monetary Fund (IMF) advocates targeted measures to aid households, businesses and financial markets that have run into difficulties from the economic damage caused by the coronavirus. On the IMF website, chief economist Gita Gopinath displays the efforts of the Italian government as an example. The Italian authorities have stretched deadlines for paying taxes in certain cases. Gopinath mentions paid sick leave and family leave as possible measures for China and South Korea, so that workers with symptoms can stay at home without fear of losing their jobs.
Stock exchanges around the world dropped substantially on Monday. Investors reacted with concern to the sharp decrease in oil prices after Saudi Arabia suddenly announced to increase oil production. In addition, the developments surrounding the coronavirus caused extra vigilance. On Wall Street, the S&P 500 fell by 6.2% on Monday. In Europe, the AEX-index decreased with 7.7% in Amsterdam and the stock exchanges in Frankfurt, London and Paris lost up to 8.4%.
American president Donald Trump consulted with his economic advisors on Monday on measures to mitigate the negative impact of the coronavirus on the economy. In a press conference subsequent to these consultations, Trump vowed to support the economy of the United States during the expansion of the coronavirus. The US government has already allocated more than USD 8 billion to withstand the spread of the virus. The U.S. central bank announced on Monday that more funds have been made available through daily overnight repo operations. This week, the Fed will provide at least USD 150 billion through these repo operations. Last week the repo operations amounted to USD 100 billion.
The 6M Euribor is unchanged at -0.43% compared to previous business day. The 10Y Swap decreased with 5 basis points to -0.31% compared to previous business day.
Oil prices decreased to the lowest level in more than three years on Friday due to the failure of a production deal between the oil cartel OPEC and Russia. In addition, the oil market is under pressure due to the concerns about the negative impact of the corona virus on the economy. The price of WTI oil fell more than 33% percent to $ 27 per barrel and Brent oil fell with 30 percent to $ 32 per barrel.
The production of German industry increased by 3 percent in January compared to a month earlier, according to the German Federal Statistical Office. Economists counted on average on 1.7 percent growth in industrial production in Europe’s largest economy.
According to the US Department of Labor, 273,000 new jobs were recorded in the USA in February (excluding agriculture). Employment growth was stronger than the 175,000 new jobs expected in advance. The unemployment rate was 3.5 percent in February, which was slightly lower than a month earlier. The average hourly wage increased by 0.3 percent on a monthly basis.
The 6M Euribor decreased with 1 basis point to -0.43% compared to previous business day. The 10Y Swap decreased with 3 basis points to -0.26% compared to previous business day.
The total volume of mortgages provided in the Netherlands grew to 128 billion euros in 2019, compared to 106 billion euros in 2018. The volume has not been this high since the measurements started in 2006. In the same period, the number of mortgages increased by more than 13 percent to 392,000. The growth is mainly caused by an increasing number of refinanced mortgages. The average mortgage sum increased by 6.5 percent to 326,000 euros.
Final figures from the US Department of Labor show that labor productivity in the United States increased by 1.2 percent in the fourth quarter of 2019. Labor productivity in the agricultural sector is not included in this number. Economists generally expected an increase of 1.3 percent. In the third quarter of 2019, productivity fell by 0.2 percent.
The US Department of Commerce has announced that factory orders in the United States fell 0.5 percent in January compared to December. Economists generally expected a decrease of 0.1 percent. In December, factory orders rose 1.9 percent.
The 6M Euribor is unchanged at -0.42% compared to previous business day. The 10Y Swap decreased with 1 basis point to -0.23% compared to previous business day.
Statistics Netherlands (CBS) has announced that consumer prices rose at a lower rate in February 2020 than the month before. The consumer price index increased by 1.6% on an annual basis in February, compared with 1.8% on an annual basis in January. The decrease was mainly caused by lower fuel prices. Based on the harmonized European measurement method, consumer prices rose 1.3% on an annual basis in February, compared to 1.7% on an annual basis in January. According to CBS, the price increase for the Eurozone in February was 1.2% on an annual basis.
The upcoming Governor of the Bank of England (BoE) Andrew Bailey has indicated that the central bank may need to act quickly in addressing the economic impact of the corona virus. Bailey will succeed current governor Mark Carney mid-March. According to Bailey, the virus can have an impact on the supply of companies, and companies must therefore receive support. In the financial markets, an interest rate cut by the BoE is increasingly being expected. The central banks of the United States, Canada and Australia have already lowered rates.
The services sector in China is suffering heavily from the effects of the corona virus. The purchasing managers’ index of research firms Caixin and Markit fell from 51.8 in January 2020 to 26.5 in February 2020. A position above 50 indicates growth. It is the first time since the start of the measurements in 2005 that the indicator has fallen below a level of 50. Because of the virus, public life is largely halted, which is heavily affecting the services sector.
The 6M Euribor decreased with 2 basis points to -0.42% compared to previous business day. The 10Y Swap decreased with 1 basis point to -0.22% compared to previous business day.
Yesterday, the US Federal (Fed) decreased interest rates by 0.5% due to the impact of the new coronavirus, to a range of between 1% and 1.25%. With this decreased, the Fed wants to ensure that prices remain stable and that the US economy will not experience a slowdown. The Australian central bank already took a similar measure yesterday. The Australian interest rate will be lowered by a quarter of a percentage point to 0.50%. Other central banks such as the European Central Bank, the Bank of England and the Bank of Japan have already indicated that they are willing to take measures to reduce the negative effects of the coronavirus on the economy.
The European Statistical Office Eurostat reported that inflation in the eurozone decreased to 1.2% year-on-year in February, from 1.4% in January. Core inflation, excluding the impact of volatile energy and food prices, increased to 1.2% year-on-year in February from 1.1% a month earlier.
South Africa’s economy entered another recession in the fourth quarter of 2019. It is the second recession in two years. The statistical office of South Africa announced that the economy contracted by 1.4% in the last quarter, after a contraction of 0.8% in the third quarter. The disappointing economic figures increase the pressure on the South African central bank to lower interest rates in order to stimulate growth. The negative impact of the coronavirus on the country’s economy could add to this pressure.
The 6M Euribor decreased with 1 basis point to -0.40% compared to previous business day. The 10Y Swap decreased with 1 basis point to -0.21% compared to previous business day.
Russia is prepared to reduce oil production to counter the price decrease caused by the coronavirus, as has been announced by Russian president Vladimir Putin. Regardless of this announcement, Putin indicated that Russia is content with current oil prices. Last week oil prices showed the largest decrease since the financial crisis. Putin’s announcement resulted in a recovery of oil prices. Since the announcement this weekend to the opening of business today, the price of a barrel of oil (WTI) increased by 6.1% to USD 47.49.
The Organization for Economic Cooperation and Development (OECD) expects the growth of the global economy to decrease as a result of the outbreak and spreading of the coronavirus. In November 2019, the OECD forecasted a growth of 2.9% for the global economy, which is regarded by the OECD as weak. The OECD currently forecasts a growth of 2.4%.
The industry in the United States shows minimal growth in February 2020. Figures from research firm ISM show that activity in the US industry grew slightly in February, as a result of the outbreak of the coronavirus. The purchasing managers’ index recorded a level of 50.1 against 50.9 in January.
The 6M Euribor decreased with 1 basis point to -0.39% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.20% compared to previous business day.
Economists at the Bank of America predict that the global economy is growing much less rapidly this year due to the outbreak of the corona virus. Bank of America expects 2.8 percent growth of the global economy, whereas economists predicted 3.1 percent growth previously. The new growth number would be the lowest in more than ten years.
The president of the Federal Reserve, Jerome Powell, announced that the Federal Reserve is ready to respond “appropriately” to the economic impact of the corona virus. According to Powell, the foundations of the American economy are strong, but the virus outbreak is an increasing risk.
The German Federal Statistical Office reports that inflation in Germany is 1.7 percent in February, just like a month earlier. On a monthly basis, German consumer prices rose by 0.4 percent, against a minus of 0.6 percent a month earlier. In addition, the German Federal Labour Office announced that unemployment in Germany remained unchanged in February at 5 percent of the labour force.
The 6M Euribor decreased with 1 basis point to -0.38% compared to previous business day. The 10Y Swap decreased with 4 basis points to -0.18% compared to previous business day.