The Federal Reserve announced after its policy meeting that it will continue its bond purchase programme. However, according to the Fed, there is currently no need to further cut its key interest rate. After two interest rate cuts in March, the key interest rate is currently in a range of 0.00% to 0.25%. Yesterday, it was announced that the US economy shrank 4.7% year-on-year in the first quarter of 2020. The contraction for the second quarter of 2020 is projected to be even higher than in the first quarter.
Statistics Netherlands reported that Dutch retail turnover in March 2020 increased with 3.5% compared to March 2019. Sales volume grew by 2.0%. The differences between the various sectors within the retail sector are large. Hardware stores and home decorating stores recorded the largest increase in turnover since the figures were first published in 2005, while clothing and shoe stores suffered a large loss of turnover. Supermarkets and drugstores also experienced strong sales growth.
Based on provisional figures, the German federal statistics agency Destatis has announced that inflation in Germany was 0.8% in April 2020, compared to 1.4% in March 2020. The decrease was partly due to lower energy prices. Based on the European harmonized measurement method, German inflation was also 0.8%, compared to 1.3% in March.
The 6M Euribor decreased with 1 basis point to -0.16% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.09% 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.
U.S. consumer confidence fell 31.9 points to 86.9 in April, according to the Conference Board report released on Tuesday. The subindex, based on consumers’ short-term outlook for income, business and labor market conditions, increased by seven points to 93.8, indicating that consumers see the impact of corona as temporary. “Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy,” according to Lynn Franco, senior director of economic indicators at the Conference Board.
The European Union announced a proposal to loosen the leverage ratio for banks on Tuesday. The proposal aims to reduce the amount of capital required by banks and allows them to deviate from strict financial and accounting rules during the corona crisis. The relaxation of the rules is caused by “exceptional circumstances” according to European Commissioner Valdis Dombrovskis and will apply until the end of 2021.
U.S. exports and imports fell to the lowest level in three years in March, according to data released by the Commerce Department on Tuesday. Goods exports decreased by 6.7 percent compared to February, the sharpest decline since 2008. Imports of cars and consumer goods decreased by 2.4 percent. The trade deficit increased to $ 64.2 billion in March.
The 6M Euribor decreased with 1 basis point to -0.15% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.07% 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.
At the last policy meeting, the Bank of Japan (BoJ) decided to expand its bond purchase program. Japanese government bonds can now be bought indefinitely by the BoJ, and the purchase of Japanese corporate bonds is also being expanded. These measures have been taken to assist the Japanese economy affected by the corona crisis. The BoJ left its policy rates unchanged.
The Ifo research institute has announced that German entrepreneurs’ confidence in the economy has further decreased to the lowest point ever. The index was at 74.3 in April 2020 against a revised 85.9 in March. A significant decline was also reported in March 2020. Economists had forecast an average decline to 79.7 in April 2020.
The Netherlands Bureau for Economic Policy Analysis published its monthly world trade monitor for February 2020. This shows that world trade volume fell by 1.5% on a monthly basis in February. World trade volume declined by a revised 1.4% in January. Global industrial production rose slightly by 0.2% in February compared to a month earlier.
The 6M Euribor decreased with 3 basis points to -0.14% compared to previous business day. The 10Y Swap increased with 2 basis points to -0.05% 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.
Preliminary figures from IHS Markit show that the Purchasing Managers Index (PMI) for the Eurozone decreased to 13.5 in April 2020, from 29.7 in March 2020. This is the lowest level since Markit started with the current series of PMI data. In the same period, the index for the industrial sector decreased from 44.5 to 33.6, while the index for the services sector decreased from 26.4 to 11.7.
Figures published by the US Department of Labor on Thursday show that 4.4 million Americans have claimed social assistance benefits in the past week. That is a decrease compared to last week, when the number of unemployed increased by 5.2 million. Economists expected 4.5 million new unemployed. In the past five weeks, a total of 26.5 million Americans have claimed social assistance benefits, the fastest increase in the number of unemployed since the 1930s.
New figures from statistics Japan show that consumer prices remained unchanged in March 2020 compared to February 2020. In February 2020, consumer prices declined slightly from a month earlier. Compared to March 2019, consumer prices rose by 0.6 percent in March 2020. These figures do not include the prices of fresh food and energy. The Bank of Japan still aims for an annual inflation rate of approximately 2.0 percent.
The 6M Euribor increased with 6 basis points to -0.12% compared to previous business day. The 10Y Swap decreased with 3 basis points to -0.02% compared to previous business day.
Figures from IHS Markit and Jibun Bank show that activity in the Japanese economy declined sharply in April 2020. For example, the purchasing managers index for the services sector fell from 33.8 last month to 22.8 in April 2020. This is the lowest level ever. The purchasing managers index for industry also fell, from 44.8 in March 2020 to 43.7 this month. In an explanation, Markit indicates that the “crippling effect” of the corona crisis increased in April.
Market researcher GfK has announced that consumer confidence in Germany has fallen sharply due to the coronavirus outbreak and measures to combat the crisis. The confidence measuring index fell from 2.3 in March to -23.4 in April. According to GfK, the decrease is largely due to concerns among German consumers about the loss of jobs.
The Dutch State Treasury Agency (DSTA) has announced that the Dutch state wants to raise between EUR 1 billion and EUR 4 billion on Tuesday with the reopening of two short-term and one long-term loan, as well as the issuance of a new loan. The two short-term loans mature at July 30, 2020 and January 28, 2021, respectively. The long-term loan, on which EUR 15.2 billion is already outstanding, matures at January 15, 2047. The new issue concerns a loan with a term of 1 year, until April 28, 2021.
The 6M Euribor increased with 1 basis point to -0.18% compared to previous business day. The 10Y Swap increased with 7 basis points to 0.01% compared to previous business day.
German investor confidence has risen sharply, according to the ZEW index measurement published yesterday. The expected reading for the index was -42.0 but the index climbed from -49.5 to 28.2. According to ZEW President Achim Wambach financial experts see light at the end of the tunnel. Investors are confident that the German economy will grow again in the third quarter of 2020 as a result of easing restrictions to limit the corona virus. The economic outlook in the wider euro area also improved sharply, ZEW’s report showed.
Central banks’ balance sheets are expanding at record rates, raising the question how extensive the buyback programs can be and whether these acquired assets can eventually be sold back to the market. Central banks of the G7 countries jointly bought $ 1.4 trillion of financial assets in March, nearly five times as much as the previous record in April 2009, according to an analysis performed by Bloomberg Economics. Morgan Stanley analysts estimate that the Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England will have expanded their balance sheets by a cumulative $ 6.8 trillion at the end of the corona crisis.
The fall of the oil price below zero on Monday also caused turbulence in the financial markets on Tuesday. June forward contracts fell 43 percent on Tuesday, closing below $ 12 a barrel for WIT. Trump’s administration pledged to help the U.S. energy sector with a stimulus package and other measures. “We are taking very aggressive but appropriate steps to help the industry,” said Energy Secretary Dan Brouillette. Current negative oil prices also have possible negative consequences for banks and traders causing potentially significant losses.
The 6M Euribor increased with 1 basis point to -0.19% compared to previous business day. The 10Y Swap increased with 5 basis points to 0.00% compared to previous business day.
The market price of a barrel of West Texas Intermediate (WTI), the leading type of oil in the United States, turned negative on Monday as a result of the corona crisis. This implies that oil companies are paying traders to buy oil, in order to avoid having to shut down oil production in certain oilfields. This is the first time that the American oil price has turned negative. After the price fall, a barrel of American oil of 42 gallons was worth only USD -/- 28.00 just after 20:30 GMT+1, which implies a drop of more than 250%.
The eurozone economy will decrease even more this year due to the corona crisis than previously expected because of stricter measures to counter the virus outbreak. This is what credit rating agency Standard & Poor’s (S&P) writes in a new report. The agency now expects the euro area economy to contract by 7.3%, compared to the forecast of 2% last month. The outlook has worsened as a result of the extension of lockdowns in many European countries. In 2021, however, 5.6% economic growth is forecasted for the nineteen EU countries.
Producers and importers of many of the items on which the United States has imposed import tariffs do not, for the time being, have to pay those tariffs. U.S. Treasury Secretary Steven Mnuchin has announced that because of the corona crisis companies are allowed to postpone their payment for up to ninety days.
The 6M Euribor decreased with 1 basis point to -0.20% compared to previous business day. The 10Y Swap increased with 3 basis points to -0.05% compared to previous business day.
Several ECB policymakers announce separately that the European Central Bank (ECB) can take further measures if necessary, to help the eurozone through the corona crisis. Despite the announcement to buy more than $ 1 trillion debt this year, tensions on the capital markets are increasing. Policy makers expect inflation to remain below the desired level of 2 percent for the time being.
The German Federal Statistical Office reported that producer prices in Germany fell by 0.8 percent in March compared to the previous month. Economists had expected an average decline of 0.7 percent. In February, the producer prices decreased by 0.4 percent.
The drop in the WTI oil price continues. Due to collapsed demand, global storage capacity is likely to become saturated. Oil futures in New York fell 8% to $ 17 a barrel when the Asian stock markets opened. That is the lowest price in 21 years. The reduction in production agreed by OPEC + therefore appears to have little effect on oil prices.
The 6M Euribor increased with 1 basis point to -0.19% compared to previous business day. The 10Y Swap increased with 1 basis point to -0.08% compared to previous business day.
Figures from the statistical office Eurostat show that industrial production in the eurozone decreased by 0.1 percent in February 2020 compared to a month earlier. In January 2020, industrial production increased by 2.3 percent on a monthly basis. Economists had already anticipated a 0.1 percent decline in February 2020. On an annual basis, industrial production decreased by 1.9 percent in February 2020.
The US Department of Social Affairs announced on Thursday that the number of unemployed increased by 5.2 million people in the past week. A week earlier, 6.6 million Americans registered as unemployed. Economists expected 5.1 million new applications in advance. In the past month, the total number of new unemployed in the United States has now increased to 20 million.
Preliminary figures from the Chinese government show that the Chinese economy contracted sharply in the first quarter of 2020. The gross domestic product decreased 6.8 percent on an annual basis, while economists had expected a decrease of 8.3 percent. In the fourth quarter of 2019, the Chinese economy grew by 6.0 percent on an annual basis. The economy contracted by 9,8 percent in the first quarter of 2020 versus the fourth quarter of 2019.
The 6M Euribor is unchanged at -0.20% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.09% compared to previous business day.
Statistics Netherlands has reported that the number of new applications for unemployment benefits rose to 38,000. As a result, the number of people currently on unemployment benefits in the Netherlands has risen to 250,000. The increase in the number of unemployment benefits was the strongest in the hospitality sector, temporary employment sector and culture sector.
Oil prices decreased sharply yesterday, following a report by the US energy agency EIA. It showed that domestic demand in the United States has fallen to its all-time low. The report is a first confirmation that the agreed production restrictions of OPEC and other countries are probably not enough to restore oil prices. Yesterday, the price for a barrel of Brent oil decreased approximately 6.5% to USD 27.69 at the close of the market.
Destatis has announced that inflation in Germany in March 2020 was 1.4% on an annual basis. This figure corresponds to a previous provisional estimate. In February 2020, inflation was 1.7% on an annual basis. Based on the harmonized European measurement method, inflation was 1.3% in March 2020.
The 6M Euribor decreased with 2 basis points to -0.20% compared to previous business day. The 10Y Swap decreased with 5 basis points to -0.07% compared to previous business day.
IMF’s chief economist Gita Gopinath presented the World Economic Outlook in Washington on Tuesday. The International Monetary Fund predicts that the global economy will shrink by 3 percent this year and that the damage could be even greater if the pandemic lasts longer. This is a significant adjustment compared to the 3.3 percent growth forecast for 2020 published in January. The calculations show that the economies of rich countries are hit hardest. The Eurozone is forecast to contract by 7.5 percent in 2020 and the US economy by 5.9 percent. The Chinese economy is not shrinking, but the forecasted growth is unprecedentedly low at 1.2%.
Despite last weekend’s ‘historic agreement’ to reduce oil production to stabilize prices, oil prices reacted Tuesday with a drop of 4.2 percent to $ 30.17 a barrel. In the World Economic Outlook, the IMF also expects relatively low oil prices in the coming years as a result of the corona crisis. It is estimated that a barrel of Brent oil will not exceed $ 45 until the end of 2023. Saudi Arabia also seems to be increasing oil production before the deal will be effective on May 1st and analysts indicate that oil storage capacity in the US has almost reached its limit.
Investor pessimism regarding the economic impact of the pandemic has reached “extreme” levels, according to the Bank of America survey. Cash levels rose from 5.1 percent in March to 5.9 percent in April, the highest level since the 9/11 attacks. The fund managers believe that credit risk is the greatest threat to the financial markets.
The 6M Euribor increased with 2 basis points to -0.18% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.02% compared to previous business day.
Chinese exports decreased less than expected in March, despite the effects of the coronavirus. This is shown by figures from Chinese customs. Imports also remained stronger than anticipated. However, the full effects of the drop in demand in the United States and Europe may not yet be included in the figures. Chinese exports fell 6.6% in March and imports fell 0.9%. Economists expected exports to fall by 13.9% and imports by 9.8%.
OPEC, Russia and other oil producing countries agreed on Sunday evening to reduce production by 9.7 million barrels per day for the months of May and June. That is about 10% of the quantity produced daily worldwide. US president Trump, who was involved in the negotiations this time, stated that the group of oil producers would actually prefer to reduce production by 20 million barrels a day.
The Federal Reserve Bank of New York is going to reduce the frequency of some repo operations “in light of more stable repo market conditions”. The Fed repeatedly pumped hundreds of billions of dollars into the financial system through so-called repos. Whereas the Fed first carried out two overnight repo transactions per day, as of 4 May this will be reduced to once a day.
In the attachment, market data on money and capital market rates as well as other rates are presented.
10th and 13th of April were bank holidays.
The US Federal Reserve (Fed) announced on Thursday that it will provide loans amounting to an additional 2.3 trillion US dollars. With these new loans, the Fed wants to further support the economy by keeping the credit flow going. Both households and employers can obtain the loans. In addition, the loans enable the state and local authorities to continue with providing critical services.
In the United States, producer prices decreased by 0.2 percent in March 2020 compared to a month earlier. In February 2020, prices also decreased by 0.6 percent on a monthly basis. Economists expected producer prices to decrease by 0.4 percent in March. On an annual basis, prices rose by 0.7 percent in March 2020. In February 2020, the increase was 1.3 percent in comparison with February 2019.
New figures from Statistics Netherlands show that the volume of exported goods in the Netherlands grew by 3.3 percent in February 2020 compared to February 2019. In January 2020, volume increased with 3.9 percent compared to a year earlier. The volume of imported goods declined by 0,9 percent in February 2020 compared to February 2019. This is the first contraction of imports in almost four years.
The 6M Euribor increased with 3 basis points to -0.20% compared to previous business day. The 10Y Swap decreased with 5 basis points to -0.0025% compared to previous business day.
According to five German research institutes, the German economy will enter a deep recession this year due to the corona crisis but is well equipped to recover next year. The institutes expect a contraction of 4.2% for this 2020, which would be the strongest recession since the financial crisis. It should be noted however that if the pandemic lasts longer, the contraction is likely to be even stronger. However, growth may return to 5.8% in 2021, due to extensive support measures announced by the German government. According to the institutes, the German government is well equipped to obtain sufficient funds to provide this support. The German finance minister expects the German economy to contract with more than 5% in 2020.
The French central bank has announced in an initial estimate that the French economy contracted with 6.0% in the first quarter of 2020. This is the strongest downfall since World War II. According to the Banque de France, economic activity has fallen by approximately a third since the lockdown in France. For example, the French industry currently only uses about 56% of the total capacity.
The Central Bureau of Statistics (CBS) reported that the average daily production of Dutch industry in February 2020 was 1.3% lower than in February 2019. Production decreased for six of the eight business classes. The production of rubber and plastic, among others, fell sharply by 8.4% year-on-year. Production in the machine industry showed strong growth at 7.9% year-on-year. Industrial production decreased by 1.7% in February 2020 compared to the previous month.
The 6M Euribor increased with 2 basis points to -0.23% compared to previous business day. The 10Y Swap decreased with 1 basis point to 0.05% compared to previous business day.
Saudi Arabia and Russia are discussing the terms of an agreement to curb oil production to mitigate the impact of the coronavirus. The two countries are close to an agreement according to delegates involved in the talks. The accord would reduce global output by about 10 million barrels a day. The OPEC+ alliance will hold a virtual meeting on Thursday to reach a final agreement.
The IMF wants to assist emerging economies and developing countries reduce their dollar deficits. “Our board is going to review a proposal in the next days on creating a short-term liquidity line that is exactly targeted to countries with strong fundamentals, strong macroeconomic fundamentals, that may be experiencing short-term liquidity constraint,” said IMF director Kristalina Georgieva in an online briefing. The proposal is a solution for countries that have insufficient collateral to participate in the US Federal Reserve program.
The meeting between European finance ministers has not led to a solution yet. The ministers met on Tuesday to discuss measures that can be taken to mitigate the economic impact of the corona virus. The ministers were asked to come up with a number of joint measures before the end of this week. After a brief interruption last night negotiating has restarted today. A number of EU countries including France, Spain and Italy are asking for “coronabonds” or “eurobonds” while an earlier possible agreement of 250 billion euros from the emergency fund ESM is now off the table.
The 6M Euribor increased with 3 basis points to -0.25% compared to previous business day. The 10Y Swap increased with 8 basis points to 0.06% compared to previous business day.
Moody’s expects the Dutch economy to shrink by 2.6% this year as a result of the negative impact of the corona crisis. Previously, the credit rating agency expected the gross domestic product to grow by 1.1%. This would imply that 2020 will be the worst year for the Dutch economy since 2009.
Factory orders in Germany fell less than expected in February 2020. According to figures from the German Federal Statistical Office, orders decreased by 1.4% on a monthly basis in February. Economists expected a 2.5% decline. In January, orders for German factories increased by 4.8%. The decrease in February is largely caused by lower foreign demand which is a result of the coronavirus outbreak in China. The March figures are expected to show the effects of the European virus outbreak.
Construction activity in Germany and the United Kingdom in the last month was severely affected by the corona pandemic, according to market researcher Markit, which published its purchasing managers’ index for construction of the two countries. As a result of the measures taken to contain the coronavirus, considerably less is being constructed. The German index stood at 42 compared to 55.8 in February and the British index fell to 39.3 compared to 52.6 a month earlier.
The 6M Euribor decreased with 1 basis point to -0.28% compared to previous business day. The 10Y Swap increased with 2 basis points to -0.02% compared to previous business day.
Russia, Saudi Arabia and several other large oil-producing countries may discuss a limitation of their oil production on Thursday. That should lay a floor under the oil price, which has declined in recent months due to the outbreak of the corona virus and a price war between Russia and Saudi Arabia. The price of a barrel of crude Brent oil was $ 34.11 on Friday, while in early January the price was almost $ 70.
The corona pandemic has developed into a financial crisis that has no precedent, IMF director Kristalina Georgieva said at a meeting of the fund. “Never in the history of the IMF have we seen the global economy come to a halt before,” said Georgieva.
The number of new claims for unemployment benefits in the United States will continue to be millions in this week as a result of the corona crisis. In general, economists surveyed by Bloomberg expect 5 million Americans to file an aid application. With 15 million aid applications in three weeks, the world’s largest economy is likely to head for 10 percent unemployment in April.
The 6M Euribor increased with 1 basis point to -0.27% compared to previous business day. The 10Y Swap is unchanged at -0.04% compared to previous business day.
The Spanish Ministry of Employment reports that since March 12, nearly 900,000 employees have lost their jobs. This figure is almost three times higher than ever before. Official unemployment rose by 300,000 to 3.54 million in March. In January 2009 unemployment rose by 200,000 people.
Producer prices in the eurozone fell by 0.6 percent in February 2020 compared to January 2020. In January, producer prices rose by 0.2 percent on a monthly basis. On an annual basis, the index decreased by 1.3 percent in February 2020. In January 2020, producer prices decreased by 0.7 percent compared to January 2019.
In the past week, the number of new claims for unemployment benefits in the United States rose to 6.6 million. This is a doubling of the number of applications compared to last week and amounts to more than 2 percent of the total working population. Until the corona crisis, the number of benefit claims in one week never exceeded 700,000. This record dated back to 1982.
The 6M Euribor increased with 1 basis point to -0.28% compared to previous business day. The 10Y Swap is unchanged at -0.04% compared to previous business day.
Payroll processor ADP has reported that employment in the United States decreased by approximately 27,000 jobs in March 2020. According to ADP, the decrease is largely caused by companies that filed for bankruptcy in early March as a result of the corona crisis. In an explanation, ADP indicates that figures after 12 March have not been included in this estimate. As a result, the number may turn out to be much more negative. Economists had forecast a decrease of 150,000 jobs.
A Russian government official has reported that Russia is refraining from increasing oil production for the time being. Following the failure of the OPEC consultation on further limiting oil production, both Saudi Arabia and Russia announced to increase oil production. However, global demand has collapsed due to the corona crisis. As a result, oil prices have collapsed worldwide and it is “senseless” to pump up more oil at the moment.
Statistics Netherlands (CBS) has announced that Dutch collective labor agreement wages rose by an average of 3.1% in the first quarter of 2020. This is the largest increase since the first quarter of 2009. The real estate wage increase was the highest at 5.6%, while the energy supply sector saw the lowest increase at 1.7%.
The 6M Euribor decreased with 1 basis point to -0.29% compared to previous business day. The 10Y Swap decreased with 2 basis points to -0.04% compared to previous business day.
The Federal Reserve has taken new measures to increase access to dollars worldwide and decrease market volatility. It opens a temporary repo facility for foreign central banks to exchange US government bonds for dollars and then distribute the money to local banks. In recent weeks, a run on dollars started because businesses took out credit rapidly and investors liquidated their positions. The facility, available on April 6, aims to prevent (central) banks from selling their government bonds in order to receive dollars.
Stock exchanges in the US ended lower again on Tuesday after a total increase of 17% in the seven trading days before. The Dow-Jones index fell 2 percent to 21,888 points and the S&P fell 1.7 percent to 2,582 points. Due to the large losses on Wall Street since mid-February, the Dow Jones has experienced its worst first quarter since 1938. In Europe, the Stoxx Europe 600 index has fallen by 24 percent since the beginning of 2020.
US President Donald Trump announced his plans for a $2 trillion infrastructure plan on Tuesday evening. These investments should not only improve infrastructure but also increase employment. Currently, unemployment in America is forecasted to rise even faster as a result of the corona crisis than economists at Goldman Sachs previously expected. The investment bank expects unemployment to reach 15 percent in the second quarter.
The 6M Euribor is unchanged at -0.28% compared to previous business day. The 10Y Swap increased with 2 basis points to -0.02% compared to previous business day.