Stocks jump despite record slump for Chinese GDP – business live – The Guardian

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Stocks jump despite record slump for Chinese GDP – business live – The Guardian

Mark Sweney

ITN, the producer of news for ITV, Channel 4 and Channel 5, has furloughed staff, frozen senior manager and cut salaries for top bosses by 20% to manage costs during the coronavirus lockdown.

Plans to furlough a “small number” of staff will mainly impact the sport and commercial production departments, while some staff have been asked to work part-time.

A company email to staff said:


These talented and hardworking teams have been hardest hit simply because of the economic downturn in the sectors in which they work.

Top management, including chief executive Anna Mallett and the ITN board, are to reduce their salaries by a fifth for the period of the government lockdown “to help with the financial challenge”.

The cost saving measures also include a recruitment “pause” and halting investment in some projects.

Jasper Jolly

The appointment of BlackRock, the world’s largest investor, to carry out a study on potential new environmental rules for banks by the European Commission, faces scrutiny from members of the European Parliament.

Three MEPs have written to the commission asking it how it intends to avoid a conflict of interest, given that BlackRock holds huge stakes in both fossil fuel companies and the banks.

It comes after the Guardian reported that environmental campaigners were concerned about the potential conflict of interest. Urgewald said the appointment was “like letting the fox guard the henhouse”.

The MEPs from the Greens/European Free Alliance – Rasmus Andresen, Monika Vana and Jutta Palus – asked the commission to also consider how BlackRock’s control of stakes in power plant operators fitted with plans to reduce carbon dioxide emissions.

Rasmus Andresen 🇪🇺🏳️‍🌈
(@RasmusAndresen)

Choosing @blackrock for a study about Green finance feels worrying. Blackrock is still a huge shareholder for the fossil industry. Financing fossil fuels & writing a Green finance study doesn’t fit together. We want an explanation from the @EU_Commission pic.twitter.com/yXRZLBvJxS

April 17, 2020

BlackRock had $7.43tn (£5.97tn) in assets under management on 31 December (before the coronavirus pandemic caused asset values to fall). The majority of those assets are in products that track equity and bond indices, meaning the company by default controls large stakes in many of the world’s biggest companies.

BlackRock previously told the Guardian that it was honoured to be selected by the commission.

China’s economy will do well to grow at all in 2020.

That’s the stark warning from Yue Su, an economist focusing on China at The Economist Intelligence Unit.

She says China will continue to struggle this year as its trading partners around the world grapple with their own Covid-19 recessions.

Su says:


The GDP contraction in January-March will translate into permanent income losses, reflected in bankruptcies across small companies and job losses.

In addition, the international spread of the pandemic will push the country’s major trading partners into recession, leading to a slump in exports in the second quarter and knock-on impacts on domestic investment and employment.

China’s economy will do well to grow at all in 2020 as a whole.

The stock market rally is set to continue stateside, with futures pointing to gains on Wall Street:

  • Dow futures are up +2.7%
  • S&P 500 futures are up +2.4%
  • Nasdaq futures are up +1.8%

Updated

Investors poised for China rate cut after Q1 GDP plunge

There’s a growing expectation that China will cut its benchmark lending rate as early as Monday, following the 6.8% contraction in first quarter growth.

A Reuters survey shows that all 52 traders and analysts polled are expecting a cut to China’s Loan Prime Rate on Monday in order to reduce financing costs for companies that are struggling to get back on their feet after the pandemic.

If their hunch is right, it would be the second cut to the benchmark so far this year.

Jacqueline Rong, a senior China economist at BNP Paribas in Beijing, said:


Judging from high frequency economic data and progress of work resumption in April, we believe the central bank will continue its easing stance for the time being despite some signs of loose liquidity in the banking system.

Hilary Osborne

Estate agency chain Foxtons has announced plans to raise £22m through the creation of new shares to shore up its finances while the coronavirus crisis continues.



A Park Lane street sign sits on the wall of a Foxtons Ltd. estate agents in the Westminster district of in London.

A Park Lane street sign sits on the wall of a Foxtons Ltd. estate agents in the Westminster district of in London. Photograph: Bloomberg/Bloomberg via Getty Images

The company, which has most of its branches in London, says the money will pay off existing credit and give it liquidity to weather a long lockdown followed by a slow recovery in the housing market.

Soon after the lockdown began ministers said that people should not be buying and selling homes as usual, causing the market to almost grind to a halt. Agents are offering virtual property tours, but uncertainty over the economy is likely to deter potential buyers for some time to come.

Foxtons said that in “a reasonable worst case scenario period of lockdown restrictions in London until the end of August 2020” revenues would be 78% lower than in the same period last year.

The agency has taken steps to cut costs, including furloughing 750 employees and cutting salaries for those earning above £40,000. It says 80% of those asked to take a cut had agreed.

It has also told HMRC that it will delay paying February’s tax and national insurance contributions on staff earnings for at least a month.

DATA FLASH: Eurozone inflation slowed in March to 0.7% year-on-year, confirming earlier estimates.

That compares to a 1.2% rise in February, and the European Central Bank’s target of below but close to 2%.

Time to catch up on Europe’s car market and the news isn’t pretty.

Passenger car sales across the 27 EU states plunged 55.1% in March to to 567,308 vehicles, after the vast majority of European dealerships shuttered in the second half of the month as the coronavirus spread across the continent.

That’s according to data from the European Auto Industry Association (ACEA).



A bar chart showing new passenger car registrations for the 27 EU states.

A bar chart showing the combined new passenger car registrations for the 27 EU states on a month by month basis. Photograph: European Automobile Manufacturers Association

Of the 27 EU markets, Italy was the hardest hit, with registrations falling by 85.4%. But demand also tumbled in France and Spain, falling 72.2% and 69.3%, respectively.

The combined figure rises to 853,077 vehicles when you combine the European Union, Britain and the European Free Trade Association (EFTA) together.

In the UK alone, car sales tumbled 44.4% to 254,684 last month.

The European stock rally is holding firm.

Even on the FTSE 100 just six stocks are trading in negative territory, and the worst decline is no more than 2%.



A list of the worst performing on stocks on the FTSE 1srcsrc on Friday morning.

A list of the worst performing on stocks on the FTSE 100 on Friday morning. Photograph: Tail1/Refinitiv

We’ll see how long this keeps up…

Updated

China’s economic trajectory post-Covid-19 is being watched closely, with some hoping it can serve as a example of what to expect in the months ahead.



Aerial view of an aquaculture base on April 16, 2src2src in Xiapu County, Fujian Province of China.

Aerial view of an aquaculture base on April 16, 2020 in Xiapu County, Fujian Province of China. Photograph: China News Service/China News Service via Getty Images

But Hugh Briscoe, a global fixed income portfolio manager at Goldman Sachs Asset Management, says China is unlikely to be the best model for western nations who have taken a very different approach to handling the coronavirus outbreak.

He says:


Investors are focused on the pace at which economic activity will return to normal given China’s prominence in the global economy; it is the world’s largest trading partner. China’s recovery is also being closely watched given its potential to serve as a template for growth paths elsewhere.

However, there are several reasons to be wary of drawing parallels. First, China’s covid-19 outbreak and in turn activity restrictions were largely confined to Wuhan. By contrast, mitigation measures in key advanced economies have been country-wide.

Second, China’s restrictions were more onerous; this influenced the progression of its virus outbreak and in turn the duration for which activity was curbed. Third, risks of a second wave of infections remain, with reported cases in China in recent weeks largely being imported.

Nonetheless, epidemiological and economic developments in China are useful to monitor, even if their magnitudes differ from what we will likely observe in core markets such as the US, Euro area and UK.

Updated

Lily Kuo

China has reported more than 3,000 deaths and 80,000 infections from the coronavirus. Even as Chinese authorities over the past month have pushed to restart the economy, fears of new infections have forced some parts of the country to enact new restrictions. China has closed its borders to almost all foreigners arriving from abroad and limited international flights.

Depressed demand from overseas is likely to hit the Chinese economy further. China’s first quarter contraction follows declines in 2019, which saw the Chinese economy expand at its slowest pace in almost 30 years, the result of slowing consumption, a pull back on debt-fuelled growth, and a protracted trade war with the US.

Analysts polled by Reuters estimate China’s yearly growth for 2020 will slow to 2.5% from 6.1% last year, the weakest pace since the last year of the Cultural Revolution.

You can read Lily Kuo’s full story here:

US crude futures tumble to $18.87

But not every market is on the rise, with US crude futures falling to their lowest level since 2002 at $18.87.

While some economies like Germany and Spain are testing the waters in sending citizens back to school or work, there seems to be some pessimism about how long the road will be for the US economy as a whole (as well as how effective the Opec+ production cut deal will be in the interim). And with over 22 million US residents now jobless, there are fears over the trajectory for US domestic demand.

Despite initial excitement after Donald Trump released guidelines for how the US would re-open the economy, there were some important caveats that mean the president would ultimately defer to state governors on when and how to return their states to normal.

Stephen Inness, chief global markets strategist at AxiCorp says:


Oil markets found baseline support from President Trump’s US reopening plan. But with NYMEX crude prices closing ominously below the psychological WTI $20 per barrel for the second day running; it’s suggesting downside risk remains the dominant factor.

If oil producers fail to address the medium-term structural oversupply situation adequately, oil prices could stay volatile, with risks skewed to the downside for the next few months.

Updated

Here we go: Germany’s DAX opens higher by +2.9%

And we’re off! European indexes are trading higher across the board.

We’re still waiting for a print from the German DAX, but here’s how we’re looking so far:

FTSE 100 is up +2.5%

France’s CAC 40 is up +1.5%

Spain’s IBEX is up +2.6%

Updated

Introduction: Stocks jump despite Chinese economy shrinking for first time on record

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

Europe has woken up to news that China’s economy shrunk for the first time on record following the coronavirus outbreak.

Data showed that Chinese GDP for the first quarter – covering the three months from January-March – came in at -6.8%, which is the first contraction since records began. That is worse than economists expected, with a Reuters poll having forecasted a contraction of -6.5%.

But markets aren’t fazed. Stocks in Asia shrugged off the news, with the Shanghai Composite closed up 0.7%, Japan’s Nikkei 225 rising 3.1% and Australia’s ASX up 1.8%. Europe is also called higher.

Some investors seem more intrigued that American biotech firm Gilead may have found a potential drug to treat coronavirus. Others seem to be taking the view that the data could have been much, much worse.

However, there is the age-old concern that the figures may not be telling the whole story, and many economists still question the reliability of China’s data – especially when you drill down into indicators like retail sales, which were hammered after shops were ordered to close during the worst of the outbreak.

Holger Zschaepitz
(@Schuldensuehner)

#China GDP declined 6.8% YoY in Q1 2020. In seasonally adj. QoQ terms GDP declined 9.8%, equivalent to -34% in annualized terms. There are reasons to think that slump was deeper than officials claim, CE says: Almost all main econ indicators contracted at double-digit pace in Q1. pic.twitter.com/yqlQ9SmkJw

April 17, 2020

Ipek Ozkardeskaya, a Senior Analyst at Swissquote Bank, explains:


Now, of course, if we compare this number with the expectation of over 30% slump in developed economies following a similar shutdown and confinement period, it is possible that there may have been some adjustment on data, and the data doesn’t reflect the real extent of the economic calamity –

Other data showed that the slump in Chinese retail sales didn’t improve as much as expected in March, down from -20.5% to -15.8% versus -10% penciled; the fixed asset investment fell 16.1% y-o-y against -15.0% forecasted by analysts and -24.5% printed a month earlier.

But, the contraction in the industrial production was only 1.1% in March, versus-7.3% expected by analysts and -13.5% printed month earlier, meaning that the Chinese production picked up at a better-than-expected speed, which is little surprising for Xi’s ambitious economy.

The agenda

  • 10.00am BST: Eurozone inflation for March

Updated

Read More

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