Stock-markets are higher this morning as hopes for economic recovery outweigh concerns over new coronavirus outbreaks in China and despite a warning from the International Monetary Fund (IMF) that “the forthcoming June World Economic Outlook Update is expected to show negative growth rates even worse than previously estimated.”
- The Fed is committed to using a full range of tools to support the US economy in these challenging times, but as those tools are reserved for times of emergency they will be put away when the coronavirus crisis is over, Fed Chair Powell reiterated in his semiannual monetary policy report to the Congress. Powell added that the US continues to face difficult and challenging times, as the pandemic is causing tremendous hardship and the GDP is likely to contract at a record pace this quarter. This comes a day after Fed announced it will update its secondary market corporate credit facility by purchasing individual corporate bonds that have remaining maturities of five years or less. The facility, which started buying shares of exchange-traded funds in mid-May, is meant to improve market functioning in the light of the coronavirus pandemic.
- The NAHB housing market index in the US climbed 21 points from the previous month to 58 in June 2020, easily beating market expectations of 45, as several states lifted the lockdowns restrictions imposed to combat COVID-19. The current single-family sub-index rose to 63 from 42 in May and the one for prospective buyers went up to 43 from 21. Additionally, the gauge for home sales over the next six months increased to 68 from 46.
- Hourly labour costs in the Euro Area increased 3.4% year-on-year in the first quarter of 2020, following a downwardly revised 2.3% rise in the previous quarter and way above market forecasts of a 2.3% gain. It is the biggest increase in labour costs since at least 2009 as COVID-19 containment measures began to be widely introduced by Member States, leading to business and store closures. The cost of wages and salaries per hour worked grew by 3.4% (vs 2.4% in Q4) and the non-wage component grew by 3.6% (vs 2.2%). By sector, hourly labour costs rose by 2.6% in industry, 3% in construction, 3.4% in services and 4.2% in the (mainly) nonbusiness economy. Among Eurozone largest economies, labour costs increased 4.3% in Germany, 0.9% in France, 3% in Italy and 3.8% in Spain.
- Average weekly earnings including bonuses in the UK increased by 1% from a year earlier to GBP 529 in the three months to April of 2020, easing from a 2.4% rise in the three months to March and missing market expectations of 1.4%. It was the smallest increase in earnings since the third quarter of 2014 as the country entered a coronavirus lockdown on March 23rd and many businesses closed. Wage growth slowed in services (1.4% vs 2.4%) such as finance and business services (0.9% vs 1.8%) and fell in wholesaling, retailing, hotels & restaurants (-0.8% vs 2%). In addition, wage growth eased in manufacturing (0.3% vs 1.8%) and dropped in construction (-2.8% vs 2.72%). Excluding bonuses, average weekly earnings increased by 1.7%, also below market forecasts of 1.9%. In real terms, total pay fell 0.4% and regular pay was up 0.4%.
- The UK unemployment rate was at 3.9% in the three months to April 2020, the same as in the previous period and below market expectations of 4.7%, as the government Coronavirus Job Retention Scheme helped funding employees wages during lockdown. The number of people out of work fell by 8,000 to 1.34 million, while the number of employed people rose by 6,000 to 32.99 million. The activity rate was at 79.5%, lower than March’s all-time high of 79.8%. However, the number of people on company payrolls fell by 1.7% in May and job vacancies dropped at a record 476K between March and May (-342K than in the previous quarter). Data collected was based on interviews that took place throughout the period from the start of February to the end of April 2020, covering a full month of the covid-19 lockdown.
- On Tuesday: European stocks rallied after the U.S. Federal Reserve outlined plans to buy individual corporate bonds to help prop up the economy amid the coronavirus pandemic. US stocks showing a substantial rebound over the course of the previous session, stocks saw further upside during trading. Asian stocks soared after the U.S. Federal Reserve outlined plans to buy individual corporate bonds to help prop up the economy amid the coronavirus pandemic.
- Tuesday’s data below:
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