While more data was releasing providing evidence on the COVID-19 impact, rhetoric from the US President against China and its handling of the crisis stepped up a gear, while Brexit negotiations re-emerged providing an insight to the political stalemate before the crisis.
Some of last week’s highlights:
– The UK economy shrank by a record 5.8% in March month-on-month, which contained just over a week of the UK’s lockdown
– At -2% the UK economy recorded its largest quarterly drop since Q4 2008 while Germany fared worse, posting a 2.2% contraction pushing their economy into recession.
– More than 110,000 people applied for the UK government’s new self-employment income support scheme on its first morning of operation, with the value of claims hitting £340m.
– Transport for London is set to receive a £1.6bn government bailout.
– The total number of unemployment benefit applications in the US reached 36.6 million since the pandemic struck.
– India’s unemployment rate increased to 23.5% in April, as 114 million people lost their jobs. The total Indian workforce is around 400 million people, so more than 1 in four workers have lost employment.
There was some positive news for China as it announced that Industrial production was almost back to normal, up about 4 per cent versus last year. There was clearly pent up demand in the manufacturing sector, and Chinese authorities were keen to get the economy up and running. But retail sales were still poor, 7.5 per cent below the same period last year.
The European and US virus cycles are running a few weeks behind China of course, and China will have been impacted in April by the sharp fall in export orders as the global economy shut down, but this gives us some idea of what to expect from other regions.
Last week, markets weakened on negative US rhetoric targeted towards China. Senator Lindsey Graham, proposed legislation that would allow sanctions on China if they fail to give a full account of how the outbreak started.
It is likely that Joe Biden will criticise Trump for being all bark and no bite on China. If this forces tougher action, Biden could potentially use falling equity markets against Trump.
In the UK, Chancellor Rishi Sunak confirmed that the furlough scheme will be extended by four months, allowing employees to receive 80 per cent of their salaries until October.
He also said that the government will ask companies to start sharing the cost from August as the scheme will allow greater flexibility to support the transition back to work, including bringing furloughed workers back part-time.