· Dollar up, set for 0.5% weekly gain on fear of nagging economic slump
The U.S. dollar was rose on Friday and was set for a small weekly gain as the threat of a second wave of coronavirus infections rattled investors as did a slew of bleak U.S. economic data.
Safe-haven assets including the U.S. dollar index were bid on Friday morning after U.S. retail sales endured a second straight month of record declines in April as the novel coronavirus pandemic kept Americans at home, putting the economy on track for its biggest contraction in the second quarter since the Great Depression.
The dollar index was up 0.07% in mid-morning trade to 100.34 and was roughly flat against the Japanese yen, another primary safe-haven currency. Further evidence of investors moving out of risk assets could be seen in the major U.S. stock indexes, with the S&P 500 index and the Dow Jones Industrial Average both down about 0.6%.
The collapse in retail sales reported by the Commerce Department on Friday added to the historic loss of 20.5 million jobs last month in underscoring the deepening economic slump that analysts warn could take years to recover from. Federal Reserve Chair Jerome Powell on Wednesday warned of an “extended period” of weak growth and stagnant incomes.
The euro was last 0.16% stronger against the dollar at $1.082. Elsewhere, the British pound remained under pressure, falling 0.85% to $1.212, its lowest since March 26, after the European Union’s Brexit negotiator Michel Barnier said on Friday that the third round of talks with Britain on a new partnership was “disappointing”.
· Treasury yields fall after retail spending drops the most on record amid pandemic
U.S. government debt yields moved lower Friday as investors digested more somber economic data.
The yield on the benchmark 10-year Treasury note fell 2 basis points to 0.595% while the yield on the 30-year Treasury bond also declined 4 basis points to 1.256%. Yields move inversely to prices.
· US retail sales plunged a record 16% in April as virus hit
U.S. retail sales tumbled by a record 16.4% from March to April as business shutdowns caused by the coronavirus kept shoppers away, threatened the viability of stores across the country and further weighed down a sinking economy.
The Commerce Department’s report Friday on retail purchases showed a sector that has collapsed so fast that sales over the past 12 months are down a crippling 21.6%. The severity of the decline is unrivaled for retail figures that date back to 1992. The monthly decline in April nearly doubled the previous record drop of 8.3% — set just one month earlier.
· Powell says a full economic recovery may not happen without a vaccine
The U.S. economy will claw its way back from the current downturn but may need a coronavirus vaccine before that is complete, Federal Reserve Chairman Jerome Powell said.
“In the long run and even in the medium run, you wouldn’t want to bet against the American economy. The American economy will recover,” Powell said in an interview with CBS’ “60 Minutes” in an excerpt aired Sunday morning on “Face the Nation.”
However, Powell noted that the recovery likely would depend on how Americans feel about their safety.
“Assuming there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of the year,” the central bank chief said. However, he added that “for the economy to fully recover ... that may have to await the arrival of a vaccine.”
The most important data for the U.S. economy right now are the “medical metrics” around the coronavirus pandemic, Federal Reserve Chairman Jerome Powell said Sunday night in broadcast remarks where he outlined the likely need for three to six more months of government financial help for firms and families.
· The United States is expected to revise its aid program for small businesses to cope with the economic fallout of the coronavirus outbreak, the Wall Street Journal reported on Sunday.
The changes are expected to include granting businesses more flexibility to spend funds as well as extend the time to spend the loan money beyond the two months originally set by the government under the Paycheck Protection Program, the newspaper reported, citing lawmakers following the deliberations.
· European leaders warn a vaccine won’t come soon enough — or perhaps ever
In separate, stark warnings, two major European leaders have bluntly told their citizens that the world needs to adapt to living with the coronavirus and cannot wait to be saved by the development of a vaccine.
The comments by Italian Prime Minister Giuseppe Conte and British Prime Minister Boris Johnson came as nations around the world and U.S. states are both struggling with restarting economies blindsided by the pandemic. With 36 million newly unemployed in the U.S. alone, economic pressures are building even as authorities acknowledge that reopening risks off new waves of infections and deaths.
Pushed hard by Italy’s regional leaders and weeks in advance of an earlier timetable, Conte is allowing restaurants, bars and beach facilities to open Monday, the same day that church services can resume and shops reopen.
“We are facing a calculated risk, in the awareness ... that the epidemiological curve could go back up,” Conte said late Saturday. “We are confronting this risk, and we need to accept it, otherwise we would never be able to relaunch.”
Conte added that Italy could “not afford” to wait until a vaccine was developed. Health experts say the world could be months, if not years, away from having a vaccine available to everyone despite the scientific gold rush now on to create such a vaccine.
“We would find ourselves with our social and productive fabric heavily damaged,” Conte said.
Italy’s economy is forecast to contract 9% this year due to the coronavirus amid a long, strict lockdown.
For his part, British Prime Minister Boris Johnson, who was hospitalized last month with a serious bout of COVID-19, speculated Sunday that a vaccine may not be developed at all, despite the huge global effort to produce one.
“I said we would throw everything we could at finding a vaccine,” Johnson wrote in the Mail on Sunday newspaper. “There remains a very long way to go, and I must be frank that a vaccine might not come to fruition.”
· UK coronavirus death toll rises by 170, lowest increase since March
The number of people who have died in the United Kingdom after testing positive for COVID-19 rose by 170 to 34,636, business minister Alok Sharma said on Sunday, the lowest increase in the official death toll since March 24.
The increase reported on Sunday was sharply down from the 468 rise in deaths reported 24 hours earlier and the lowest since Britain brought in a lockdown to curb the spread of the virus on March 23.
· Oil jumps 6%, posts third week of gains amid signs of demand pickup
Oil prices rose on Friday, posting their third week of gains, as data showed demand for crude picking up in China after the easing of curbs to stem the coronavirus outbreak, boosting hopes that the global supply overhang may start to fade.
Brent crude was up $1.14, or 3.66%, to trade at $32.27 per barrel, while West Texas Intermediate settled up 5.9% to trade at $29.52 per barrel, having jumped 9% in the previous session.
Amid supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, bright spots are also emerging on the demand side. Data released on Friday showed China’s daily crude oil use rebounded in April as refineries ramped up operations.
Still the market mood remains far from euphoric, with the coronavirus pandemic far from over and new clusters emerging in some countries where lockdowns have been eased.
Reference: AP, CNBC, Reuters
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