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Economy

GLOBAL MARKETS-Asian stocks slip as Trump warns of horrors to come

* Trump warns of ‘horrific’ days ahead

* Asian stocks slip, bonds rally, dollar firms

* U.S. jobless claims due at 1230 GMT, seen hitting fresh record

* Asian stock markets: tmsnrt.rs/2zpUAr4

By Tom Westbrook and Herbert Lash

SINGAPORE/NEW YORK, April 2 (Reuters) – Asian equities fell for a second session on Thursday, after a dire warning about the U.S. coronavirus death toll had investors looking to the safety of dollars and bonds and bracing for more bad news from U.S. jobless figures.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%. Japan’s Nikkei extended Wednesday’s heavy drop with a 1.5% fall, and investors are beginning to worry that equities may re-test last month’s lows.

Markets in Hong Kong, Sydney, Shanghai and Seoul fell, though futures for the S&P 500 bounced following Wall Street’s 4% plunge overnight.

“Difficult days are ahead for our nation,” U.S. President Donald Trump told reporters at the White House on Wednesday.

“We’re going to have a couple of weeks, starting pretty much now, but especially a few days from now, that are going to be horrific.”

Trump had initially played down the virus’ severity, but White House medical experts now forecast that even if Americans follow unprecedented stay-at-home orders, some 100,000 to 240,000 people could die from the respiratory disease.

The World Health Organization said the global case count will reach 1 million and the death toll 50,000 in the next few days. It currently stands at 43,412.

Markets are also steeled for bad news on the economic front when weekly U.S. jobless claims data is released at 1230 GMT.

“The shift in rhetoric from the White House has hurt some of the more bullish traders,” said Michael McCarthy, chief strategist at brokerage CMC Markets in Sydney, while optimism about local stimulus was waning quickly.

Australia’s benchmark ASX 200 index fell 2.6%, led by falls in bank stocks after New Zealand’s central bank ordered a suspension of bank dividends – hitting Australia’s banks, which own most of New Zealand’s big lenders.

Shelter was sought in the bond market, with the yield on benchmark 10-year U.S. Treasuries – which falls when prices rise – dropping to 0.5680%, its lowest since March 10.

The dollar held its overnight gains.

U.S. JOBLESS SEEN SWELLING

Trump also said overnight that he is considering a plan to halt flights to coronavirus hot zones in the United States, which would hammer an already reeling airline industry and add to an overall slowdown that will curb corporate earnings.

Wall Street’s three major indexes fell more than 4% overnight.

“The question of whether the U.S. index goes to test the March lows will be all the talk today,” Chris Weston, head of research at Melbourne brokerage Pepperstone, said in a note.

“Earnings estimates are too high,” he said. “And when we’re hearing of companies curbing buybacks, and shelving dividend plans, then we should expect this to resonate through earnings downgrades too.”

U.S. labour market data will likely provide the next test. According to a Reuters survey of economists, initial claims for jobless benefits last week probably surpassed the week-ago record of 3.3 million, with 3.5 million expected.

In currency markets, safety and liquidity remained in hot demand, with the dollar standing at $1.0950 per euro and 107. 31 Japanese yen.

It also mostly held gains against the Australian and New Zealand dollars and rose against emerging market currencies.

Spot gold fell 0.5% to $1,584.33 an ounce.

Oil futures bounced after overnight drops, before paring gains since the demand outlook remains weak and storage tanks are quickly filling with an oversupply of crude.

Brent futures last traded $1 firmer at $25.78 per barrel and U.S. crude was 3% higher at $20.96 a barrel.

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Economy

PRESS DIGEST-Financial Times – April 2

April 2 (Reuters) – The following are the top stories in the Financial Times. Reuters has not verified these stories and does not vouch for their accuracy.

Headlines

– Rolls-Royce and Airbus lobby UK in support of Virgin Atlantic bailout on.ft.com/3aBSAfA

– Morrisons wins appeal over data breach on.ft.com/39CDDZj

– BP slashes spending to counter oil price collapse on.ft.com/3aC3aTO

– Auto Trader to raise £200m in share sale after waiving ad fees on.ft.com/2Jy1uPa

Overview

– Rolls-Royce and Airbus SE have sent letters to Grant Shapps, Britain’s transport secretary on behalf of Virgin Atlantic as the airline seeks a £500 million pounds ($619.05 million) bailout package of commercial loans and guarantees to survive the fallout from the coronavirus pandemic.

– British supermarket retailer WM Morrison has won a Supreme Court appeal over liability for a data breach affecting roughly 100,000 staff.

– UK energy group BP Plc on Wednesday cut its 2020 capital spending by 25 per cent, which includes a $1 billion capex reduction at the group’s U.S. shale business BPX, as it seeks to bolster its finances and maintain shareholder payouts in the face of the oil price collapse triggered by the coronavirus outbreak.

– UK online car marketplace Auto Trader will issue about £200 million pounds of fresh shares to boost its finances after letting dealerships use its online marketplace for free during the coronavirus lockdown. ($1 = 0.8077 pounds) (Compiled by Bengaluru newsroom)

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Economy

Canada continuing to assess need for more changes to banks' capital buffers

TORONTO, April 1 (Reuters) – Canada’s financial system has the capacity to respond to further stresses and the regulator will continue to assess if additional changes to banks’ capital buffers are needed, the Office of the Superintendent of Financial Institutions (OSFI) said on Wednesday.

OSFI reduced the domestic stability buffer for banks in March to free up C$300 billion ($211.3 billion) of additional lending capacity.

While banks can treat loans subject to six-month payment deferrals as performing loans, they must meet higher capital requirements if they become non-performing beyond that period, OSFI officials said on a media call.

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Economy

Coronavirus: Fed will do 'whatever it takes' to help US economy likely in recession, says Daly

SAN FRANCISCO (REUTERS) – The Federal Reserve is ready to do more to help a US economy ground to a sudden halt as businesses shutter and people stay home to slow the coronavirus pandemic, San Francisco Fed president Mary Daly said on Tuesday (March 31).

“The Federal Reserve is prepared to do whatever it takes within our powers to ensure that we are part of the solution of shoring up people over the virus, shoring up the American economy and putting us in the best position to grow again once the virus recedes,” Daly said in an interview with Yahoo Finance.

“If we do the right thing and shelter in place and curb the spread of the virus, the economy will be in the best position to bounce back.”

With the coronavirus infecting tens of thousands of Americans and killing hundreds each day, three-quarters of the US population are under orders to stay home except for essential trips to slow the spread of the virus.

With businesses laying off millions of workers as demand dries up and states ordering non-essential businesses to close, the economy is likely already in recession, Daly said.

The Fed’s job, along with that of the US government that on Friday finalized a $2.2 trillion rescue package, is to provide the support to financial markets, businesses and people who are doing their duty to boost the public health, Daly said.

Once the pandemic threat has passed, the Fed’s programs and low interest rates will help drive the economic recovery, she said.

“The virus and its evolution will determine both the magnitude of the downturn and its duration,” Daly said, adding that Fed staff are working to manage programmes already under way and stand up new ones, including the to-be-launched Main Street Lending Facility.

“The virus will also determine the amount of action we have to take. These are unprecedented times and they call for unprecedented action.”

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Economy

Swiss Treasury to tap markets more for virus-fighting effort

ZURICH, March 31 (Reuters) – Switzerland’s treasury is stepping up its funding plans in response to government measures to cushion the economic impact of the COVID-19 pandemic, doubling the volume of outstanding short-term money market instruments.

“Over the course of this year, the Federal Finance Administration (FFA) will increase the outstanding volume of short-term money market instruments from around 6 billion Swiss francs ($6.24 billion) to 12 billion francs,” the treasury said in a statement on Tuesday.

“In addition, it will once again step up sales of its own Confederation bond holdings.”

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Economy

JGBs tick down on last day of fiscal year, weighed down by debt issuance worries

TOKYO, March 31 (Reuters) – Japanese government bond prices dipped on Tuesday, the last day of the Japanese financial year, weighed down by worries about a probable increase in government debt issuance to finance its massive stimulus.

Government sources told Reuters on Monday that Japan will boost government bond issuance by 16 trillion yen ($148 billion)in the next fiscal year starting from April to fund a massive stimulus package aimed at combating the hit to the economy from the coronavirus pandemic.

The government will increase issuance for JGBs of all maturities excluding 40-year bonds, inflation-linked bonds and liquidity-supplying bonds, and the increase is likely to start from July, they said.

But the losses were mitigated by expectations that the Bank of Japan will likely step up buying if an increase in debt issuance threatens to cause a sharp fall in JGB prices and boost their yields.

Benchmark 10-year JGB futures fell 0.29 point to 152.44, with a trading volume of 9,240 lots in late afternoon trade.

The benchmark 10-year JGB yield rose 1.5 basis points to 0.015%. For the quarter, it was up 4 basis points.

The 20-year JGB yield rose 1 basis point to 0.300%. The 30-year JGB yield rose 1 basis point to 0.405%.

At the shorter end, the two-year JGB yield rose 3 basis points to minus 0.140% while the five-year yield rose 2 basis points to minus 0.105%.

The Japanese bond market as a whole is on course to post its second consecutive quarter of fall in January-March, measured by Nomura BPI, a popular benchmark.

As of Monday, the market’s total return was -0.289%.

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Economy

Edmonton lays off over 2,000 staff at city rec centres, public libraries due to COVID-19

The City of Edmonton’s Community and Recreation branch and Edmonton Public Library issued more than 2,000 layoff notices to employees Monday morning after extended closures were put in place to halt the spread of COVID-19.

The city announced 1,600 of its employees have been laid off, and 489 library employees were also served notice Monday.

Interim city manager Adam Laughlin and EPL CEO Pilar Martinez confirmed the decision during a news conference Monday afternoon.

“For quite some time we’ve talked about how COVID-19 is taking a terrible toll on our city, our public health, city services and the economy,” Laughlin said, clearly emotional.

“Today it is having an impact on the jobs of 1,600 people,” he said.

Not all rec and community employees have been affected — 400 people were not laid off, said Laughin, continuing work at locations such as cemetery services, animal care at the zoo, and plant care at the Muttart.

Some employees have been redeployed from rec centres to other positions, for example to the EXPO Centre, but the exact number of employees who were transferred was not available.

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The city has a total of about 14,000 employees, Laughlin said. City council has also asked administration to bring forward an updated budget plan, taking the COVID-19 pandemic into account, by April 15.

“The work we have been undertaking up until then would be assessing if we do need to pursue additional layoffs.”

All city recreation facilities have been closed since March 14. 

Laughlin said that the city employees laid off include cashiers, fitness instructors, arena attendants, city hall tour guides, art and education instructors, booking clerks, labourers and lifeguards.

Meanwhile, Edmonton Public Library will be laying off 489 employees — about 75 per cent of its staff.

“EPL has been closely monitoring the developments of COVID-19 over the past several weeks,” said Martinez.

“This decision in no way reflects their hard work and dedication to EPL,” said Martinez.

In a layoff letter obtained by Global News, Edmonton Public Library employees were told that branch closures that were initially announced on March 14 would be continuing for an “extended period of time” and that, as a result, the organization would be initiating temporary layoffs.

The layoffs will be effective Tuesday, April 14, and will affect positions across the organization, including branch services and “almost every other department at EPL.”

The letter said that along with Employment Insurance or the Canadian Emergency Response Benefit, laid off employees will also be able to access a “Supplementary Unemployment Benefit Plan” that will provide additional income top-ups for employees, up to 75 per cent of average weekly earnings.

Recreation employees will also have access to the SUB plan, said Laughlin at the news conference.

With the SUB plan, permanent full-time employees will receive up to 16 weeks of the top-ups, and part-time and temporary employees will receive the top-ups for eight weeks.

“We felt this was an appropriate support for our employees going through this difficult time,” said Laughlin. “If there is confirmation, in terms of supplemental support from the provincial or federal governments, we would certainly revisit this.”

The EPL and city employees who participate in benefit plans will have their coverage continue through the layoffs, including mental health support.

Global News has reached out to CSU 52, the union which represents many EPL clerical employees, for a statement.


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Economy

UPDATE 2-German Bund yield falls to two-week low as economic uncertainty persists

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices, adds details on Italian bonds, comment)

By Dhara Ranasinghe

LONDON, March 30 (Reuters) – Germany’s benchmark 10-year bond yield fell to a two-week low on Monday as high-rated fixed income assets drew support from the global economic uncertainty caused by the coronavirus crisis.

As the dust appeared to settle on a month of heightened volatility and wild swings that has seen German Bund yields rise to as high as -0.14%, support for top-rated bond markets in the euro area appeared firm.

Aggressive asset purchases by the European Central Bank to support economic growth, fragile stock markets and weakness in oil prices all pointed to lower yields in euro zone benchmark issuer Germany, analysts said.

The ECB last week made its largest purchases of government bonds since its bond-buying programme started in 2015.

“For a while there was a focus on the spending implications of the coronavirus outbreak, but there is a realisation that the worst is not over for the economy,” said Nordea chief analyst Jan von Gerich. “So, focus has moved back to the economy and a view that central banks will not allow yields to rise.”

German annual inflation slowed sharply and came in below forecast in March at 1.3%, well below the European Central Bank’s target.

Meanwhile, Germany’s council of economic advisers predicted that German output could shrink by up to 5.4% in 2020.

The benchmark 10-year Bund yield fell more than 6 basis points (bps) to almost -0.55%, down 40 bps from 10-month highs hit earlier this month. Other 10-year bond yields were also lower. .

“Risk sentiment remains fragile as the virus still challenges hopes for a near return to more normal economic and social life,” said Commerzbank rates strategist Rainer Guntermann.

“The spread to the U.S. in particular is in focus with markets doubting that the Fed can also immunize the real economy,” he said, referring to the U.S. Federal Reserve.

Italian bonds continued to underperform peers, with 10-year yields last up 16 bps on the day at 1.49%, set for their worst day in nearly two weeks.

Analysts said a downgrade of Britain’s sovereign rating by Fitch on Friday had turned the focus to the weak ratings outlook for Italy and may help explain the bond sell-off.

The sell-off comes a day before Italy is scheduled to sell up to 8.5 billion euros through an auction of four bonds.

“The markets are continuing to be relatively thin in liquidity so maybe we see some adjustment ahead of tomorrow’s auction,” said DZ Bank strategist Christian Lenk.

Analysts also said continued opposition by Germany to the continued issuance of German debt given the finance minister’s comments over the weekend was adding to a risk-averse tone that put pressure on Italian bonds. (Reporting by Dhara Ranasinghe with additional reporting by Yoruk Bahceli; Editing by Kirsten Donovan and Mark Heinrich)

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Economy

China unexpectedly cuts key rate rate by most in 5 years to support coronavirus-hit economy

SHANGHAI (REUTERS) – China’s central bank unexpectedly cut the rate on reverse repurchase agreements by 20 basis points on Monday (March 30), the largest in nearly five years, as authorities ramped up steps to relieve pressure on an economy ravaged by the coronavirus pandemic.

The People’s Bank of China (PBOC) announced on its website that it was lowering the 7-day reverse repo rate to 2.20 per cent from 2.40 per cent, but it did not give a reason for the move.

Ma Jun, a central bank adviser told state media that China still has ample room for monetary policy adjustment and the rate decision took into consideration the return of Chinese companies to work, the global virus situation and a deterioration in the external economic environment.

It was the third cut in the 7-day rate since November, and comes as the coronavirus infections in China – where the outbreak originated late last year – has slowed from a peak in February. The country has so far reported 3,304 deaths from 81,470 infections.

In a note to clients, Capital Economics said “a lot more easing will be needed, especially on the fiscal front, to help the economy return to its pre-virus trend.”

Global policymakers have rolled out unprecedented stimulus measures in the past few weeks, cutting rates sharply and injecting trillions of dollars to backstop their economies as many countries have been put under tight lockdowns to contain the pandemic.

Yan Se, chief economist at Founder Securities in Beijing, said the rate cut was China’s commitment to a pledge it made during the Group of 20 major economies meeting last week to combat the coronavirus and stabilise financial markets.

“China was the only major economy that had not yet implemented large-scale easing measures” Yan said, noting that many other nations have implemented more drastic steps such as quantitative easing and deeper cuts to benchmark rates.

Leaders of the G20 pledged on Thursday to inject over US$5 trillion (S$7.1 trillion) into the global economy to limit job and income losses from the coronavirus, which has so far infected more than 700,000 people and killed nearly 34,000 worldwide.

Earlier in the day, the PBOC injected 50 billion yuan (S$10 billion) into money markets through seven-day reverse repos, breaking a hiatus of 29 trading days with no fresh fund injections.

Chinese 10-year government bond futures initially responded positively to the cut, with the most-traded contract for June delivery rising as much as 0.23 per cent, before pulling back to last trade down 0.1 per cent.

Xing Zhaopeng, markets economist at ANZ in Shanghai, said the latest cut follows the ruling Communist Party’s Politburo meeting last Friday.

“The medium-term lending facility (MLF) rate and Loan Prime Rate (LPR) will be cut at the same pace this month. We believe this cut is a signal to urge all loans to refer LPR as the benchmark so that the PBOC can improve the effectiveness of monetary policy transmission,” he said.

At Friday’s meeting, the politburo said the government will step up policy measures and tighten enforcement in a bid to achieve full-year economic and social development targets.

The coronavirus hit the Chinese economy just as it was starting to show some signs of stabilising after growth cooled last year to its slowest pace in nearly 30 years amid a trade war with the United States.

Analysts expect China’s economy to contract sharply in the first quarter due to widespread disruptions to business and consumer activity caused by the virus as authorities put in place tough public measures to contain the pandemic.

Nomura has lowered its annual GDP growth forecast for China to 1.0 per cent this year, from 1.5 per cent previously, and adjusted quarterly GDP forecasts to a 9.0 per cent annual contraction, from an earlier prediction of 0.9 per cent contraction.

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Economy

With 660,000 job losses, rich Nordic economies are in deep shock

STOCKHOLM (BLOOMBERG) – In one of the richest and stablest corners of the globe, well over half a million people are suddenly out of a job due to the economic standstill triggered by the spread of the coronavirus.

With a combined population of roughly 27 million people, the Nordic region has seen 580,000 workers put on temporary leave, many without paychecks in recent weeks. Another roughly 80,000 have been fired, according to calculations by Bloomberg based on company statements and data provided by national authorities.

The head of the Confederation of Norwegian Enterprise, Ole Erik Almlid, likened the development to “a tsunami” that’s rolled over the country’s businesses. “And it’s getting worse,” he said.

Knut Hallberg, senior economist at Swedbank, said the situation across the entire Nordic region is “severe.”

Nordic populations rely on generous welfare states that ensure those dropping off payrolls still get some form of monthly support. And the region’s universal health care and free education add an additional layer of security. But even with those safety nets, the economic shock is painful.

The Numbers:-

Temporary layoffs in Norway: 263,000; 27,000 jobs lost

Short-term layoffs in Finland: 259,000; 4,000 redundancies

Temporary furloughs in Sweden: 49,000; 18,000 job cuts

Job losses in Denmark: 31,000; estimated 70,000 people’s wages partially paid by the government

People reduced to part-time work in Iceland: 9,700

Some of the biggest Nordic companies are among those caving under the strain of the crisis. Truckmaker Volvo Group has temporarily laid off its entire 20,000-strong Swedish workforce. Airlines SAS, Finnair and Norwegian Air have all put most of their employees on leave. Scandic Hotels Group has locked the doors of more than 60 hotels, while retailers including Hennes & Mauritz have sent thousands of shop staff home.

It’s “easy to imagine that the high numbers we are seeing will increase dramatically if the economy doesn’t get restarted within a relatively short time,” said Helge Pedersen, chief economist at Nordea Bank in Copenhagen.

Meanwhile, Nordic governments are struggling to provide disaster relief, including subsidies of as much as 75 per cent of wages. The goal is to prevent temporary layoffs becoming permanent.

But despite these programmes, there’s one group that still faces a “very, very dark situation,” according to Hallberg at Swedbank, and that’s young graduates.

“If it lasts only a couple of months or a couple of quarters, it’s not a problem,” he said. “But three to four years of unemployment after school could destroy career potential and lead to lower income for life.”

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