Wall Street has closed for the week - and what a week.
The S&P 500 is down 15% for the week. The Dow fell over 900 points on Friday after a brief morning rally. The tech-heavy Nasdaq lost 12% over the week.
It’s been the worst week for investors since the 2008 financial crisis.
Gold and oil fell too as investors moved to cash.
In New York claims for unemployment have rocketed and the state is struggling to cope with increases in claims of up to 1,000%.
In the UK the government has pledged to pay 80% of wages for those who have lost their jobs to the pandemic.
The floor of the New York Stock Exchange will be empty of traders on Monday after two people tested positive for coronavirus infection. So no men (mainly) in funny coats.
But trading will continue electronically - most of it is done that way anyway.
Thanks for reading. We will be back with all the live business news on Monday. In the meantime, stay safe and wash your hands.
You can follow all the latest Covid-19 developments here.
Among those New Yorkers being laid off we mentioned earlier: billionaire would-be president Mike Bloomberg’s staff.
They are not happy.
“I am disgusted by Mike Bloomberg and his staff," one of the Bloomberg aides told POLITICO on Friday. "He has left us with no health insurance during this pandemic. I have a family and do not know what we will do at the end of the month." https://t.co/Q5nHKhKzQR
There is mounting anger among the self employed over what they regard as insufficient support for them in the emergency measures announced this evening in the UK by chancellor Rishi Sunak.
The self employed will gain access to the equivalent of Statutory Sick Pay, and be given tax deferrals, but are not part of the 80% earnings pledge.
The Federation of Small Business said: “The question at this point is – with firms beingforcedto close – why have the self-employed been excluded from the commitment to pay 80% of earnings?
“It cannot be right that an employee currently earning £25,000 a year could access £20,000 per annum through the new job retention scheme, while someone who’s self-employed earning the same sum might only access around £5,000 worth of support.”
Phillipa Childs of the Bectu union, which covers thousands of freelancers in the entertainment and media industry, added: “The Chancellor’s support package for workers will come as a devastating blow to freelance and self-employed workers who needed much more support than they are being given.
“He must urgently revise his income support plan to include these workers and not force them onto the welfare system and we will be making urgent representations to government to make sure all our members are protected during this crisis.”
More frightening news on Covid-19’s economic impact. Goldman Sachs is now predicting the pandemic will trigger an unprecedented 24% decline in the US economy in second quarter, following a 6% decline in the first quarter.
That’s the most grisly prediction from a big bank economist so far.
The bank’s economists expect a bounce back of 12% in the third quarter and 10% in the fourth quarter, but unemployment will surge to 9%.
“Over the last few days social distancing measures have shut down normal life in much of the US. News reports point to a sudden surge in layoffs and a collapse in spending, both historic in size and speed, as well as shutdowns of many schools, stores, offices, manufacturing plants and construction sites,” the economists said. “These developments argue for a much sharper drop in GDP in Q1 and Q2.”
With less than an hour of trading left all the major markets are back in the red - again. If this holds, it will be the worst week on US stock markets since the financial crisis of 2008.
New York sees 1,000% increase in unemployment claims
New York - now a major center of new Covid-19 infections - is cracking under the strain of people applying for unemployment benefits.
As restaurants, bars, hotels and other businesses close thousands are trying to get benefits in order to meet their bills.
The New York state labor department said it received 159,000 calls by noon on Thursday, compared with the average of 10,000 calls a day. In some parts of the state, the department said, there was a 1,000% increase in claims. The website is seeing a 400% increase above normal in logins each day.
This as Goldman Sachs is warning new claims for unemployment could pass two million for the week ending March 21, his most conservative estimate of a million claims which would top the record high of 695,000 in 1982.
Here are some more reactions to the chancellor’s emergency package.
Adam Marshall, director general of the British Chambers of Commerce, said:
The chancellor has given businesses desperately needed breathing room at this critical moment.
The deferral of VAT payments keeps money in the pockets of businesses so that they can pay their people and suppliers, and the commitment to cover wages of those unable to work will allow firms to retain jobs if they are forced to reduce their operations.
The government now needs to go foot-to-floor to ensure that details of the job retention scheme and loan guarantees reach firms on the ground as soon as possible. Given that this situation continues to evolve, ministers must also keep the door open to additional measures to support business cash flow.
Matthew Cady, investment strategist at Brooks Macdonald, an investment manager, said:
Today’s steps by the chancellor are building on the confidence that we’re now seeing from markets that the policy responses arriving are getting to the size that’s needed. Within the gains in UK equities today, we’re seeing relative outperformance in more UK-focused domestic companies, unwinding some of the weakness they’ve seen coming into today’s announcement.
What is needed from governments and politicians is a ‘right-now’ plan, and it’s good to see that the chancellor has finally recognised this with the measures he is taking today. For markets, the coronavirus outbreak will clearly drive a significant jolt to the UK economy over the next one or two quarters. But with UK policy makers now giving it both fiscal and monetary barrels, there are good chances that this stays a short-term impact. Today’s actions should start to give investors some encouragement to take advantage of the pullback in valuations as they think about their longer-term investment horizons.
Kallum Pickering, senior economist at Berenberg, an investment bank, said:
The UK is now running a ‘virus war’ economy. The usual rules do not apply.
Providing cash-strapped firms with generous subsidies to retain their staff will dramatically lower the risk of surging unemployment during the corona virus recession. Encouraging firms to hoard their labour while authorities tackle the medical emergency raises the chance that the economy can get back to normal quickly once any containment restrictions are lifted.
It is hard to say at this early stage exactly how much the employment subsidy scheme will cost. As a proportion of annual GDP, quarterly aggregate employees compensation is around 12.5%. If the scheme runs into two quarters or more, the cost in % of GDP to the treasury will easily be double-digits.
Across the world central banks and governments are working a hard to prevent the inevitable corona-virus recession from developing into a financial crisis. We continue to see enough evidence that, in the UK and in other advanced economies, policymakers will likely pull it off, in the end.
Some reaction is starting to come in from business groups and unions.
Michael Izza, chief executive of the ICAEW, an accountancy body, said:
The real battle now is for public confidence: if we can sustain that, the economics will follow. The chancellor’s announcement of direct action by government to keep people in employment is a really good start. This should make a difference to how people feel, and keep them working and spending.
Mike Clancy, general secretary of Prospect, a union, said:
The government has finally acted to secure incomes during the pandemic and we welcome the steps they have taken on universal credit, tax delays and income protection for employees.
However this is far from the ‘whatever it takes’ approach the chancellor promised and his plan still contains gaping holes which could sink many family finances and ultimately the economy.
This is too late for many of our members from flight engineers to cinema staff who have already been let go. The chancellor must make it clear that these workers should be rehired with their incomes secured by government for the duration of the crisis. They should not pay the price of the government dragging its feet.
There is still no real protection for freelance, self-employed and contract workers who seem not to be covered by the income protection scheme and are being left to struggle through the inadequate benefits system .
Boris Johnson said all cafes, bars, pubs and restaurants must close tonight.
Nightclubs, theatres, gyms, cinemas and leisure centres must also close on the same timescale.
Paying wages
To protect jobs, the chancellor announces that the government will step in and help pay wages, for the first time in UK history. It’s called the coronavirus job retention scheme.
Companies and organisations will be able to apply for a grant from HMRC to cover the wages of people who are not working due to coronavirus shutdowns, but who haven’t been laid off.
It will cover 80% of the salaries of these retained workers, up to £2,500 per month.
It means that workers across the company can retain their jobs, even if their bosses can’t afford to pay them, Sunak explains.
VAT holiday
no business will pay VAT from now to June, and they’ll have until the end of the financial year to repay those bills. That should help companies struggling with a cash flow crisis.
The chancellor this will injection £30bn into the economy.
Business loan scheme
The government is also extending its coronavirus business interruption loan scheme, to be interest free for 12 months (up from 6 months).
Deferring self-assessment deadline for taxes
The deadline for self-assessment of taxes will be extended to January 2021, meaning that self-employed people will have longer to pay their taxes.
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