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US economy shrinking at fastest pace since financial crisis - business live US economy shrinking at fastest pace since financial crisis - business live
(32 minutes later)
America’s GDP shrank at an annualised rate of 4.8% in January-March, and there’s worse to come...America’s GDP shrank at an annualised rate of 4.8% in January-March, and there’s worse to come...
It appears that Gilead > GDP today.
Stocks have jumped at the start of trading in New York.
Investors are focusing on the positive trial news about remdesivir’s effects on Covid-19 patients, rather than the dire US GDP figures.
The Dow Jones industrial average has gained 401 points, or 1.6%, to 24,503 points, with the S&P 500 up 1.9%.
Markets are shrugging off the looming US recession, and grasping onto hopes of a medical breakthrough for Covid-19 treatments.
US biopharmaceutical company Gilead has excited investors by announcing positive results from a trial of its antiviral drug remdesivir, to test if it could help severely ill COVID-19 patients.
In a statement, Gilead said remdesivir had shown positive results when given to patients for either a five-day or 10-day course of treatment.
Preliminary results showed that more than half of patients in both groups improved, and had been discharged from hospital by the 14th day after starting the treatment.
Merdad Parsey, chief medical officer at Gilead Sciences, says there were similar results between those on the five and 10-day trial:
Gilead also reports that patients who received remdesivir earlier were more likely to be released from hospital faster:
Investors have been watching Gilead’s progress closely, on hopes that remdesivir could treat the symptoms of the coronavirus - which can caused organs to shut down in severe cases, as well as attacking the lungs.
Markets had fallen back last week after reports that Remdesivir had failed a trial, so this feels like an encouraging development.
Stocks are moving higher in London, with the FTSE 100 up 2% or 124 points at 6082.
Bloomberg economist Michael McDonough has dug into the US GDP report:Bloomberg economist Michael McDonough has dug into the US GDP report:
Here’s our US business editor Dominic Rushe on today’s US GDP report:Here’s our US business editor Dominic Rushe on today’s US GDP report:
He also points out that the current slump could rival the economic collapse of the Great Depression.He also points out that the current slump could rival the economic collapse of the Great Depression.
More here:More here:
Robert Alster, Head of Investment Services at wealth manager Close Brothers Asset Management, says the White House will not like today’s GDP figures.Robert Alster, Head of Investment Services at wealth manager Close Brothers Asset Management, says the White House will not like today’s GDP figures.
The instant reaction to today’s growth report is that America’s economy is suffering, and it’s about to get a lot worse.The instant reaction to today’s growth report is that America’s economy is suffering, and it’s about to get a lot worse.
Wall Street financier Steven Rattner fears that the slump will accelerate alarmingly in the current quarter, so that the economy shrinks at an annualised rate of 40%.Wall Street financier Steven Rattner fears that the slump will accelerate alarmingly in the current quarter, so that the economy shrinks at an annualised rate of 40%.
Dan Primark, business editor of Axios, agrees that things are going to get worse:Dan Primark, business editor of Axios, agrees that things are going to get worse:
Investment strategist Callie Cox points out that US consumer spending plummeted (as people obeyed orders to stay home, and shops and restaurants closed)Investment strategist Callie Cox points out that US consumer spending plummeted (as people obeyed orders to stay home, and shops and restaurants closed)
America’s longest economic expanse in history is over!America’s longest economic expanse in history is over!
The contraction in the last quarter ends a record-breaking run of growth which began back in the summer of 2009.The contraction in the last quarter ends a record-breaking run of growth which began back in the summer of 2009.
America’s economy shrank so sharply in the last quarter because personal spending fell, exports declined, and companies slashed investment.America’s economy shrank so sharply in the last quarter because personal spending fell, exports declined, and companies slashed investment.
The BEA explains:The BEA explains:
NEWSFLASH: America’s economy is contracting at the fastest rate since the financial crisis a decade ago, as the coronavirus lockdown hits activityNEWSFLASH: America’s economy is contracting at the fastest rate since the financial crisis a decade ago, as the coronavirus lockdown hits activity
US GDP shrank at an annualised rate of -4.8% in January-March, new figures from the Bureau of Economic Analysis. That’s worse than the 4.0% annualised contraction expected by economists.US GDP shrank at an annualised rate of -4.8% in January-March, new figures from the Bureau of Economic Analysis. That’s worse than the 4.0% annualised contraction expected by economists.
(That means GDP contracted by roughly 1.2% on a quarter-on-quarter basis).(That means GDP contracted by roughly 1.2% on a quarter-on-quarter basis).
The BEA explains:The BEA explains:
More details to follow....More details to follow....
Just in: Boeing has warned its staff that it plans to cut its headcount by 10%.Just in: Boeing has warned its staff that it plans to cut its headcount by 10%.
In an email to staff, CEO Dave Calhoun said the Covid-19 crisis is having a serious impact on demand for its planes. It will use natural wastage, voluntary redundancies, and compulsory layoffs where necessary.In an email to staff, CEO Dave Calhoun said the Covid-19 crisis is having a serious impact on demand for its planes. It will use natural wastage, voluntary redundancies, and compulsory layoffs where necessary.
With demand for commercial airline travel down very sharply, airlines are delaying purchases for new jets (a message also spelled out by Airbus this morning).With demand for commercial airline travel down very sharply, airlines are delaying purchases for new jets (a message also spelled out by Airbus this morning).
Boeing also reported its second quarterly loss in a row, losing $641m in January-March due to the coronavirus pandemic and the ongoing 737 Max grounding.Boeing also reported its second quarterly loss in a row, losing $641m in January-March due to the coronavirus pandemic and the ongoing 737 Max grounding.
Goldman Sachs isn’t convinced by the stock market rally.Goldman Sachs isn’t convinced by the stock market rally.
Its analysts have predicted that Wall Street will drop back towards last months lows, before rallying again later in the year.Its analysts have predicted that Wall Street will drop back towards last months lows, before rallying again later in the year.
After an upbeat morning, the UK stock markets is still at a seven-week high as traders await the latest US GDP report in 90 minutes time.
In London, cruise operator Carnival (+10%), Barclays bank (+6.6%) and energy firm Centrica (+5.9%) are the top risers.
European markets are a little more subdued, though:
FTSE 100: up 45 points or 0.75% at 6003 points,
German DAX: up 36 points or 0.3% at 10,832
French CAC: down 8 points or 0.2% at 4,561 points
AstraZeneca, Britain’s biggest drugmaker, is involved in a number of initiatives to find a treatment for Covid-19.
It is testing its diabetes drug Farxiga to treat hospitalised covid-19 patients at risk of serious complications to try and prevent heart or kidney failure.
The firm has started enrolling 900 people in the UK, the rest of Europe and the US for a late-stage clinical trial and expects to have the first results in a couple of months. The firm also has two out of six medicines in the government’s Accord programme to fast-track covid-19 treatments, and expects to dose the first patients in the next few days.
One is the blood cancer drug Calquence, which is being tested to see if it can suppress the cytokine storm that inflames the lungs and other organs of some Covid-19 patients. It has already been given to some Covid-19 patients with advanced lung disease in the US, where researchers at the NIH’s National Cancer Institute observed “some clinical benefit”.
AstraZeneca has teamed up with fellow pharma giant GlaxoSmithKline and the University of Cambridge to set up a new coronavirus testing lab in Cambridge that should able to carry out 30,000 tests a day by early May. AstraZeneca has also donated nearly nine million face masks to healthcare workers around the world, including half a million in the UK.
The drugmaker has benefited from clients stockpiling respiratory drugs such as Symbicort, which boosted sales by 16% to $6.4bn in the first three months of the year, but its chief executive Pascal Soriot said the overall impact of the Covid-19 crisis on AZ would be negative, as fewer people are going to the doctors and using medicines. He expects the crisis to last between three and six months.
Shares in UK electricals chain Dixon Carphone have surged 20% this morning, after it showed it was getting to grips with the pandemic.
Dixons reported that its online sales have grown by 166% in the last five weeks, under the lockdown, as customers flock to buy home computers, gaming consoles and kitchen gadgets.
This means Dixons has recovered around two-thirds of the £400m sales lost because its UK and Ireland shops are closed.
It also reported strong trading at its Nordic stores (which are still open), where it has been learning how to operate under physical distancing rules.
Shares have jumped to 81p, a one-month high.
European airline manufacturer Airbus has struck a very cautious note today, saying the travel industry may not recover until 2025.
Airbus CEO Guillaume Faury warned:
He believes it could take “three to five years” for passengers to be as willing to fly as before the crisis.
Raffi Boyadjian, senior investment analyst at trading firm XM, says there is a “mood of cautions optimism” in the markets today.
The rally in shares, and in oil, come as several countries began to ease their lockdown measures.
Boyadjian says:
Just in: Economic confidence across the eurozone has suffered its worst ever fall -- quite a contrast with the recent stock market rally.
The European Commission’s economic sentiment index has slumped to just 67.0 points this month, down from 94.2 in March and 103.4 in February.
The gloom is darkest in the service sector - where the confidence measure slumped to -35 points from -2.3 in March.
The survey also showed the consumers are more worried about losing their jobs, and also expect prices in the shops to rise.
The days of cramming thousands of bankers into skyscrapers may be numbered, due to Covid-19.
The City of London and Canary Wharf are both pretty deserted right now, with financial services companies telling staff to work remotely where possible - either at remote sites, or from home.
Barclays has a large tower block at the Wharf, but CEO Jes Staley is pondering whether it needs to pack its staff into one place.
He told reporters that the Canary Wharf offices will open gradually, with just two people allowed in an elevator at once.
And in the long term.....
Keeping staff two metres apart is pretty much impossible on a busy trading floor, unless you sharply reduce the number of people in the office at once. Bosses will also be very nervous about future disruption -- one Covid-19 case could force everyone to go home.
Another factor: the City seems to have coped well with remote working.
Staley says it is “absolutely remarkable” that technology has allowed 70,000 staff to keep Barclays’ operations running properly “from their kitchens.”
But, there will be a knock-on impact if City workers stay home, as Neil Wilson of Markets.com explains:
The oil price is recovering this morning too, helping to nudge stocks higher.
Brent crude has gained 3% to $21.07 per barrel, while US crude has gained 13% to $13.94 per barrel.
David Madden, market analyst at CMC Markets, explains:
Hitting 6,000 points again is a “significant milestone” in FTSE 100’s recovery from the pandemic-inspired stock market slump, says Russ Mould, investment director at AJ Bell.
He gives some of the credit to Barclays, where decent investment bank trading made up for growing problems in the UK economy.
Standard Chartered, the emerging markets-focused bank, has also reassured investors today despite reporting falling profits.
The FTSE 100-listed lender told the City that it sees signs of recovery in its key markets in Asia, predicting:
Standard Chartered is also setting aside more money to cover bad loans, with a credit impairment of $956m for the last quarter.