Daily Brief

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Some bad data, others worse

Government looking rattled

Investors did a great job of completely ignoring the economic data over the last few days. They paid far more attention to Covid-19 news and political developments.  A poor performance by sterling in the Far East this morning was apparently the result of the prime minister spending the night in hospital.

The mark-down for sterling today was an extension of general disenchantment on Friday, brought about by doubts about the coherence of the government’s Coronavirus strategy. Confusion about testing for Covid-19 is one problem. Where Germany is testing 50k people a day, Britain is covering only a fifth of that number. On Sunday Health Secretary Matt Hancock threatened to tighten the restrictions if people fail to comply with social distancing. He said a small number of people are spoiling it for everyone else.

The only economic statistic that might have helped the pound on Friday was the services sector purchasing managers’ index. It did no such thing. At 34.5 it marked a record fall in activity. However, it was better than Germany’s 31.7, Euroland’s 26.4 and Italy’s 17.4.

 

Not the full story

The monthly change in US non-farm payrolls is normally one of the most eagerly-awaited economic indicators. Friday’s number, however, was neither eagerly-awaited nor much of an economic indicator. There was minimal reaction from the dollar; indeed it was the day’s top performer among the majors.

There was a reduction of 701k in nonfarm payrolls, pushing the rate of unemployment up from 3.5% to 4.4%. Startling though the payrolls drop may be, it was well short of the 826k decline recorded for May 2009 during the global financial crisis. Unfortunately, Friday’s number does not tell the whole story. In the last two weeks 10 million people have registered as unemployed and another five million are likely to join them on Thursday.

The US services sector PMIs were both much lower on the month. Markit, the firm that measures Europe, Japan and the UK, recorded a 39.8 reading, down from 49.4 in February. The figure from the longer-established ISM was five points lower on the month and still positive at 52.5.

 

Construction PMI

In a thin agenda today the only UK ecostat is Markit’s relatively unimportant construction sector PMI. There is nothing of any great consequence from Europe or the United States either.

New Zealand kicked things off with a 2.1% monthly decline in its commodity price index. ANZ says there is more downside to come. UK consumer confidence plunged 27 points to -34 at the end of March, its lowest level since the global financial crisis. German factory orders fell 1.4% in February and were 1.5% higher on the year.

Yet to come are Euroland investor confidence, the UK construction PMI and the Bank of Canada’s Business Outlook Survey. Tonight brings NZ business confidence and AiG’s services sector PMI.

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