Market news 30 March 2020

Jobless claims spike to record level; US delivers massive fiscal and monetary stimulus; markets remain volatile

• US jobless claims spiked last week as more than 3 million Americans filed for unemployment benefits (consensus: 1.7m, previous week: 285,000). The increase over the week was larger than any previous week on record – previous weekly spikes recorded were 695,000 in October 1982 and 665,000 in March 2009 in the depth of the GFC. Claims came from former employees across various industries although sectors particularly affected were hotels and restaurants, but also entertainment, transport and manufacturing companies were also forced to make cost savings. Economists are expecting further weeks of higher claims given retail trade, leisure and hospitality companies account for 12 – 16 million jobs in the US.
• The US government released a $2.2trn disaster funding package this week to support the economy as various states go into lockdown.
• The Fed committed to buy ~$75bn of US Treasuries and $50bn of agency MBS every day, the same amount they were buying per month at the height of the last crisis. For the first time ever they also undertook to buy corporate bonds, announcing programmes for primary and secondary bond market purchases, both worth ~$100bn in total.
• Markets staged a sharp bear market rally, with the S&P up 20% from the recent trough at one point, although renewed weakness set in towards the weekend. This is likely to continue as more Covid flashpoints merge around the country (so far New York has been the only major one), with the government’s lead spokesman on Covid, Dr Anthony Fauci, forecasting perhaps 100,000-200,000 deaths nationwide.