Stock markets have gained ground on Thursday as investors look beyond the current certain recessions in major economies towards hopes of gradual recovery.

European stock markets, including the FTSE 100 gained some ground, as did Wall Street. However, US stocks have been dented by the FT’s report that a promising antiviral drug has not performed as expected in trials in China.

The relative stability on stock market indices belied a day of dire economic data. Here are some of the most noteworthy developments today:

• One of the Bank of England’s top policymakers, Jan Vlieghe, has warned that the UK could be suffering its worst economic shock in several hundred years.
• An additional 4.4 million Americans filed unemployment claims last week, as losses have wiped out all the job gains made since end of the last recession.
• UK purchasing managers’ index (PMI) data showed that Britain’s economy is shrinking at an unprecedented rate.
• It was a similar tale in the eurozone data.
• Oil prices rebounded further after this week’s historic falls, but still remained far below the start of the month.
  
• In the UK, the government plans to ban landlords from using “aggressive” debt collection tactics to keep the high street afloat.

You can continue to follow our live coronavirus coverage from around the world:

In the UK, key workers and their families can get tests from Friday, Hancock says

In the US, former presidential candidate Elizabeth Warren says her brother has died of Covid-19

And in our global coverage, France could unveil lockdown exit plan on Tuesday

Thank you for reading, and join us next week for more live coverage of business, economics and financial markets. JJ

One of the drugs that scientists hoped might help fight Covid-19, remdesivir, has not performed well in clinical trials, according to the Financial Times (£).

US stock market indices have quickly lost some of their earlier gains after the report was published. The S&P 500 is up 0.6% and the Dow Jones industrial average has now only gained 0.7%.

And the news could barely have come out in a worse way for the embattled World Health Organization: it was posted to its website in error.

Investors had latched onto reports that the antiviral medication, made by pharma company Gilead Sciences, had been an effective treatment, but the FT reports that the document suggests the drug did not deliver the expected benefits. From the FT:

“In this study of hospitalised adult patients with severe Covid-19 that was terminated prematurely, remdesivir was not associated with clinical or virological benefits,” the filing said.

Gilead’s statement said the study results are “inconclusive” and that other studies had suggested a benefit particularly for patients treated early.*

*This post was amended to add Gilead’s statement.

Oil markets are at it again in what will go down as a truly historic week for the commodity.

Brent crude futures prices, the international benchmark, have rallied by $2 per barrel today - a heady 10% gain - to hit $22.39. However, such has been the turmoil on oil markets this week that it still remains far below Tuesday’s opening price of $26.33.

On the US benchmark, West Texas Intermediate, futures prices have jumped by more than 30% today. One barrel for June delivery will now set back a trader $17.56.

Remember, the storage shortage on Monday caused WTI prices to turn negative, plunging as low as -$40, as traders paid others to take oil off their hands for fear they would be unable to store it. That was partly due to technical factors to do with the futures market, but it wouldn’t have happened if the market were not already under severe strain.

The government plans to ban landlords from using “aggressive” debt collection tactics such as winding up orders and statutory demands for high street shops who cannot pay their rent because of the coronavirus.

The business department also urged landlords to “give their tenants the breathing space needed” in the hopes that companies can survive the lockdowns.

Legislation will ban the use of winding up orders and statutory demands, and will also prevent landlords from using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

On the other side of the coin, the announcement said:

The government calls on tenants to pay rent where they can afford it or what they can in recognition of the strains felt by commercial landlords too.

Business secretary Alok Sharma said:

In this exceptional time for the UK, it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.

I know that like all businesses they are under pressure, but I would urge them to show forbearance to their tenants. I am also taking steps to ensure the minority of landlords using aggressive tactics to collect their rents can no longer do so while the Covid-19 emergency continues.

Newsflash: America’s economy is sinking at the fastest rate in at least a decade, but not as badly as in the UK and the Eurozone.

Data firm IHS Markit says its flash US Composite Output Index has slumped to 27.4 this month, down from 40.9 in March.

That’s the worst reading since the survey began in late 2009 -- and shows an extremely sharp contraction (anything under 50 is a contraction).

So, brutally bad. But not as awful as in the UK, where the composite PMI sank to just 12.9 this month (see this morning’s post), or the eurozone’s 13.5.

Markit says:

The decline in output largely stemmed from a slump in both domestic and foreign client demand. Temporary company closures, travel restrictions and other emergency public health measures across the globe weighed on total new orders.

Services companies registered the steepest rate of decline in the survey’s history, while manufacturers recorded the sharpest fall in sales since the depths of the financial crisis in early-2009.

Back in the UK, more than 660,000 jobs will be put at risk due to the collapse in air travel, the industry has claimed.

That includes direct employment and jobs indirectly supported by aviation, calculated by the International Air Transport Association.

The latest Iata figures forecast 140 million fewer UK air passengers in 2020, resulting in a $26.1bn revenue loss.

Rafael Schvartzman, IATA’s regional vice president for Europe, said continent-wide revenues were now likely to be down by $89.4bn this year.

He waded into the row about refunds, which many airlines are refusing to provide to passengers on cancelled flights. The cumulative cost would be around $10bn in Europe, he said, and hence Iata has campaigned to change the rules, and allow vouchers to be issued instead – as many airlines are (illegally) doing already.

He added:

“We know this is controversial...We don’t want to deny passengers their rights. We ask that the time frame be extended to a month rather than seven days, that would give them the breathing space they need.

“Refunds will mean multiple bankruptcies which will make refunds even more difficult Flexibility will help airlines restart and serve passengers well – by flying them or refunding them.”

Here’s some snap reaction to the news that another 4.4 million Americans signed on for jobless benefit last week:

Richard Flynn, UK Managing Director at Charles Schwab:

“While this week’s 4.4 million jobless claims are staggering, there are signs that the pace of layoffs has reached its peak, and markets have already priced in a significant rise in unemployment in the first half of the year. The key questions at this point are when can the economy reopen, and what happens when it does?

“While the shape of any potential recovery is a major talking point, the shape of the virus curve is of paramount importance. A flattening in the number of new cases and deaths is key to determining when the economy can reopen. Longer term, developing an effective vaccine and/or treatment is essential. Until then, it is difficult to know when we will return to business as usual.”

Neil Birrell, Chief Investment Officer at Premier Miton Investors, said:

“At the moment it is difficult to know just how bad an employment number, or any other economic data point needs to be to hurt markets. As bad as it sounds, another 4.42 million initial jobless claims in the US is not it, whilst the government and the Fed are standing firm. Policy vs. reality, for now policy is winning.”

The US unemployment crisis is threatening to overwhelm America’s states, and is hurting millions of people badly, my colleagues Dominic Rushe and Amanda Holpuch in New York report:

An additional 4.4 million Americans filed for unemployment last week adding to a total of over 26 million since the coronavirus pandemic shutdown swathes of the US and brought its economy to a standstill.

The pace of layoffs appears to have slowed slightly but a backlog of claims mean millions more are likely to file in the coming weeks. States across the country are encountering problems with the sheer number of people applying for unemployment benefits.

In Florida, already bedevilled by the widespread collapse of its already flawed benefits system, just 14.2% of the more than 668,000 claims filed since 15 March have been paid. In Ohio, claimants now have to file on a specific day of the week, depending on the first letter of their last name, to ease congestion. Washington residents are complaining that the state’s website crashes or takes hours to respond.

Latasha Johnson, 41, has been struggling to get by without a paycheck for a month. In mid-March, she was laid off from her job in dining services at the University of Illinois, where she was employed by the British-based multinational Compass.

She had no severance and it took a month for her to file an unemployment claim because the site was overwhelmed.

Johnson said it was especially difficult because she is a single mother. “I pay for all my bills on my own, I don’t have any outside help, outside resources, I am doing everything by myself,” she said. “It’s a huge, huge struggle.”

Newsflash: Another 4.4 million American have filed new claims for unemployment benefit last week, as the US economy continues to suffer from the lockdown.

That takes the total number of ‘initial claims’ filed in the last five weeks to more than 26 million.

This is down on the 5.2 million initial claims filed in the previous seven days, and below the record high of 6.9 million.

But it’s still horrendous. Before the crisis began, the all-time record for weekly jobless claims was below 700,000.

P&O Cruises and Cunard, the two UK cruise lines in the Carnival group, have announced extensions to the “pauses” in their operations, until July 31 this year.

The 11-week extensions take the shutdown in cruise holidays a month further than most other global brands. Others are however likely to follow suit after US medical authorities said that they would close ports to cruise sailings, in an order that could last until late July.

Cruises have played a grim role in the spread of coronavirus, with passengers and later crew marooned on ships where the virus has rapidly spread. One Carnival-owned cruise ship, the Ruby Princess, has also accounted for a significant proportion of all coronavirus cases in Australia.

P&O Cruises president Paul Ludlow said the line was “considering the evolving advice as well as potential restrictions in ports of call as we look at how and when we phase our ships back into service”, and said future holidaymakers would likely have to adhere to “new stringent measures” that “will become the new normal”.

Bank of England policymaker Jan Vlieghe also defended the stimulus measures announced by the Bank of England since the Covid-19 outbreak began.

Those measure include buying another £200bn of government debt through the Bank’s QE scheme, and allowing the Treasury to expand its overdraft.

Vlieghe insists in today’s speech that these measures are a sensible response to the financial turmoil earlier this year, when a slump in asset prices created a dangerous tightening of financial conditions.

He insists the BoE is not acting like Germany’s central bank during the money-printing days of the Weimar Republic, or that of Zimbabwe, which suffered hyper-inflation more recently.

The first difference, Vlieghe argues, is that the BoE is trying to avoid a damaging depression. If it succeeds, inflation will remain low (around the 2% target).

The second difference, is that the BoE is taking these decisions independently - Westminster is not calling the shots.

Vlieghe argues:

If we were the central bank of the Weimar Republic or Zimbabwe, the mechanical transactions on our balance sheet would be similar to what is actually happening in the UK right now. That is not where you would find the smoking gun.

The difference would be that government would be telling the central bank what to do, implicitly or explicitly, in order to achieve fiscal objectives while subordinating any inflation objectives, a situation also known as fiscal dominance.

Why would that ultimately lead to inflation? Because, once a government decides to prioritise its fiscal objectives above its inflation objectives, it is likely to involve removing central bank independence implicitly or explicitly, and crucially keeping short-term interest rates lower than would be appropriate to meet the inflation target.

The full speech is online here.

One of the Bank of England’s top policymakers has warned that the UK could be suffering its worst economic shock in several hundred years.

Jan Vlieghe, a member of the BoE’s interest-rate setting committee, made this warning in a speech just released:

Based on the early indicators, and based on the experience in other countries that were hit somewhat earlier than the UK, it seems that we are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries.

Vlieghe says that the Covid-19 virus, and the lockdown, has created both a supply shock (because people can’t work) and a demand shock (because normal consumption patterns are disrupted by the lockdown).

This economic shock is also ‘highly asymmetric’, he adds - as some sectors are much worse hit than others [today’s PMI report, for example, showed that financial services is coping much better than car manufacturing and textile making].

Social distancing, in part voluntary and in part imposed, means that a wide range of consumption activities are sharply reduced or simply not taking place. Shopping in physical stores, recreational activities, personal services, and a long list of other types of spending have been sharply reduced.

As a result, the businesses that normally provide these goods and services have sharply reduced activity, or shut down entirely. Absent any policy response, most of the employees of these businesses would lose their jobs, and face a dramatic reduction in income. In contrast, those working in sectors whose output is still in demand, for example food retail and online businesses, face no reduction in income at all or even experience increased income.

But they are still unable or unwilling to consume goods and services that require social contact, so they end up with a large involuntary increase in savings.

But there is some good news.... Vlieghe reckons the economy should, in principle, return roughly to its pre-virus trajectory once the pandemic is over.

Everyone’s agreed - the UK PMI report is just awful.

Even though we know the economy is in deep-freeze right now, the extent of the decline is still shocking.

Duncan Brock, Group Director at CIPS, says Britain’s economy has entered the ‘twilight zone’:

“Though this significant and further deterioration from last month’s results came as no great surprise, it is no less devastating. Manufacturing output sometimes shrank into almost nothing as the pandemic’s grip took hold and factory closedowns at home and abroad made regular production schedules impossible. Supplier delivery times lengthened to an unprecedented extent. Some manufacturers commented on switching plant capacity to assist healthcare supply chains.

Meanwhile, service providers ramped up their online operations to survive, but others just hit a dead stop, shedding jobs and facing extreme cash flow difficulties.

“The overall services fall in output was faster than manufacturing and the steepest since records began in 1996 as social distancing measures enforced for the population stopped everything in its tracks and an eerie silence descended over the UK’s streets.

Howard Archer of EY Item Club says Britain is clearly heading for a record contraction in the April-June quarter.

The toll on services activity was particularly heavy reflecting the effective shutdown of several sectors.

We expect the economy to contract around 13% quarter-on-quarter in the second quarter on the assumption that there is some lifting of restrictions on activity during the quarter. We see GDP contracting 6.8% over 2020.

Newsflash: Britain’s economy is shrinking at an unprecedented rate this month, matching the slump in the eurozone.

Data firm Markit’s UK Composite PMI, which tracks activity across the economy, has slumped to just 12.9 for April. That’s down from 36 in March, and much worse than the the most pessimistic forecasts.

It’s the worst reading since Markit started recording this data more than two decades ago.

Both manufacturing and services companies reported a collapse in business this month, confirming that the Covid-19 lockdown is pushing the UK into a severe recession.

Any reading below 50 shows a contraction -- but these numbers are appallingly grim.

• Services PMI: 12.3, down from 34.5 in March
• Manufacturing output: 16.6, down from 43.9 in March

More to follow....

Newsflash: The eurozone economy is suffering the steepest falls in business activity and employment ever recorded this month, as it sinks into recession.

The eurozone-wide composite PMI, just released, has hit an all-time low of 13.5 in April, down from a prior record low of 29.7 in March.

That’s the largest collapse in output ever -- reflecting the wholesale shutdown of Europe’s economy this month. It implies an extremely sharp contraction in economic activity this quarter.

Markit says:

The eurozone economy suffered the steepest falls in business activity and employment ever recorded during April.

Any reading below 50 shows a contraction -- and these are unpredecentedly bad numbers.

Bosses from factories and offices across the eurozone reported that their businesses were being very badly hurt by the Covid-19 lockdown.

Here’s the damage:

• Flash Eurozone Services PMI Activity Index(2) at 11.7 (26.4 in March). Record low (since July 1998).
• ▪ Flash Eurozone Manufacturing PMI Output Index(4) at 18.4 (38.5 in March). Record low (since June 1997).

Services sector companies in hospitality, accommodation, restaurants, travel and tourism saw especially steep falls in activity, with vast numbers of such companies either shutting down or hardly able to operate.

Many manufacturers also reported dramatically reduced demand or major shortages of staff and inputs, if they were able to keep open at all. Supply chain delays hit the highest ever reported.

NEWSFLASH: The French and German economies are contracting at an unprecedented rate this month under the lockdown.

Data firm Markit’s latest surveys of purchasing managers, just released, shows that business activity in both countries slumped dramatically.

France’s ‘composite’ PMI, which covers manufacturers and service sector firms, has cratered to just 11.2 for April -- down from 28.9 in March. A 50-point reading would show stagnation, so this is a real shocker - and the worst reading on record.

Markit says:

French private sector activity continued to plunge in April, with ongoing business closures stifling both supply and demand.

Germany’s composite PMI has sunk too, to just 17.1 from 35 in March. That also shows an unprecedented contraction in activity under the lockdown.

Markit says:

The decline in business activity across Germany deepened in April, with both services and manufacturing seeing record decreases in output as a result of the COVID-19 pandemic and subsequent lockdown....

Businesses reported a collapse in demand from clients both at home and abroad in April. The rate of decline in overall inflows of new work far exceeded the previous record seen in March, with new business received from abroad falling at a similarly sharp pace. In both cases, the decline was led by the service sector

I fear the eurozone-wide PMI, which also includes Spain and Italy, will be just as bleak. It’s due at 9am BST, followed by the UK’s report at 9.30am....

The UK has announced plans for a massive surge in borrowing over the next few months, to cover the cost of the Covid-19 pandemic.

Britain’t Debt Management Office says it plans to issue £180bn of bonds between May and July.

That’s up from £32.6bn in the same period a year ago, and more than the DMO had expected to raise over the entire year.

Most of this borrowing will be used to cover the cost of the government’s packages to tackle the outbreak, such as the wage retention scheme for workers who are furloughed.

The DMO says:

This remit revision takes into account implications for the government’s financing requirement of all measures announced by government to date to support the economy through the period of disruption caused by COVID-19.

But, it’s also on top of the £45bn which the DMO also raised in April alone to cover the first wave of Covid-19 spending.

In total, the UK will be borrowing £225bn over the first four months of this financial year - an astonishingly high total (the entire national debt is around £2 trillion).

The Treasury says:

“This higher volume of issuance is not expected to be required across the remainder of the financial year.”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

A fresh blizzard of data today will show us just how badly the world economy is suffering from the Covid-19 downturn.

Surveys of purchasing managers across the UK, Europe and the US are likely to give the same story -- plunging activity, falling orders and rising unemployment, as the world falls into a recession.

This is likely to drive some of these PMI surveys of activity down to their lowest levels since they began.

Fiona Cincotta of City Index explains that a particularly grim PMI report could spook investors:

Sentiment clearly remain fragile and that could be magnified with the release of the PMI readings for the UK and Eurozone.

The service sector accounts for 80% of UK economic activity. In March the UK service sector contracted at the fastest pace on record, dropping to 34.5 on the index. And that was only the beginning of lock down! This months’ reading is expected to dive deeper into contraction territory to 29.

The manufacturing sector, which has not been as servery impacted by the stay at home measures is forecast to contract further to 42 in April down from 47.8 the previous month.

America is bracing for another horrific weekly jobless total. Economists predict that more than four million people filed new claims for unemployment benefit last week - which would take the total laid off in the crisis to over 25 million. That’s more than all the jobs created in the last decade.

Jim Reid of Deutsche Bank explains:

Over the last 4 weeks, a cumulative total of more than 22m claims have been made, which is around the number of jobs that were created in the decade of expansion. So it’s no exaggeration to call the scale of the declines unprecedented.

The agenda

• 9am BST: Eurozone composite ‘flash’ PMI for April: expected to fall to 25.9, from 29.7
• 9.30am BST: UK composite ‘flash’ PMI for April: expected to fall to 31 from 36
• 1.30pm BST: US weekly jobless claims figures: expected to drop to 4.5m from 5.2m
• 3pm BST: US composite ‘flash’ PMI for April: