Graeme Wearden and Jasper Jolly 

IMF: Global economy faces worst recession since the Great Depression – as it happened

Rolling coverage of the latest economic and financial news
  
  

The IMF logo is seen outside the headquarters building in Washington
The IMF logo is seen outside the headquarters building in Washington Photograph: Yuri Gripas/Reuters

Closing summary: World economy braces for depression

The International Monetary Fund today warned that the world faces its worst recession since the Great Depression of the 1930s - but stock markets appear to be fixated on a potential recovery.

Wall Street investors enjoyed a day of strong gains by the early afternoon in New York, with the S&P 500 up by 2.7% and the Nasdaq rising by 3.5%, aided by good news on a recovery in iPhone orders from China for Apple.

Here are some of the most important developments from today:

  • In its new World Economic Outlook, the IMF slashed its growth forecasts dramatically, saying it expects the global economy to shrink by 3% this year, rather than expand by 3.3% as it thought back in January.
  • The IMF also said there were “cracks” showing in the financial system that could cause a credit crunch - although that had not happened yet.
  • G7 finance ministers and central bank chiefs say they “stand ready” to provide temporary debt relief to poorer nations whose finance ministries are struggling to pay for healthcare spending, but only if other creditors agree.
  • The Office for Budget Responsibility said that the UK economy could shrink by a third during this quarter as the lockdown continues, and unemployment could hit 10. (Note it was a “scenario” rather than a forecast.)
  • The FTSE 100 was the worst performer among major European stock markets. London’s benchmark lost 0.9% to close at 5,791 points.

You can keep following our live coverage of the pandemic and the response around the world:

In the UK, chancellor Rishi Sunak said the UK will be able to recover “quickly and strongly” once the crisis is over

In the US, the country’s top infectious disease specialist says “we are not there yet” on reopening the economy

And in our global coverage, confirmed cases worldwide are approaching 2m

Thank you as ever for reading, and do join us tomorrow for more live coverage of business, economics and financial markets. JJ

A bit more on Barclays: as well as delaying redundancies, it has also said that it will delay payments for its top two executives.

Chief executive Jes Staley and chief financial officer Tushar Morzaria will not receive payments from 2017 until March 2021, rather than June 2020, according to a statement to the stock market.

The banks have already cancelled dividend payments to shareholders at the behest of the Bank of England. Even though they are in a much stronger position than they were during the financial crisis just over a decade ago, the prospect of paying millions of pounds to executives under previous schemes may have been unpalatable while millions are receiving state support.

The statement added:

Mr Staley and Mr Morzaria are supportive of the remuneration committee’s determination in this regard.

UK chancellor Rishi Sunak is holding the government’s daily briefing right now.

The most important way to protect the economy is to protect people’s health, Sunak said.

He was speaking after the Office for Budget Responsibility’s scenario calculations suggested there could be a deep recession ahead for the UK, amid calls from some quarters to reopen the economy.

You can follow updates on the UK coronavirus live blog:

IMF: Pandemic causes 'cracks' in global financial system

The coronavirus pandemic has exposed “cracks” in the global financial system and “will likely” see banks suffer both credit losses and market losses that will test their reserves, the International Monetary Fund (IMF) warned on Tuesday.

The IMF usually issues its global financial stability report and the earlier economic forecasts ahead of its spring meetings, but this year they have been replaced by virtual meetings.

Earlier it said that the economic effects will be on a par with the Great Depression of the 1930s, based on what we already know.

There could be further troubles down the road - including a credit crunch, if recessions stop companies from paying their banks:

This crisis presents a very serious threat to the stability of the global financial system. Following the COVID-19 outbreak, financial conditions tightened at unprecedented speed, exposing some “cracks” in global financial markets. [...]

These developments have raised the risk that the inability of borrowers to service their debts would put pressure on banks and cause credit markets to freeze up. A prolonged period of dislocation in financial markets could trigger distress among financial institutions, which, in turn, could lead to a credit crunch for nonfinancial borrowers, further exacerbating the economic downturn.

But, bear in mind that these are only “cracks” at this point, rather than a full-on breakdown. That could help (or at least not hinder) the recovery if economies can get back on track.

Apple is the big driver of the Nasdaq’s outperformance, on signs that the world’s third-biggest company by market capitalisation is seeing improvements in China.

Apple shares are up by 4%.

This is from CNBC:

Apple shipped 2.5 million iPhones in China in March, according to government data. It had shipped only 500,000 phones in China in February.

Althought that is still a 20% decline compared to March 2019, it still suggests that a return to relative normality in China could provide much-needed cash for many companies in the US and Europe whose home markets have now locked down.

Across the Atlantic, Wall Street is on for another day of strong gains.

The S&P 500 is up by 1.9%, while the Dow Jones industrial average has risen by 1.4%.

The Nasdaq, which is dominated by big tech stocks, has jumped by 2.6% - its highest level since 6 March.

Stock markets are a bit of a mixed bag across the world as trading approaches its end in Europe.

The FTSE 100 has lost 1%, or 59 points, to trade at about 5,784 points. Italy has also lost ground, with the FTSE MIB down by 0.6%.

However, it’s more positive in France, where the Cac 40 is up by 0.7%, and the export-sensitive Dax in Germany, which has gained 1.6%.

There has been a spate of attacks on mobile network infrastructure because of completely baseless conspiracy theories about 5G. Now the attacks are directly affecting people in NHS hospitals, according to Vodafone.

Nick Jeffery, the mobile network’s chief executive, has posted on social network LinkedIn saying that arson attacks on masts have hit coverage at the new Nightingale hospital in Birmingham, as the Guardian’s Mark Sweney reports:

Jeffery said:

It is deeply disappointing to learn that arsonists are still attacking our mobile phone masts – that’s 20 so far. One of the sites targeted over the weekend provides mobile connectivity to the Nightingale hospital in Birmingham.

It’s heart-rending enough that families cannot be there at the bedside of loved ones who are critically ill. It’s even more upsetting that even the small solace of a phone or video call may now be denied them because of the selfish actions of a few deluded conspiracy theorists.

Barclays has become the lastest British bank to halt new job cuts while the coronavirus crisis is ongoing - following in the footsteps of HSBC and Lloyds.

British banks have imposed big job cuts in the last few years, as customers abandon high street branches and move transactions online. At the same time, some investment banks serving large corporates have struggled in the 12 years since the financial crisis.

HSBC and Lloyds have already put tens of thousands of redundancies on hold through the crisis, giving people vital salaries even through lockdown.

Reuters said it has seen a Barclays internal memo:

The British lender also said it is offering additional financial support to staff already in the process of being made redundant, modelled on the government’s furlough scheme which offers up to 80% of an employee’s wages up to 2,500 pounds ($3,134.00) per month.

The payments will be funded by Barclays rather than the government, however. A Barclays spokesman confirmed the contents of the memo.

And it’s Jasper Jolly taking over from Graeme Wearden through to the European market close.

Back in the UK, the fashion chains Oasis and Warehouse are on the brink of administration.

Around 2,300 jobs are at risk, as the Covid-19 lockdown threatens to claim more retail victims.

G7 backs debt moratorium for poor countries, if others agree....

Finance ministers from the world’s biggest economies have moved another step closer to giving debt relief to poorer countries to help them handle the Covid-19 crisis.

G7 finance ministers and central bank chiefs say they ‘stand ready’ to provide temporary debt relief -- if other creditors agree [reminder, the IMF announced its own debt relief overnight].

In a joint statement, the G7 say they held a virtual meeting today where they reiterated their pledge to do “whatever is necessary” to help support growth.

And on debt relief, they say:

Ministers and Governors noted that a number of the most vulnerable and poorest countries will face acute health and economic challenges related to the fallout of COVID-19.

Ministers and Governors support multilateral efforts to assist these countries and stand ready to provide a time-bound suspension on debt service payments due on official bilateral claims for all countries eligible for World Bank concessional financing, if joined by all bilateral official creditors in the G20 and as agreed with the Paris Club. This initiative would provide liquidity support to help these countries deal with the health and economic impacts of the crisis.

Ministers and Governors also support the G20’s work with the Institute of International Finance to call on private creditors to provide comparable treatment, on a voluntary basis.

Updated

Wall Street is shrugging off the prospect of a dire recession this year.

Stocks have opened higher in New York, where the Dow Jones industrial average has gained 486 points, or just over 2%, to 23,877. The S&P 500 is also up 2%.

Our economics editor Larry Elliott has delved into the military history books to argue that the IMF has been blindsided by Covid-19 -- while it was worrying about other dangers:

In 1941, Britain considered its colony of Singapore to be pretty much impregnable. But while the naval base was bristling with big guns, its defences were geared towards preventing a sea-based invasion and when the attack came it was on land, down the Malay peninsula. Britain was expecting trouble, just not from that direction.

The same fate has befallen the International Monetary Fund, which has been fretting for some time about excessive financial speculation on the back of permanently lowinterest rates and the risks posed by global heating but – like almost everybody else – failed to spot where the immediate threat was coming from.

The fact that the Covid-19 pandemic spread so quickly meant countries had virtually no time to prepare for it. Nor had they any experience of a recession arriving with such sudden ferocity. A look back at past slumps shows that it normally takes 18 months or two years for output to fall from peak to trough. This time, the IMF expects that following an unprecedented collapse recovery will begin in the second half of 2020.

Here’s Rain Newton-Smith, CBI chief economist, on the IMF’s forecast of a global recession - and the OBR’s scenario that Britain’s GDP shrinks by 35% this quarter.

“This makes for bleak reading and stresses the need for the right policies to support our economy through this crisis. The need for coordinated global action to rebuild confidence has rarely been greater.

“The Government will also need to work with businesses and many parts of civil society here at home, to create a plan to revive the economy once the lockdown is lifted.”

Gita Gopinath also says it is important that world leaders aren’t driven into protectionism by the coronavirus crisis.

She calls on them to avoid imposing restrictions on trade in medical supplies.

IMF hails UK's 'aggressive approach' to Covid-19

The IMF is holding a virtual press conference now to discuss its new World Economic Outlook.

Q: Why is the IMF expecting the eurozone economy to shrink so much more than the United States this year? (-7.5% vs -5.9%)?

Chief economist Gita Gopinath explains that euro area was already expected to grow slower than the US this year, before the coronavirus risis.

It started with lower projected growth, so the numbers are lower now, she explains.

In addition, Europe has been hit very hard by the crisis, she points out.

Q: How does the UK’s economic response compare to other countries - and should the Treasury do more?

The UK has taken a very aggressive approach, Gopinath replies.

It has come in with “large, substantial, very carefully targeted measures”, which have provided considerable help to households and businesses.

The UK has done all the right things at this point, Gopinath adds.

That will obviously be welcomed by the Treasury (which is paying wages of furloughed workers and providing loans to businesses) and the Bank of England (which has cut interest rates to record lows and restarted its QE scheme).

However, there are signs that the loans programme is off to a slow start:

You can read more about the IMF’s new report on their blog, here.

The IMF is also urging governments and central bankers to spend heavily to protect their economies from the worst effects of the Great Lockdown.

Chief economist Gita Gopinath says the Covid-19 crisis needs to be dealt with in two phases - first, containment and stabilization, then recovery.

In both phases public health and economic policies have crucial roles to play, she explains:

Quarantines, lockdowns, and social distancing are all critical for slowing transmission, giving the health care system time to handle the surge in demand for its services and buying time for researchers to try to develop therapies and a vaccine. These measures can help avoid an even more severe and protracted slump in activity and set the stage for economic recovery. Increased health care spending is essential to ensure health care systems have adequate capacity and resources.

Special dispensations for medical professionals—who are on the frontlines of combating the pandemic—should be considered, including, for example, education allowances for their families or generous survivor benefits.

While the economy is shut down, policymakers will need to ensure that people are able to meet their needs and that businesses can pick up once the acute phases of the pandemic pass. This requires substantial targeted fiscal, monetary, and financial measures to maintain the economic ties between workers and firms and lenders and borrowers, keeping intact the economic and financial infrastructure of society

There is one glimmer of light in the IMF’s forecasts - they show a recovery in 2021. But not enough to make up for this year’s decline.

For the global economy, it predicts growth of 5.8% in 2021, bouncing back from a 3% decline this year.

In the UK, the Fund predicts GDP will rise by 4.0% next year after shrinking 6.5% this year.

For the US, it sees a 4.7% recovery in 2021, following a 5.9% contraction in 2020. In the euro area, a 7.5% decline is followed by a 4.7% recovery.

The Fund also estimates China’s economy will slow to just 1.2% growth this year, from 5.5% in 2019 -- but then expand by 9.2% in 2021 as the world economy recovers.

But there’s obviously uncertainty about these forecasts for next year.

Here’s our economics editor Larry Elliott on the IMF’s new forecasts:

IMF: Global economy faces worst recession since the Great Depression

Newsflash: The International Monetary Fund has warned that the world faces its worst recession since the Great Depression of the 1930s.

In its new World Economic Outlook, the Fund has slashed its growth forecasts dramatically, predicting painful contractions in all advanced economies, and most emerging countries too.

The IMF now expects the global economy to shrink by 3% this year, rather than expand by 3.3% as it thought back in January.

Chief economist Gita Gopinath says the Covid-19 pandemic means the world economy has changed “dramatically” since January, creating a crisis “like no other”.

First, the shock is large. The output loss associated with this health emergency and related containment measures likely dwarfs the losses that triggered the global financial crisis.

Second, like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.

Third, under current circumstances there is a very different role for economic policy. In normal crises, policymakers try to encourage economic activity by stimulating aggregate demand as quickly as possible. This time, the crisis is to a large extent the consequence of needed containment measures. This makes stimulating activity more challenging and, at least for the most affected sectors, undesirable.

Advanced economies will shrink by 6.1% this year, the Fund estimates. That includes a 5.9% contraction in the United States, a 7.5% contraction in the euro area, and a 6.5% slump in UK GDP (very bad, but not as bad as the Office for Budget Responsibility’s new scenarios).

Gopinath explains that today’s forecasts could prove too optimistic:

It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.

A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely.

Updated

Time for a quick recap, before the International Monetary Fund releases its new World Economic Outlook.

OBR forecasts: snap reaction

Britain’s new shadow chancellor, Anneliese Dodds, says the OBR’s grim forecasts show that the government must do more to protect the economy.

Labour has been working constructively with Government on its economic support package. It is clear that additional action needs to be taken to increase the take-up of the different measures. We have called for urgent action in relation to the loans scheme in particular, as take-up is worryingly low.

“It is absolutely critical that government now does all it can to minimise the depth and length of the economic impact from necessary anti-Coronavirus measures.”

Reuters Andy Bruce points out that the OBR is assuming the economy returns to normal next year -- which seems implausible....

Chris Giles of the Financial Times is also unconvinced, given the severe damage being caused to some sectors of the economy:

Our main UK liveblog has more details:

OBR scenario shows UK GDP falling 35% and unemployment hitting 10%

Newsflash: Britain’s economy could shrink by a third during this quarter as the Covid-19 lockdown continues, joblessless would hit 10%, and the government’s deficit could surge by over £200bn.

That’s according to a new scenario drawn up by the UK fiscal watchdog, which paints an alarming picture of the impact of the coronavirus.

The Office for Budget Responsibility has just published its “Coronavirus reference scenario”, to outline how the economy and the public finances would be affected by a three-month shutdown.

The OBR is very clear that this is not a forecast - but an ‘illustrative scenario’ that explores the possible impact of the coronavirus outbreak on the public finances.

And it’s extremely grim -- with unemployment expected to surge by over two million, and the national debt remain much higher than before the crisis.

Here are the key points (the report is online here):

  • We do not attempt to predict how long the economic lockdown will last – that is a matter for the Government, informed by medical advice. But, to illustrate some of the potential fiscal effects, we assume a three-month lockdown due to public health restrictions followed by another three-month period when they are partially lifted. For now, we assume no lasting economic hit.
  • Real GDP falls 35 per cent in the second quarter, but bounces back quickly. Unemployment rises by more than 2 million to 10 per cent in the second quarter, but then declines more slowly than GDP recovers. Policy measures support households and companies’ finances through the shock.
  • Public sector net borrowing increases by £218 billion in 2020-21 relative to our March Budget forecast (to reach £273 billion or 14 per cent of GDP), before falling back close to forecast in the medium term. That would be the largest single-year deficit since the Second World War.
  • The sharp rise in borrowing this year largely reflects the impact of economic disruption on receipts (with smaller effects from policy measures like the business rates holidays) and policy measures that add to public spending (with smaller effects from higher unemployment).
  • Public sector net debt rises sharply in 2020-21 thanks to lower GDP, higher borrowing and the accounting consequences of the Bank of England’s policy measures. It surpasses 100 per cent of GDP during the year, but ends it at 95 per cent (versus 77 per cent in the Budget forecast) as the economy recovers. It remains 10 per cent of GDP above the Budget forecast in 2024-25.

The OBR also explains that the measures announced by chancellor Rishi Sunak will be very expensive -- but not as costly as doing nothing:

The Government’s policy response will also have substantial direct budgetary costs, but the measures are designed specifically to support individuals and businesses through this temporary shock and so they should help prevent greater economic and fiscal damage in the long term.

The immediate cost of the Government’s actions may be high, but we can be confident that the cost of inaction would ultimately have been much higher.

But even if growth recovers in the second half of this year, the economy would (in this scenario) shrink by 13%. That would “comfortably exceed any of the annual falls around the end of each world war or in the financial crisis”, the OBR says.

JP Morgan profits fall amid "unprecedented challenge" of Covid-19

We also have results from JP Morgan, and they show that its earnings have been hit by the coronavirus.

Earnings for the last quarter are down 70% at 78 cents per share, while group net revenues fell 3%.

JP Morgan has also raised its provision for credit losses was $8.3bn, up $6.8 billion from the prior year. This reflects a deterioration in the macro-economic environment as a result of the impact of COVID-19 and continued pressure on oil prices, it says.

CEO Jamie Dimon says JP Morgan is doing its bit to help:

“The first quarter delivered some unprecedented challenges and required us to focus on what we as a bank could do - outside of our ordinary course of business - to remain strong, resilient and well-positioned to support all of our stakeholders.

In Consumer & Community Banking, we have remained focused on meeting our customers’ needs. Approximately three quarters of our 5,000 branches have been open - all with heightened safety procedures and many with drive-through options - and the vast majority of our over 16,000 ATMs remain open. In March alone, we opened half a million new accounts for our card customers and extended over $6 billion of new and increased credit lines, and we were active in Home Lending and Auto.

We lent over $500 million to small businesses in the month and we’re now actively supporting the SBA’s Paycheck Protection Program. For the quarter, we continued to see flows into both client investment assets and deposits

Just in: pharmaceuticals and consumer goods firm Johnson & Johnson has hiked its dividend to shareholders.

J&J has beaten Wall Street expectations for the last quarter too, as it handles the Covid-19 crisis better than many other companies.

Marketwatch explains:

Net income rose to $5.80 billion, or $2.17 a share, from $3.75 billion, or $1.39 a share, from a year ago. Excluding non-recurring items, adjusted earnings per share rose to $2.30 from $2.10, beating the FactSet consensus of $2.01.

Revenue grew 3.3% to $20.69 billion, above the FactSet consensus of $19.73 billion, with all three business segments topping expectations.

But, J&J has also lowered its profit forecasts for the full-year -- to $7.50-$7.90 per share, from $8.95 to $9.10.

Investors see 'U-shaped' recovery from global recession

Nearly all leading fund managers expect the world economy to contract this year.

That’s according to Bank of America’s monthly survey of investors, just released, which found that 93% investors expect a global recession in 2020. Not a surprise (although who are the 7% who don’t?!)

It also found that 52% of investors expect a “U-shaped” recovery from Covid-19 -- meaning a sharp slump, then a period of stagnation, before a recovery.

Some 22% expect a W-shaped recovery, while just 15% see a V-shaped bounceback.

The survey also found “extreme pessimism” among investors, with cash levels at their highest levels since the 9/11 terrorist attacks.

Updated

Britain’s FTSE 250 index of medium-sized companies is not having a good day, currently down 1.45% at 16,169 points (a drop of 237 points).

Cineworld, which was forced to close cinemas in the UK and Europe, are down 11%.

Pub chain Mitchells & Butlers has dropped almost 8%. It told investors this morning that its sites have been closed for the last three weeks on government orders, with staff now furloughed.

This could mean it has breached its banking covenants, but a ‘temporary waiver’ has been agreed, M&B says:

It is possible that the forced closure of our sites, as required by the Government, could amount to a technical breach of our secured financing arrangements but, as a first step, we are announcing today that a temporary waiver until 15th May has now been granted to avoid this pending further discussions.

Next's reopened website closes until tomorrow

UK retail chain Next has now re-closed its website for the day, just hours after re-opening today, because of a surge in orders.

Next says it will reopen on Wednesday, and is carefully limiting orders so staff can comply with physical distancing rules.

My colleague Sarah Butler explains:

Analysts at Peel Hunt said that Next had hit its order deadline for Tuesday by 08.30am.

The retailer has relaunched its warehouse and online store nearly three weeks after they closed as it said it had made changes to protect staff from coronavirus infection. Initially the site will only sell childrenswear and small homewares but may extend that in future. The retailer asked for volunteers to staff the warehouse and 3,000 have come forward so far.

It said it would begin by selling low amounts of goods, so that only a small number of staff would be required at any one time, helping to ensure social distancing rules are complied with.

David Madden of CMC Markets says:

In the grand scheme of things it is a small step in the right direction, but it sends out a positive message – some limited online business is better than no business.

Updated

British banks and other lenders have provided over 1.2 million mortgage payment holidays to households hit by the coronavirus outbreak - according to industry group UK Finance.

It says:

“Action by lenders means one in nine mortgages in the UK are now subject to a payment holiday.

French economy 'to shrink 8% this year'

France’s finance minister has warned that its economy will suffer an even sharper recession than first feared, as measures to contain the Covid-19 outbreak are extended.

Bruna Le Maire says GDP is now expected to shrunk by 8% in 2020 -- an extremely painful contraction, and even worse than the 6% previously expected.

Like much of Europe, France is currently under a heavy lockdown - and pledging support for its businesses and workers to survive the pandemic.

The impact of these emergency measures will drive France’s budget deficit higher - it’s now expected to hit 9% of GDP this year.

Le Maire told BFM TV that Paris’s government will do whatever’s needed to cushion the impact of the recession:

“If we need to do more, then we will do more. We will be there.”

Yesterday, French president Emmanuel Macron announced the lockdown will last another month, at least.

In a TV address, he said France would start returning to normal life on 11 May, if citizens were “civic, responsible and respected the rules” – and if the number of cases of coronavirus continued to drop.

The FTSE 100 is not sharing today’s rally - it’s now down 36 points or 0.6% at 5806.

That’s still a sharp improvement on last month’s lows (when it closed below 5,000 points for the first time since 2011).

Troubled cruise operator Carnival is the top faller, down 6%, with Intercontinental Hotels down 5.8% and gambling firm Flutter losing 4% (three stocks all vulnerable to the Covid-19 lockdown).

The stronger pound will also be pulling the Footsie back a little.

Updated

European stock markets are holding steadily at their highest levels in over a month.

The EU-wide Stoxx 600 index is trading at 334 points, up 0.8% today - its highest level since 11 March, and up from 280 points three weeks ago.

Rachel Winter, Associate Investment Director at Killik & Co, says global markets have escaped their recent Bear Market:

“European markets may have been closed for Easter weekend but other major markets around the world were still open, so the value of the MSCI World index was still calculated yesterday. The index closed at 1956.75, which is 19.6% below its all-time high, and that means that at the moment we are no longer in a bear market.

This really highlights just how much markets have recovered from the lows it hit towards the end of March. The MSCI World is actually up 22% since then. We’ve seen some absolutely huge moves over the last few weeks and for us this just shows how difficult it is to try and time the market.

The pound has also strengthened to a one-month high of $1.256 today.

IMF agrees Covid-19 debt relief - but campaigners push for more

Overnight, the International Monetary Fund has announced it will provide debt relief to some of the world’s poorest countries, to help them handle the coronavirus pandemic.

The Fund will cancel debt payment which it is owed by 25 countries - mostly in Africa - over the next six months to free up vital cash for healthcare.

They are: Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, Congo, D.R., The Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo, and Yemen.

IMF chief Kristalina Georgieva says:

“This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts.

Sarah-Jayne Clifton, director of Jubilee Debt Campaign, says it’s a “very welcome move”, but more is needed.

This debt cancellation helps keep money in countries so it can be used for urgent health spending and social protection. Crucially, the payments are being cancelled rather than rolled into the future.

“However, the scale of the economic crisis faced by developing countries requires the IMF to go much further. The IMF is sitting on $27 billion of reserves and over $135 billion of gold. It can afford to cancel more debt, and now is the time to do it. We need the cancellation of payments to be extended to a much bigger group of developing countries and be for the next full year. Beyond the IMF, debt cancellation needs to cover payments to all creditors, including the private sector, alongside the commencement of a process to work out how to bring debts down to a sustainable level once the crisis is over.”

Wizz Air to cut 1,000 jobs; Heathrow traffic slumps

Just in: Budget airline Wizz Air says it is cutting 1,000 jobs, due to the impact of Covid-19.

Nearly one in five staff are being made redundant, and others are being furloughed, following restrictions on travel imposed by governments.

Wizz Air says:

Despite its best efforts, the Company is taking the difficult step to make 1,000 positions redundant, representing a 19% workforce reduction. Additional employee furlough measures have also been and will be taken in the short term as necessitated by the travel restrictions due the COVID-19 pandemic.

The company’s chief executive, the Board of Directors and all senior Officers are taking a 22% pay cut, while salaries of pilots, cabin crew and office staff will be reduced by 14% on average.

The news comes as Heathrow Airport predicts air passenger traffic will fall 90% in April, following a 52% decline in March. Much of this demand is limited to airlines focusing on repatriating citizens stuck abroad during the coronavirus travel ban.

The total number of flights landing and taking off at Heathrow – covering both passenger planes and cargo – fell 35% to 25,798. The airport also warned that the decline in travel would have “lasting and significant” effects on the industry (my colleague Kalyeena Makortoff reports):

Updated

Next announces 'limited' reopening of online shopping

Next shares are also rallying, up 2.2% after it announced plans to reopen its online shopping.

The retail chain suspended web shopping and distribution last month, as the UK lockdown began. But it now plans to reopen from today - insisting that it has heeded staff concerns about contracting the covonovirus.

Next tells the City:

On Thursday 26 March NEXT announced it had temporarily closed its Online business along with its Warehousing and Distribution Operations, having listened very carefully to colleagues.

NEXT has since implemented very extensive additional safety measures and having consulted with colleagues and our recognised union, USDAW, it will re-open Online in a very limited way from today, Tuesday 14 April 2020. Initially only categories that our customers most need will be offered, such as Childrenswear and selected small Home items. Other product ranges may be added at a later date.

Operations will start with support from colleagues who are willing and able to safely return to work. The idea is to begin selling in low volumes, so that we only need a small number of colleagues in each warehouse at any one time

AstraZeneca shares jump on Covid-19 trial plan

Shares in pharmaceuticals giant AstraZeneca have surged 6% after it started testing whether its Calquence drug can help treat severely ill Covid-19 patients.

Calquence is a blood cancer treatment - it inhibits an enzyme called Bruton’s tyrosine kinase (BTK) which helps some leukemic cells to survive and proliferate (details here).

AZ is now testing whether Calquence could help treat the exaggerated immune response associated with COVID-19 infection in severely ill patients.

It says there is strong scientific evidence that BTK plays a role in the exaggerated immune response suffered by some severely ill patients (this is the ‘cytokine storm’ which can hit in the second week of infection as the patient’s immune system goes into overdrive)

Yesterday, Forbes reported that early results were “promising”.

José Baselga, AZ’s executive vice-president, Oncology R&D, says the company is moving at record pace to test the drug:

“With this trial we are responding to the novel insights of the scientific community and hope to demonstrate that adding Calquence to best supportive care reduces the need to place patients on ventilators and improves their chances of survival. This is the fastest launch of any clinical trial in the history of AstraZeneca.”

Here’s the full statement: AstraZeneca initiates CALAVI clinical trial with Calquence against COVID-19

European markets have opened higher too, with the Stoxx 600 gaining 1% - and Germany jumping 1.6%.

But in London the rally is a little more muted, with the FTSE 100 gaining 0.5% or 30 points.

Asia-Pacific stock markets have hit a one-month high, helped by the better-than-expected trade data from China.

The major indices have all gained ground, lifting MSCI’s benchmark Asian index to a four-week high - and 20% above its lowest point in March.

Reuters explains:

Analysts said some of the tail risks that had threatened a much deeper and prolonged downturn were starting to dissipate thanks to a slowdown in new coronavirus cases in major economies and a raft of monetary and fiscal stimulus globally.

Market sentiment was boosted by data showing China’s exports in March fell only 6.6% from the year-ago period, smaller than the expected 14% plunge. Imports eased a modest 0.9% compared with expectations for a 9.5% drop.

“Looking ahead, production constraints should no longer be an issue as economic life in China returns,” Oxford Economics said in a note, but added that exports were expected to fall more substantially due to weak global demand.

Chinese trade data beats forecasts

New trade data from China offers hope that its economy may be recovering from the coronavirus shock.
Chinese exports fell by 6.6% year-on-year in March in US dollar terms, according to the General Administration of Customs, while imports shrank 0.9%. That’s a marked improvement on January and February, when imports shrank 4% and exports contracted by over 17%.

The trade data is even better when valued in Chinese yuan -- this showed a 3.5% drop in exports and and a 2.4% rise in imports last month.

This is better than economists had expected.

Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, writes:

Asian equities kicked off the week on a mostly positive note on the back of encouraging trade data in China. Chinese exports fell 6.6% in March versus a 14% slump expected by analysts and a 17.2% decline recorded a month earlier. Imports retreated 0.9% y-o-y during the same month versus -9.5% penciled in and -4.0% printed a month earlier.

The Chinese trade surplus rose to $19 billion in March, up from $ -7.09 billion printed in February. Due Friday, the Chinese GDP should however confirm a 6% drop in the first quarter. But for now, the market mood seems to hold.

Introduction: Market rally continues despite recession worries

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

After a refreshing break for Easter, stock markets are resuming their recovery - despite plenty of evidence that the global economy is being dragged into a deep recession by Covid-19.

Asia-Pacific indices have rallied overnight, with Japan’s Nikkei jumping 2.% and China’s CSI 300 up 1.2%.

And after its best week in more than a decade, Britain’s FTSE 100 is being called up another 90 points. That would lift the blue-chip index back over 5,900 points for the first time in a month (since the stomach-churning plunge of 12 March).

The flood of stimulus packages and emergency liquidity moves from governments and central bankers are cheering investors -- despite a steadily rising death toll in the UK and US.

As Kyle Rodda of IG puts it:

For markets, it’s a matter of financial conditions over fundamentals at the moment. The Fed’s moves last week to open up its credit lines to a broader range of borrowers, and deepen the amount of credit it extends, has eased credit risk in the market.

There’s also some relief that Opec finally agreed to cut production over the weekend - although the deal hasn’t lifted crude prices much.

The markets will be reminded today that the world economy is in a terrible mess. The International Monetary Fund kicks off its Spring Meeting - virtually - with some dire new growth forecasts. It latest World Economic Outlook report is expected to show the global economy contracting sharply as lockdown measures hit activity.

IMF Kristalina Georgieva set the scene last week, saying the world faces “a crisis like no other”.

Morgan Stanley is also preparing for the long haul, predicting that the US economy won’t return to pre-Covid 19 levels until the last quarter of 2021.

Analyst Matthew Harrison wrote:

Recovering from this acute period in the outbreak is just the beginning and not the end. We believe the path to re-opening the economy is going to be long. It will require turning on and off various forms of social distancing and will only come to an end when vaccines are available, in the spring of 2021 at the earliest.

The new earnings season kicks off today, with Wall Street banks JPMorgan Chase and Wells Fargo and consumer goods giant Johnson & Johnson reporting results and giving forecasts. That will show whether corporate bosses are also bracing for a long haul, or hopeful that growth will recover soon.

The agenda

  • 1.30pm BST: IMF publishes its World Economic Outlook
  • 3.30pm BST: IMF publishes its Global Financial Stability Report
 

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