US Stocks tumbled Wednesday | Economic Data reveals hit from lockdown worse than expected | Apple to release new iphone for $399
(16/04/2020)
Corporate earnings and economic data changed the
optimistic tone of recent positive trading sessions as US Stocks tumbled on
Wednesday, a feat that matched European stocks. As stocks were sold off
investors rushed into US treasuries with the yield for the 10 year note being
pushed down to 0.63%, 0.12% lower.
Economic data revealed on Wednesday suggested the hit from the lockdown is
worse than feared. Both US industrial output and retail sales recorded
historically bad levels. Industrial output fell by its most in 70 years, the
biggest drop since the end of the World War II. In retail, sales fell in March
to its lowest since data began in 1992, recording a drop of 8.7%. While these
figures are already setting historical records, April could see these figures
surpassed as lockdown wasn’t in place for the entirety of March and is looking
likely to continue for the full month of April.
Apple are set to release a new iphone for $399, a far fall from the previously
new iphones released with price ranges upwards of $1000. This pandemic-era
price highlights the potential need for businesses to reduce cost in order to
attract business. Deflation in the cost of consumer goods could be a benefit to
consumer pockets.
The Eurozone saw the biggest increase in cash in circulation since the 2008
crisis people in Europe have responded to the pandemic by hoarding cash. The
value of banknotes distributed to individuals and businesses rose in the four
weeks prior to 10th April by $41.2bn. According to a previous
ECB study, approximately a third of all cash in circulation is kept for a “rainy
day” by households. The large increase in cash withdrawals is comparable to the
uptick in the weeks leading to Christmas, which shows the level of recent
spending as people moved to stock up on household items.
Of the $349bn in small business loans that the US government has provided,
already over 90% has been used up as businesses scramble to get funds for
payroll expenses to keep themselves afloat. Approximately 1,525,000 companies
have received funding totaling more than $324bn. The average rate of approvals
ran at $2.8bn an hour between 8.30am and 9pm on Wednesday, a rate that could
see the remaining funds run out in the next nine hours, highlighting the worry
that the programme will be exhausted before the Democrats and Republicans make
a deal to replenish it. The ECB’s decision to buy an extra $900bn in bonds this
year has so far kept yields under control, however government debt is now
catapulting to 100% of GDP. Central Bankers have warned that debt burdens could
stifle growth, particularly in the weaker economies. Calls for a joint action
such as a Eurobond are still ongoing to prevent another rerun of the 2010-12
Eurozone debt crisis.
