Economists were prepared for a shock but were nevertheless gobsmacked last night by a weekly increase in US new jobless claims of 3 million, greater than any other number since 1967 when the series began, and double expectations.
This was pretty much the first data release that began to tell the true tale. Next week’s scheduled releases include February data that are largely irrelevant, but also a slew of more up-to-date readings that will begin to reflect the virus impact.
These include March manufacturing PMIs from across the globe, followed by services PMIs, and culminating with US unemployment on Friday.
In the meantime, massive global monetary and fiscal stimulus has managed to turn oversold stock markets around from panic levels and triggered a textbook snap-back rally. Next will come confirmation of recession – not via GDP readings as is the technical definition but through everything from monthly unemployment data to loan impairments.
If the correction continues to play to the script, this relief rally may yet run further but will eventually give way to renewed selling on reality. The question then is whether another dip will bottom above the prior low, or below it.
And that all depends on “flattening the curve”.
