Equities, which had been treading water in recent sessions, are back in the red today with some European indices posting sizeable losses of 4-5%.
As has often been the case in recent months this correction in global risk appetite has been accompanied by a Dollar rally. The GBP/USD cross, which had inched past 1.26, is back down to a 1.25 handle. But it’s the Kiwi Dollar which stands out, with USD/NZD down 1.75% from 24 hours ago and back below 0.60.
A fall in crude oil prices has seemingly contributed to this latest correction in financial markets as have macro data releases starting to put into context the magnitude of the contraction in global output and demand, including in the US. The Dollar-value of retail US retail sales fell 8.4% mom in March and while this was broadly in line with expectations it was still the largest monthly contraction on record (i.e. since 1992). US
industrial output shrank 5.4% mom in March, versus -4.0% mom expected. Canada, one of the few countries in the world to have released GDP data for March, posted a 9.0% mom collapse – again the largest ever recorded and as result GDP fell 2.5% qoq in Q1 (based on admittedly preliminary data).
And worryingly, although perhaps not unsurprisingly, the picture for April is looking even worse. The forward-looking New York Empire State manufacturing index tanked to -78.20 in April from -21.5 in March, pointing to the US industrial sector having effectively shut down (the worst monthly print during the 2008-2009 financial crisis was “only” -38.2).
