The Bank of England held off further stimulus measures but said it was ready to take fresh action to counter the coronavirus hammering which could cause the country’s biggest economic slump in over 300 years. The BoE kept Bank Rate at its all-time low of 0.1% and left its target for bond-buying, most of it Gilts, at 645 billion pounds. In what it called an “illustrative scenario”, the BoE said it saw a plunge of 14% in Britain’s economy in 2020 followed by 15% bounce-back in 2021. Britain’s government has already rushed out spending and tax measures worth about 100 billion pounds to try to counter the effect of its coronavirus lockdown. The BoE said it expected a 25% plunge in British gross domestic product in the April-June period with the unemployment rate more than doubling to 9%. Sterling rose after the central bank’s announcement, initially gaining half a cent against the U.S. dollar before falling back. FTSE 100 climbed 0.4% also supported by China's exports rise in April, the first of the year with factories racing to make up for lost sales due to the coronavirus shock.
Total Covid-19 cases and fatalities rose again in Germany and Italy as the countries prepared to relax measures while Spain extended the lockdown for two more weeks. The U.K. has drawn up a three-stage plan to ease its lockdown, with phase one expected to start on Monday, despite the country overtaking Italy suffering the highest number of fatalities in Europe. The US, Russia, Canada, India and Brazil also saw their figures rise. India reported a services PMI of just 5.1 after embarking on the world's biggest coronavirus lockdown, the lowest record from anywhere in the world. The index, usually showing a number of around 50, higher for expansion and lower for contraction, also saw Spain post a single-digit services PMI of 7.1 on the same day, while Italy's came in at 10.8. The European Commission forecasts economic contractions of more than 9% in Italy, Spain and Greece this year.
The safe-haven yen flirted with a seven-week high against the dollar as investors limited their exposure to riskier assets amid dire global economic data, rising trade tensions and concerns over the euro zone. The yen rose to seven-week high of 105.985 per dollar and last stood at 106.40. Against the euro, it traded at 114.81 yen per euro, having hit a 3.5-year high of 114.43 overnight. The British pound eased, touching its lowest level in almost two weeks overnight, but has since recovered some trading at $1.2362. Against the euro, sterling has been more volatile now quoting 87.26 pence.
Asian shares pared early losses after Chinese exports proved far stronger than anticipated, while U.S. bond investors were still daunted by the staggering amount of new debt set to be sold in the coming weeks. U.S. Secretary of State Mike Pompeo renewed his aggressive criticism of China over its early handling of the virus outbreak. The S&P 500 fell for the first time in three days, though technology and consumer discretionary shares kept the Nasdaq Composite in the green. Contracts in Australia and Hong Kong declined.