Covid-19 lockdown causes record fall in eurozone business activity – business live

Newsflash: China is slashing the amount of cash that small and medium sized banks have to hold as reserves, to help pump more liquidity into the economy.

The People’s Bank of China is expected to cut the reserve requirement ratio by a total of 100 basis points, split between April and May.

It is expected to release around 400 billion yuan (£46bn) into the Chinese market, according to reports.

The move is part of attempts to support China’s economy, as it starts to emerge from the coronavirus crisis.

While all of the decline in business activity across the UK and eurozone aren’t necessarily be surprising given the coronavirus lockdown, the falls are proving even worse than initial estimates and are causing a re-think about how severe the contraction will actually be.

The beleaguered airline industry may have at least one rescue package on the horizon.

Air France-KLM is said to be in talks with banks about securing a multibillion euro loan package backed by both the French and Dutch governments.

Air France may get as much as €4bn euros in French-guaranteed loans while KLM could get close to €2bn backed by The Hague, Reuters reported, citing sources.

Taken alone, the UK services sector suffered its steepest decline for more than two decades.

The reading came in at 34.5 for March, below flash readings of 35.7 and down from 53.2 in February.

The report from IHS Markit/CIPs explains:

The slump in activity was almost exclusively linked by survey respondents to business shutdowns and cancelled orders in response to the coronavirus disease 2019 (COVID-19) pandemic.

That exceeded the previous record low logged during the height of the global financial crisis. It was also the fastest downturn for the services sector since the survey started in July 1996.

That is despite an uptick in technology services, where there were pockets of expansion (which is pretty much to be expected following the surge in remote home working).

You can read the full survey here.

There’s been no relief for the UK either.

UK composite PMI came in at 36.0 in March, which is even lower than flash estimates of 37.1.

That is a sharp fall from 53.0 in February and marks the lowest level since the survey began in January 1998.

The IHS Markit/CIPS survey notes that there has been a slightly faster reduction in private sector output than seen at the at the height of the financial crisis, when the index fell to 38.1 in November 2008.

Commenting on the shocking drop in Eurozone business activity, IHS Markit’s chief business economist Chris Williamson says:

The data indicate that the eurozone economy is already contracting at an annualised rate approaching 10%, with worse inevitably to come in the near future.

The service sector is currently seeing an especially severe impact from the COVID-19 outbreak, with travel, tourism, restaurants and other leisure activities all hit hard by virus containment measures.

No countries are escaping the severe downturn in business activity, but the especially steep decline in of Italy’s service sector PMI to just 17.4 likely gives a taste of things to come for other countries as closures and lockdowns become more prevalent and more strictly enforced in coming months.

A combined reading of the Eurozone’s manufacturing and services sectors shows the biggest ever single monthly fall in March.

The composite PMI reading was the lowest ever recorded as part of the survey, at 29.7.

That was not only down from February’s 51.6, it was also weaker than the earlier flash estimate of 31.4.

More PMI data makes for grim reading of Europe’s economic outlook:

Correction: In my intro, I’ve corrected the Caixin services sector data which came out this morning. The reading was 43.0, signalling a contraction, but at a slower rate than February when the reading was 26.5.

Italy, which is has suffered most from the Covid-19 outbreak in Europe, experienced a sharp contraction across its services industry last month.

Italy’s services PMI came in at 17.4 compared to a Reuters poll forecasting a reading of 22.0. That’s a significant fall from February when it was still in expansion territory at 52.1.

In a broader view of industry performance, Italy’s composite PMI plunged from 50.7 in February to 20.2 in March.

With minutes to go until our next PMI reading (next up: Italy), time to check in on oil prices.

Despite slipping overnight, Brent prices are back up over the 30-dollar mark, rising more than 1.7% on the session to $30.52.

You’ll remember yesterday’s whopping 30% jump in prices, following Donald Trump’s tweet, which suggested that both Russia and Saudi Arabia might be ready to cut output by as much as 15m barrels a day.

Those comments were (slightly) dampened after Putin’s spokesman reportedly told journalists that “no one has started talking about any specific or even abstract deals”.

And in the first of a string of PMI data out this morning, Spain’s services sector performed worse than expected in March.

Economists had been expecting a reading of 25.5, according to a Reuters poll. But even that wasn’t pessimistic enough, with the actual figure coming in at 23.0, down from 52.1 a month earlier.

A reminder that 50 is the neutral reading, and any reading below signals a contraction in the sector.

It’s a bit of a mixed bag of companies that are making up the biggest fallers on the FTSE 100 this morning:

European stock markets are open and have followed Asia’s lead into negative territory:

• FTSE 100 down -0.7%
• Germany’s DAX down -0.4%
• France’s CAC 40 down -0.4%
• Spain’s IBEX down -0.2%

And Europe’s STOXX 600 has fallen 0.4%

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

Despite a positive end to trading on Wall Street, new services PMI data out of China has hit sentiment and sent Asian stocks and US futures back into the red.

The Caixin services PMI showed the country that first bore the brunt of the coronavirus outbreak is still struggling to return to normalcy.

The reading of 43 was up from 26.5 a month earlier. It shows a sector still struggling to reach expansion territory, and one which is nowhere near the levels of growth that economists have come to expect from the Asian nation.

Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, explains:

Stocks in Tokyo, Shanghai, Hong Kong and Sydney traded in the red, as all three US majors were pulled lower. The Caixin services PMI confirmed a slower contraction in the Chinese activity, but the number also illustrated that life in China has certainly not gotten to a normal pace just yet, with the manufacturing being an exception to this.

We will be keeping an eye on a swathe of data out of Europe and the US, which is expected to confirm a sharp contraction in economic activity and employment.

Here’s what we’re expecting today:

The agenda:

8:15am BST: Spain services PMI for March

8.45am BST: Italian services PMI for March

8.50am BST: French services PMI for March (final reading)

9.00am BST: Eurozone services and composite PMI for March (final reading)

9.30am BST: UK services and composite PMI for March (final reading)

13.30pm BST: US non-farm payrolls for March