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Markets drop as investors fear long-term economic harm from Covid-19 – business live

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

Worries over the human and economic cost of Covid-19 are continuing to dog the markets today.

US Federal Reserve chair Jerome Powell gave investors a jolt yesterday, when he warned the US risks a ‘prolonged recession’, and an “extended period” of weak economic growth.

Powell’s prognosis is a blow to any lingering hopes of a V-shaped recovery — the road back from this pandemic is going to be rather bumpier.

The Fed chair also warned that governments may need to spend even more to protect their economies – on top of the huge stimulus packages already laid out.

Mark Haefele, CIO at UBS Global Wealth Management, fears this call may not be heeded.

Powell called for further fiscal stimulus to help offset the economic fallout from the pandemic, but ruled out pushing US interest rates into negative territory. Given ongoing partisan tensions in Washington, the additional fiscal stimulus Powell called for seems unlikely to immediately materialize.”

His warning came hours after we learned Britain had suffered its biggest monthly decline in GDP on record, with UK GDP shrinking by almost 6% in March.

Health experts are also expressing caution against assuming that life can return to normal soon.

Overnight, the World Health Organisation warned that coronavirus “may never go away”. Their emergencies chief, Michael Ryan, said:

“It is important to put this on the table: this virus may become just another endemic virus in our communities, and this virus may never go away.

I think there are no promises in this and there are no dates. This disease may settle into a long problem, or it may not be.”

Stocks in the Asia-Pacific region have fallen back, with Japan’s Nikkei 225 and Australia’s S&P/ASX 200 both down 1.7%, after Wall Street dropped over 2%.

European market have opened lower too, with the FTSE 100 shedding another 82 points to 5821.

The global risk sell-off is picking up momentum on worries that the post-coronavirus economic recovery may be bumpy due to renewed contagion waves, explains Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank:

The UN warned that the coronavirus crisis could shed four years of growth and push 130 million people into extreme poverty. If the business reopening plans fail worldwide, these numbers could shoot up and paint an uglier economic picture for the decade to come.

The latest weekly US jobless report will another dollop of paint to the canvas – economists predict that another 2.5m people filed new unemployment claims last week.

That would lift the total since the crisis began to around 35 million people. Unimaginable a few months ago.

The agenda

  • 9am BST: European Central Bank publishes its Economic Bulletin
  • 1.30pm BST: US weekly jobless figures


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