Oil slides to 18-year low as Covid-19 recession fears hit markets – business live

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

Anxiety over the Great Lockdown recession of 2020 is haunting markets, even though stocks have staged quite a recovery in recent weeks.

Oil is under pressure again this morning, after slumping by over 7% last night to two-week lows.

Brent crude has dropped by another 1.5% in early London trading to just $29.18 per barrel, and US crude is heading back towards $20 per barrel. That means they’ve lost more than half their value this year.

Traders remain sceptical that last weekend’s Opec++ agreement to cut 10% of world oil supply will spark live into a market hit hard by the covid- 19 pandemic.

And who can blame them, with the International Monetary Fund predicting the deepest recession since the Great Depression, with painful slumps across the globe.

China’s policymakers have acted overnight, by cutting a key medium-term interest rate to record lows and paving the way for a similar reduction in benchmark loan rates.

But that didn’t stop the CSI 300 index ending the day in the red, down 0.6%.

European stocks are also dipping in early trading, with the Stoxx 600 down 0.3%. Britain’s FTSE 100 has lost 17 points to 5774, on top of Tuesday’s 51 point drop (-0.9%).

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says investors are turning gloomier as the Covid-19 recession strikes.

News on how long and how deep the coronavirus-led recession should continue hitting the global headlines and sour the investor mood. The IMF warned yesterday that the economic recession which will follow the ‘Great Lockdown’ will be the steepest in a century, while the British Office for Budget Responsibility (OBR) said the UK’s economy could contract as much as 35% in the second quarter of this year, the worst since 1956. Leading banks also expect over 30% decline in growth in developed economies in the second quarter and the numbers are perhaps not an exaggeration.

Under these circumstances, and with looming first quarter corporate earnings, recent gains we have seen in equity markets could be the calm before the storm. Investors could close their positions and run to safety in the blink of an eye. This explains why safe haven assets are curiously bid despite solid gains across global equities.

In recent weeks, the markets had been cheered by hopes that the lockdowns could soon ease and people would return to the office, the shop and even the pub. But gradually, more investors are realising that the coronavirus will cause long-term economic damage too.

As Marketwatch puts it:

“Most of the analysts are asking — ‘When will the economies return back to work?’ — which we believe is the wrong question,” said Boris Schlossberg, managing director of BK Asset Management, in a Tuesday note.

“The much more relevant question is — ‘When will aggregate demand recover to pre-virus levels?’ That is a much more difficult dilemma to assess given the massive damage done to consumer balance sheets.”

Also coming up today

The IMF is publishing its Fiscal Monitor later today, looking at the state of government finances – as Covid-19 drives borrowing sharply higher.

We’re also expecting to see a big drop in US retail sales, and a slump in factory output in the New York region.

The agenda

• 1.30pm BST: International Monetary Fund publishes its Fiscal Monitor
• 1.30pm BST: US retail sales for March – expected to tumble by 8%
• 1.30pm BST: Empire survey of New York state manufacturing in April – expected to fall to -32.5 from-21.5
• 3pm BST: Bank of Canada interest rate decision
• 3.30pm BST: US weekly oil inventories