LBLV Manufacturing PMI in Europe marks its biggest drop 2020/04/05

LBLV provides an overview of economic news.


The main economic news for Monday, May 4:

1. U.S. set to remove supply chains from China
The Trump administration is working on an initiative to remove global industrial supply chains from China as it set to impose new tariffs to punish Beijing for its handling of the coronavirus outbreak, according to officials familiar with U.S. planning. “We’ve been working on [reducing the reliance of our supply chains in China] over the last few years but we are now turbo-charging that initiative,” said Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State Department. The U.S. Commerce Department, State and other agencies are looking for ways to push companies to move both sourcing and manufacturing out of China. Tax incentives and potential re-shoring subsidies are among measures being considered to spur changes.

2. Shares and oil decline amid U.S.-China dispute
Stock markets fell and oil dropped on Monday as a U.S.-China spat over the origin of the coronavirus put the brakes on optimism about an economic recovery as countries around the world ease restrictions. On Sunday, Secretary of State Mike Pompeo raised concerns on the markets, saying there was “a significant amount of evidence” that the virus emerged from a laboratory in the central Chinese city of Wuhan. However, he did not provide any evidence. U.S. stock futures last traded 0.7% lower. In Europe, FTSE futures fell 0.6% and EuroSTOXX 50 futures declined 3%. While China and Japan were on holiday, MSCI broadest index of Asia-Pacific shares outside Japan fell 2.5%, as Hong Kong’s Hang Seng returned from a two-session holiday with its biggest drop in six weeks. Meantime, U.S. West Texas Intermediate (WTI) crude futures fell 5.1% to $18.77 per barrel, while Brent crude futures were down 0.4% at $26.34 a barrel amid worries a global oil glut may persist due to slumping demand.

3. Manufacturing PMI in Europe marks its biggest drop
Manufacturing activity in the euro zone slumped last month as government-imposed lockdowns to stop the spread of the new coronavirus forced factories to close and consumers to stay indoors, a survey showed on Monday. IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) for the euro zone dropped to 33.4 from March’s 44.5, marking its lowest since the survey began in mid-1997. This figure was lower than earlier flash reading of 33.6 and significantly below the 50 mark separating growth from contraction. With shops closed and consumers concerned about their health and employment prospects, demand tumbled last month to the lowest in the survey’s history, with the new orders PMI came in at 18.8 – almost half March’s already weak reading of 37.5.

4. Telefonica plans to merge with Virgin Media
Spain’s telecom firm Telefonica SA confirmed on Monday it has opened talks with billionaire John Malone’s Liberty Global Plc over a possible merger of the two companies’ businesses in Britain. The talks to merge Telefonica’s British mobile operator O2 and Liberty’s Virgin Media network company have just started. A deal between Telefonica and Liberty would end uncertainty around the fate of one Britain’s biggest mobile operators after it was repeatedly touted as a possible candidate for a sale or a stock listing in recent years. It would also offer Telefonica a way to partially cash out from O2 while retaining a presence in Britain, which the company sees as one of its core markets along with Spain, Germany and Brazil.