The ADP private employment release for April showed that 20 million workers stopped receiving their pay cheques in April. We expect the employment report out this Friday to show that 25 million people will have ceased to be employed, greater than the -22 million consensus figure. With restrictions on mobility being relaxed around the world, economic data is likely to improve over the coming months. As this happens, we think there will be a shift in narrative towards scrutinising the cumulative impact of the COVID-19 pandemic on economies and away from the size of the initial shock. Refresh this chart

Subscribe here to receive Fathom’s Recession Watch newsletter and receive invitations to Fathom’s regular Recession Watch Forums and participate in lively discussions with our team and others in the community. Next forum date: Monday 18 May 2020, 3:00pm BST Headlines European Commission spring report makes the case for a sharp recovery underpinned by demand and a limited rise in unemployment Bank of England also firmly in the V-shaped recovery camp; minutes strike a dovish tone with two MPC members favouring an increase in QE purchases German factory orders drop 16% YoY The US ADP employment report plummets by 20M European

The US risks a more prolonged economic slump if COVID-19 prevalence remains high. The federal government’s guidelines on social distancing expired at the end of April, and many governors have eased restrictions. This should boost economic activity in the short term versus a counterfactual of extended restrictions. However, the number of new US cases remains high, and well above those in Europe. That could end up delaying the time when a stronger recovery can be established. Refresh this chart in your browser | Edit the chart in Datastream __________________________________________________________________________________ Datastream Financial time series database which allows you to identify and

Subscribe here to receive Fathom’s Recession Watch newsletter and receive invitations to Fathom’s regular Recession Watch Forums and participate in lively discussions with our team and others in the community. Next forum date: Monday 18 May 2020, 3:00pm BST Headlines Global daily new cases down 15% from peak April PMIs point to severe contraction across the world Brent crude rallies, up 50% over the past week US government expects to borrow $4.5 trillion in 2020 German court questions legality of ECB QE programme There is more reason to think that the trough in global economic activity is behind us. Last week, we looked at throughput at US airports that troughed in mid-April and is

Early signs of distressed borrowing by the private sector across the major developed markets are now visible in the bank lending data for Q1. It is not clear thus far how much of the uptick in bank lending to the private sector is underwritten by the government, but the synchronised pickup is striking. On this occasion it does not suggest stronger growth in aggregate demand, rather the reverse — a shortfall in income that leads firms and households to borrow more. It is likely that distressed borrowing will increase further from here.   Refresh this chart in your browser |

More unprecedented economic data were released at the end of last week, this time from the Bank of England. M4 deposits, excluding the deposits of financial intermediaries within the OFC sector, rose by a staggering £57 billion in March, a series high, with all three sectors seeing record increases — so the largest gains since 1963 in the case of households and PNFCs, and since 1998 in the case of non-intermediary other financial corporations. M4 is a broad measure of the UK money supply, and includes the sterling deposits of UK residents held at banks and building societies, in addition

Headlines Although President Trump has seen ‘convincing evidence’ that the virus causing COVID-19 came from a laboratory in Wuhan, China, he is ‘not allowed’ to share it with us New Zealand reports no new cases of COVID-19 after entering a period of strict lockdown on 26 March – after much of Europe, but at a much earlier stage in that country’s epidemic cycle South Korea reports that early indications of re-infection with the virus causing COVID-19 were probably a consequence of limitations of the testing process With increasing evidence that the trough in economic activity may be behind us, we

The Fed did not change interest rates yesterday, but struck a dovish tone boosting market returns across the board. Since March, the Fed balance sheet as a share of the S&P 500 market cap has swelled up 10pp to 26% after briefly dipping below 15% prior to the COVID-19 outbreak. Given the unprecedented size and breadth of measures put in place by the Fed, asset purchases will remain an extremely important driver of market sentiment and liquidity. It is also likely that Fed assets will surpass the 30% peak recorded during the GFC. Refresh this chart in your browser |

Subscribe here to receive Fathom’s Recession Watch newsletter and receive invitations to Fathom’s regular Recession Watch Forums and participate in lively discussions with our team and others in the community. Next forum date: Monday 4 May 2020, 3:00pm BST Headlines Global economic activity may have hit its trough in the past couple of weeks But output is likely to remain below pre-COVID 19 levels for an extended period It is unclear how much restrictions can be relaxed while keeping R below 1 Excess mortality data from a range of countries suggest official figures understate the COVID-19 impact on deaths There is increasing evidence that the trough in global economic activity may be behind

While almost all countries are following similar approaches, there appears to be a difference between those who want to flatten and those who want to bend their COVID-19 curves. Countries such as Australia and New Zealand seem to be trying to suppress the virus entirely, with daily new cases below 100 before relaxing restrictions. That is consistent with bending. In contrast, countries in Europe and individual US states appear willing to ease lockdown measures subject to the constraint of the reproduction rate being below 1 and the health system not being overwhelmed, even if that means an ongoing presence of

Singapore was lauded for its initial handling of the coronavirus outbreak. It was one of the first countries outside China to report a sharp increase in cases, but a swift government response, which included contact tracing, quarantine measures and travel restrictions seemed to have halted the spread of the disease. However, the number of confirmed cases has started rising sharply again, highlighting the risks of a premature easing of lockdown restrictions at a time when several European countries are plotting a path out of lockdown. The city state recorded 799 new cases on Monday, bringing the total number of confirmed cases to

Equity prices have fallen on average by around the same amount as expected earnings per share since the start of the year. And earnings-per-share expectations are not on the whole factoring in the risk of a protracted, L-shaped recession. That risk has not disappeared, but the Fed ‘put’ option has arguably reappeared — an implied option to sell equities directly to the Fed should they fall below a certain price, or a promise by the Fed to buy government debt without limit and exploit the impact of portfolio rebalancing to the same end. Markets expect that the Fed will print