E3: Markets poised for Opec decision as US jobless data looms - business live
Rolling coverage of the latest economic and financial news as investors wait for a deal between oil producers, and prepare for another 5 million US jobless claims
Meanwhile, former Greek finance minister Yanis Varoufakis has contrasted the UK’s direct financing arrangement with the EU’s failure (so far) to reach a deal on a coordinated coronavirus rescue package.
The Bank of England just announced it will finance the gvt directly. Meanwhile in the eurozone the tragi-comedy of errors, also known as the Eurogroup, will reconvene tonight to proclaim that the crisis is SO urgent that it will do NOTHING of macroeconomic significance.
There is understandably some surprise over the extension of the government’s overdraft, given that Bank of England governor Andrew Bailey batted away suggestions that the facility would be used in light of the outbreak.
There was also Bailey’s interestingly times op-ed in the FT at the start of the week, which quashed speculation as to whether the Bank would use monetary financing to directly fund the UK government.
Bailey on a call with journalists on the 18th March: the ways and means facility is an historical relic.
Bailey in an FT op-ed on 6th April: we won’t use monetary financing.
Bank today: ok, just a bit of monetary financing via the ways and means facility. But it’ll be temporary.
How significant is it that BoE will be able to lend money directly to Govt? On one hand it’s not unprecedented: happened in 2008 & it’s only for technical cash flow reasons. On other hand, it further muddies the waters of whether money is being printed to keep the govt solvent
The distinction between monetary (eg BoE) & fiscal (eg gilt auctions) financing of govt already a grey area. Esp when BoE is buying £200bn gilts. BoE insists it decides that independently. That’s a fig leaf of sorts. Important. But a fig leaf. And the leaf keeps getting smaller.
You can read the full story on the government’s emergency borrowing facility here:
Related: Bank of England to finance UK government Covid-19 crisis spending
The Treasury has announced it is to extend its overdraft facility at the Bank of England in a fresh sign of the mounting financial pressure on the government caused by the Covid-19 enforced lockdown of the economy.
Amid growing speculation that the quarantining will be extended next week, the Treasury said it needed extra firepower to support its cashflow and to ensure financial markets ran smoothly.
As a temporary measure, this will provide a short-term source of additional liquidity to the government if needed to smooth its cashflows and support the orderly functioning of markets, through the period of disruption from Covid-19.
Any use of the W&M facility will be temporary and short term. As well as temporarily smoothing government cashflows, the W&M facility supports market function by minimising the immediate impact of raising additional funding in gilt and sterling money markets.
And European markets, which closed in the red last night, have taken their cues from Wall Street after both the Dow and S&P closed +3.4% higher.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors have more than enough on their plate on the last day before the Easter long weekend.
The sharp rise in unemployment levels across the world is a clear and present concern for some in the markets, who take the not unreasonable view that markets are underestimating the economic damage that is about to be unleashed on the US and the global economy.
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