Friday, March 27, 2020
1. Economic activity plunges to decade-low
- The U.S. economy contracted at the fastest rate in March since the depths of the financial meltdown a decade ago.
- IHS Markit’s purchasing managers index saw manufacturing activity drop to a reading of 47.6, while the services index plunged to 39.1. Anything below 50 is a signal of contraction. The composite of those two fell to 40.5 in March, down from 49.6 in February.
- In the eurozone, the comparable index fell to 31.4 in March from 51.6 in February.
- “We are confident that the speed of the collapse now is faster than after the crash of September 2008, at which point the economy had already been in recession for a year; this is an overnight stop,” Ian Shepherdson, chief economist at Pantheon Macroeconomics said in a note to clients. “We expect a further decline in April, which ought then to be the floor, or close to it.”
2. Oil majors begin cutting
- Much of the financial stress in the U.S. shale sector has been concentrated in small and medium-sized drillers. But even the oil majors are drilling unprofitable wells with oil in the $20s.
- This week, they began to reverse course, after ramping up drilling in the Permian over the last few years. Chevron (NYSE: CVX) announced that it would cut its spending by $4 billion, and spending in the Permian by half.
- ExxonMobil (NYSE: XOM) has a dividend yield at about…
