Good morning, Bull Sheeters. Oil prices have recovered. Stocks though are mixed.

Let’s take a look at what’s moving markets.

Markets update

Asia

• Asia is mostly in the green, led higher by Japan’s Nikkei. A rally on Hong Kong’s Hang Seng lost steam in afternoon trade.
• We’re getting fresh reads on the economic impact of coronavirus: Japan revealed manufacturing activity fell by the most since 2009. And Singapore is bracing for a big hit to GDP this year.
• Oil-reliant Saudi Arabia, meanwhile, plans to slash spending and borrow its way out of the crisis, suggesting it could raise as much as 220 billion riyals ($58 billion) in debt to plug the supertanker sized hole in its national budget.

Europe

• European bourses are mixed. Milan, Paris and Madrid are clinging to gains while Frankfurt and London falter. The benchmark STOXX Europe 600 Index was up nearly a half-percent at the open, before slumping.
• There’s another make-or-break EU summit scheduled today. Member states are still far apart on how to finance the recovery. The Italians want coronabonds, per favore. And the Germans? Nein!
• While they dither, the ECB unveiled a plan aimed at protecting the bloc’s hardest hit economies. It reads as if they’ve lifted the text straight from the Fed’s rescue plan. It involves accepting junk debt as collateral for loans.
• We knew Q1 car sales would be bad, but this bad? German auto giant Daimler is looking at a near 70% plunge in quarterly sales, forcing it to scrap its full-year forecast. That’s a lot of Mercedes sitting idle in showrooms.

U.S.

• The Dow, S&P 500 and Nasdaq futures point to a flat open after yesterday’s impressive gains.
• The markets took off in afternoon trade yesterday as Congress voted to send another giant stimulus package to the president’s desk.
• It’s Thursday, so all eyes will be on the jobless claims numbers, set to be revealed before the market open. Economists forecast another 4 million will have applied for unemployment benefits in the past week, taking the tally to over 25 million in the past month.

Elsewhere

• Gold is up, slightly.
• As is the dollar.
• Crude continues to bubble up, extending yesterday’s rally. WTI futures surpassed $15/barrel—cheap, but oil traders will take it. Brent, the global benchmark, is steady in the low twenties.

Trillion dollar question

Each Thursday throughout this crisis, economists examine the latest jobless claims numbers and then take a hard look at their GDP projections. Pandemic economics you might call it.

GDP growth and unemployment rates are closely tied. But how closely tied is open to some debate. Many economists work off an old model that adapts Okun’s law, named after the American economist Arthur Okun. I wrote about this in the latest issue of Fortune. I’m going to share a small part of that analysis here this morning:

Okun’s law goes something like this: for every 1% rise in the unemployment rate, you get a 2% fall in GDP. That might be too extreme a calculus these days as the CARES Act, for one, is meant to blunt the economic destruction of mass unemployment posed by the coronavirus in the short term.

And so Goldman Sachs has developed a modified Okun—the “half-Okun,” if you will—that suggests a 1:1 correlation between rising unemployment and falling GDP. 

But even the half-Okun paints a frightening picture. With consensus GDP expectations suggesting a drop of more than 30%, that would portend Depression-era jobless numbers.

Drilling down on GDP now…Goldman forecast late last month a 34% drop in Q2 GDP (it wasn’t the only one putting a negative-30 handle on Q2), led by stunning drops in consumer spending and manufacturing, particularly in April. You can see where much of the pain will play out in today’s chart.

Since this initial calculation, Congress has passed more stimulus measures—four in total. So, the “positive effects from fiscal response” on the right side of the chart could be more pronounced, blunting the negative effects on spending on the left.

But that will be of small comfort to the millions who’ve filed for unemployment benefits in recent weeks.

Postscript

Is there an award for “lockdown heroes?” If so, I’d happily nominate 13-year-old Vittoria Oliveri and Carola Pessina (11) from Finale Ligure, in the north of Italy. Their tennis club posted a video of them playing rooftop tennis.

They’re absolutely crushing it!

The ATP Tour was so impressed they posted it to their Twitter feed. You can check out the action here.

I’ve been sneaking a peek to watch and rewatch their tremendous volley. Don’t mess with these two!

***

Have a nice day, everyone. Stay safe and sane. I’ll see you here tomorrow.

Correction and update, April 23, 2020: This post has been updated to correct the spelling of Okun’s Law.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

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