LONDON (Reuters) – Britain’s economy shrank by a quarter in the March-April period as entire sectors were shuttered by the coronavirus lockdown, reaching what looks likely to be the bottom of a “catastrophic” crash before a long and slow recovery.

In a slump dwarfing previous downturns, the economy contracted by 20.4% in April from March, when it shrank by nearly 6%. It was 24.5% smaller than in April 2019.

Both readings were below the unprecedentedly weak forecasts in a Reuters poll of economists. The Office for National Statistics said the economy had shrunk back to its size in 2002.

“This is catastrophic, literally on a scale never seen before in history,” Paul Johnson, director of the Institute for Fiscal Studies think tank, said. “The real issue is what happens next.”

Finance minister Rishi Sunak said: “In line with many other economies around the world, coronavirus is having a severe impact on our economy.”

However, the Organisation for Economic Co-operation and Development says Britain – with its huge services industries which are hit hard by social distancing measures – could suffer the worst downturn among the countries it covers, with an 11.5% contraction this year.

Sunak said the 133 billion pounds ($168 billion) of extra spending and tax cuts he has rushed out meant Britain had “the best chance of recovering quickly as the economy reopens”.

Much of Britain’s retail sector is due to open its doors next week and the government last month urged people who could not do their jobs at home to return to work as lockdown restrictions are gradually lifted.

Bank of England Governor Andrew Bailey – who has warned of the deepest recession in three centuries this year – said on Wednesday he could see some signs of a recovery but long-term economic damage remained likely.

The BoE is expected to announce a fresh increase of at least 100 billion pounds in its bond-buying firepower next week.

Johnson of the IFS told Sky News the hit might be short, if the roughly one third of private sector employees who are temporarily laid off can return to work, consumers go out and spend again and Britain avoids a second COVID-19 wave.

But it was more likely that unemployment jumps as the government’s wage subsidy scheme ends in October, pushing many workers over an income cliff, and Britain limps into 2021 with the risk of a Brexit shock also on the horizon, he said.

Britain formally left the European Union at the end of January but little has yet changed in its relationship with the bloc during a transition period which lasts for the rest of the year. Talks on a comprehensive future relationship deal have hardly progressed since February.

The ONS said output in the dominant services sector fell by 19.0% in April from March while manufacturing was down more than 24% and construction crashed by nearly half.

In the three months to April, the overall economy contracted by 10.4% from the previous three-month period.

TOKYO (Reuters) – Oil prices slid early on Friday, extending heavy overnight losses on a surge in U.S. coronavirus cases this week that has raised the prospect of a second wave of the outbreak slamming demand in the world’s biggest consumer of crude and fuel.

West Texas Intermediate (CLc1) was down $1.32, or nearly 4%, at $35.02 a barrel by 0011 GMT, after slumping more than 8% on Thursday. Brent crude (LCOc1) was down $1.15, or 3%, at $37.40 a barrel, having dropped nearly 8% the previous session.

A rally off April’s lows has come to a shuddering halt this week as the market faced the reality that the coronavirus pandemic may be far from over globally, with cases in the United States alone passing 2 million this week.

The oil benchmarks are heading for their first weekly decline in seven, with Brent dropping about 12%, while U.S. crude is heading for a loss of more than 10%.

“A sustainable rally needs to include improving gasoline demand, reducing inventories, increasing product margins to the point where refiners kickstart runs,” RBC Capital Markets said, noting that “U.S. driving patterns are far from normal.”

While producers have been cutting supply, demand remains constrained by the outbreak, with gasoline stockpiles in the U.S. last week rising more than expected to 258.6 million barrels, according to government data.

U.S. crude inventories rose against forecasts by 5.7 million barrels to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.

In the meantime, states including Texas and Arizona are struggling to cope with a rising number of coronavirus patients filling hospital beds.

In Houston, Lina Hidalgo, the senior official for the county that includes the city that is the heart of the U.S. oil industry, warned “we may be approaching the precipice of a disaster”.

More than 7.43 million people have been infected by the novel coronavirus around the world and more than 400,000 have died, according to a Reuters tally.

TOKYO (Reuters) – The safe-haven Swiss franc and the yen held on to gains on Friday while the U.S. dollar also held firm against riskier currencies after global stock prices tumbled on renewed doubts over the prospects of a quick recovery in the global economy.

Doubts over the economy stemmed in part from the U.S. Federal Reserve’s dire economic assessment as well as fears over new coronavirus infections, though some analysts said a stock market correction was inevitable after a rally.

The Swiss franc rose to 0.94395 per dollar , having hit a three-month high of 0.9376 on Thursday.

The franc has recovered its lost ground against the euro over the past two weeks to trade at 1.0665 to the euro (EURCHF=).

The yen also rose to 106.79 yen per dollar . It hit a one-month high of 106.58 on Thursday, having gained 3.1% from a 2-1/2-month low hit just a week ago.

Following its two-day meeting, the Fed signalled on Wednesday it plans years of extraordinary support for the U.S. economy, which policymakers project will shrink by 6.5% in 2020, with the unemployment rate at 9.3%.

Although that appears to have triggered selling in shares, analysts have said Fed officials have been cautious all along, especially compared to the bullish mood in financial markets until earlier this year.

“It is almost mudslinging to blame the stock falls on the Fed’s dour assessment. Most market players have acknowledged that the stock rally has been driven by excess liquidity and the Fed’s accommodative stance is unlikely to push stocks lower,” said Makoto Noji, chief currency strategist at SMBC Nikko Securities.

“In short, it was a correction from an overbought market, which should not last long. But what we should be careful is that the market’s fall could continue if we have more bad news from China and Europe for instance.”

The tensions between the United States and China have shown limited signs of abating while Europe is facing tough negotiations next week on its recovery fund plan.

Investors were also worried about new coronavirus infections as the world gradually reopened following shutdowns aimed at curbing the spread of the disease.

In the United States, new infections are rising slightly after five weeks of declines, according to a Reuters analysis.

Part of the increase is due to more testing, which hit a record high on June 5 of 545,690 tests in a single day but has since fallen.

The dollar held firmer against risk sensitive currencies.

The euro stood at $1.1299 (EUR=), off Wednesday’s three-month high of $1.14225.

Similarly, the British pound slipped to $1.2582 from Wednesday’s high of $1.2812.

The Australian dollar tumbled to $0.6838 , having fallen 2% in the previous session, the biggest daily fall since the market turmoil of March.

The Mexican peso lost 3.8% and dipped further in Asia to 22.85 to the dollar .

NEW YORK (Reuters) – Asian equities are set to fall sharply on Friday after Wall Street stocks and oil tumbled over growing concerns that a resurgence of coronavirus infections could stunt the pace of reopening economies.

The three major U.S. stock indexes fell more than 5%, posting their worst day since mid-March, when markets were sent into freefall by the abrupt economic lockdowns put in place to contain the pandemic.

“All of a sudden the coronavirus, which has been an also-ran story for some days now, became more important as the virus began picking up in some states, and the market began thinking there may be delays to reopening,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Australian S&P/ASX 200 futures were down 3.04% at 20:59 GMT, while Japan’s Nikkei 225 index closed down 2.82% at 22,472.91​​​​ on Thursday. Hong Kong’s Hang Seng index futures were down 2.06%.

Cases of the disease have jumped in several U.S. states in recent days, raising concern among experts who say authorities have loosened restrictions put in place to contain the spread too early.

Cases in New Mexico, Utah and Arizona rose by 40% for the week ended Sunday, a Reuters tally shows. Florida and Arkansas are other hot spots.

The U.S. Federal Reserve released a gloomy economic outlook at the end of its two-day monetary policy meeting on Wednesday. Chair Jerome Powell warned of a “long road” to recovery.

Economic data appeared to back up the Fed’s projections, with jobless claims still more than double their peak during the Great Recession and continuing claims at an astoundingly high 20.9 million.

On Wall Street, the Dow Jones Industrial Average dropped 6.9%, the S&P 500 lost 5.89%, while the Nasdaq Composite shed 5.27%.

Oil prices tumbled on renewed concerns about demand, as new cases of the coronavirus disease rise globally, and a large buildup of U.S. crude inventories. [O/R]

Benchmark Brent crude futures settled 7.62% lower at $38.55 a barrel in U.S. trading hours, before sliding further in Asia on Friday. U.S. crude oil futures settled at $36.34 a barrel, down $3.26, or 8.23%.

U.S. Treasury and euro zone government bonds rallied after the Fed on Wednesday signaled it plans years of extraordinary support to counter the economic fallout from the pandemic.

Yields on 10-year Treasury notes dropped sharply from last week’s peak of 0.96%. [US/]

The 10-year Treasury note fell 8.6 basis points to yield 0.6625%, while Germany’s 10-year benchmark fell 10 basis points to a nine-day low of -0.43%.

Gold futures settled more than 1% higher and the dollar, yen and Swiss franc all benefited from safe-haven flows.

The yen rose to a one-month high against the dollar, while the Swiss franc climbed to a three-month peak. The dollar also rose 0.4% to 96.556 against a basket of currencies.

The euro fell 0.63% to $1.1297, and the yen slid 0.22% to $106.8500.

U.S. gold futures settled up 1.1% at $1,739.80 an ounce.