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The Federal Reserve boosted its monetary response to the pandemic, projecting no interest rate increases until at least the end of 2023 and indicating it would not tighten policy until inflation had been higher than 2 per cent “for some time”.

“The new guidance from the Federal Open Market Committee implements a shift towards a more dovish long-term stance that was endorsed by the Fed last month, and is likely to translate into rock-bottom interest rates for years to come.”

[The rate was 1.5 – 1.75% at the end of 2019, so hardly dizzying even then but, as with their newly tolerant position on inflation, this is an important announcement because it demonstrates that the Fed is prepared to throw out the rule-book to keep things ticking over].

https://www.ft.com/content/827302da-4257-4bbc-a0fa-9bc98f65d661


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The World Trade Organization undercut the main justification for President Donald Trump’s trade war against China, saying that American tariffs on Chinese goods violate international rules.

Still, the ruling failed to dissuade Washington of its ‘America First’ trade policy and will do little to alter the current trade environment.”

Video:

https://www.bloomberg.com/news/videos/2020-09-16/china-s-paper-wto-win-won-t-dissuade-u-s-from-trade-war-video


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Investment flows between China and the US fell to their lowest level in almost a decade in the first half of the year… Capital flows between the two countries amounted to $10.9bn in the first six months of 2020, lower than any period since 2011…

“US-China relations have fallen to their lowest point in decades following the coronavirus pandemic, which exacerbated frictions over trade and ushered in fears of a “cold war” chill between the world’s two largest economies.”

https://www.ft.com/content/458af94f-d152-47bf-8909-737f3ccce700


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Europe’s Economic Revival Is Imperiled, Raising the Specter of a Grinding Downturn:

As the coronavirus regains force, economists fear that Europe’s tentative recovery is at risk from traditional political concerns [and a resurgence of Covid-19]…

““It’s hard to imagine a recovery that’s going to be strong and sustained given the current situation,” said Ángel Talavera, lead eurozone economist at Oxford Economics in London. “There’s not a lot of engines of growth.””

https://www.nytimes.com/2020/09/16/business/europe-economy.html


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“One has to pity Christine Lagarde, the president of the European Central Bank (ECB). In its effort to revitalize the Eurozone economy and avoid deflation, the last thing that the ECB needs is a strong Euro.

“Yet the Euro has been strengthening, and there is little that the ECB can do to weaken the currency without creating another set of serious problems for itself.”

https://thebulwark.com/the-european-central-bank-is-running-out-of-options/


Spain’s recovery from record recession will be slower than expected after a surge in coronavirus infections weighed on activity in the third quarter…”

https://www.reuters.com/article/spain-economy-outlook-cenbank/update-2-bank-of-spain-grows-more-pessimistic-about-recovery-from-record-slump-idUSL8N2GD2ET


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In pictures, The eerie abandoned sites of modern Greece:

The Covid pandemic signalled the death knell for countless Greek businesses, which were already struggling after ten years of economic crisis.”

https://www.telegraph.co.uk/travel/destinations/europe/greece/articles/greece-abandoned-ruins-recession/


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The head of macro strategies at Record Currency Management, which oversees $63bn in assets, is reportedly shorting government bonds of Spain, France and Italy—as well as the euro itself—on the expectation that Turkey’s market ructions will soon be felt on the balance sheets of European banks

“The shares of Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), which owns an almost 50% stake in Turkiye Garanti Bankasi, Turkey’s second-largest private bank, are down more than 50% in the year so far.”

https://www.intellinews.com/veteran-trader-shorts-eurozone-debt-on-expectation-european-banks-will-soon-be-hit-by-turkey-s-market-ructions-192048/


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Moody’s Investors Service said it downgraded the ratings of 13 Turkish banks after recently revising Turkey’s sovereign bond rating to B2 from B1, with the negative outlook maintained.

The outlooks on the long-term deposit and debt ratings of all the Turkish banks rated by Moody’s remain negative, in line with the negative outlook on the sovereign rating. The negative outlooks reflect the downside risks associated with a balance of payments crisis, which could lead to capital controls and restrictions on foreign currency outflows, the ratings agency said in a statement on Tuesday.”

https://seenews.com/news/moodys-downgrades-13-turkish-banks-maintains-negative-outlook-713807


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South African banks have made their rainy-day provisions. Now, they must wait and see whether the funds set aside will be enough to manage a potential torrent of bad debt…

“The country’s so-called “Big Four” experienced a profit slump deeper than that seen during the global financial crisis in the six months ended June…”

https://www.bloomberg.com/news/articles/2020-09-17/south-african-banks-prepare-for-the-worst-hope-it-doesn-t-come


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Expect More Venezuelas in the Post-Peak Oil Era:

The capitulation of independent oil producers to a future of weaker demand should be a wake-up call to governments. If BP and Shell find it harder to survive in a world after crude, life will be even tougher for Saudi Arabia and the UAE.”

https://www.washingtonpost.com/business/energy/expect-more-venezuelas-in-the-post-peak-oil-era/2020/09/15/ff70d86c-f7a7-11ea-85f7-5941188a98cd_story.html


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Cash-strapped Venezuela seeks deal with bondholders despite sanctions:

Venezuela has missed more than $10 billion in payments to bondholders. Exports of oil – the country’s main source of foreign currency – are at their lowest levels since the 1940s.”

https://www.reuters.com/article/venezuela-debt/update-1-cash-strapped-venezuela-seeks-deal-with-bondholders-despite-sanctions-idUSL1N2GC26C


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Battered by worsening inflation, Sudan declared an economic state of emergency on 10 September, triggered by what it called a “systematic vandalism” of its currency.”

[Sudan derives most of its revenue from exporting oil.]

https://www.theafricareport.com/41877/sudan-declares-an-economic-state-of-emergency/


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Nigeria’s inflation rate, last placed at 12.82 percent in July, may soar to more than 14 percent by the end of December, the central bank has warned. This comes as Africa’s largest economy faces a rising government deficit and broader economic challenges amid the coronavirus outbreak.”

[As does Nigeria. Sudan, Nigeria and Venezuela have also been hammered by floods recently as our crises converge].

http://venturesafrica.com/blog/2020/09/15/nigerias-central-bank-paints-grim-economic-outlook/


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Oil prices have plunged during the pandemic and the sector’s crisis could get worse as new investments are unlikely to flow in, experts said at an energy conference this week.

“Pandemic-related movement restrictions stopped people from commuting and traveling, drastically reducing oil usage.”

https://www.cnbc.com/2020/09/17/oil-sector-could-face-more-distress-as-it-struggles-to-draw-investments.html


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The oil market has a diesel problem and it’s not letting up.

“While crude stockpiles in the U.S. are sitting at the lowest since April, supplies of distillates, which include diesel, heating oil and jet fuel, are continuing to swell and skyrocketed to the highest level for this time of year in U.S. government data going back to at least 1991.”

https://www.livemint.com/industry/energy/swollen-diesel-stockpiles-threaten-oil-price-recovery-11600329805035.html


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Oil Tanker Industry Is In An Ocean Of Trouble

“…much of the oil that traders and producers stored in the spring is still there, FreightWaves’ Miller noted. Off the coast of China, according to Kpler data, there are some 67 million barrels in storage alone. This means that the new demand for offshore storage will by necessity be limited, setting a ceiling on freight rates, too.”

https://oilprice.com/Energy/Crude-Oil/Oil-Tanker-Industry-Is-In-An-Ocean-Of-Trouble.html


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The coronavirus crisis cost the global tourism sector $460 billion in lost revenue during the first six months of 2020 as the number of people travelling plunged, the UN said Tuesday.

Revenue lost between January and June amounted to “around five times the loss in international tourism receipts recorded in 2009 amid the global economic and financial crisis…””

https://uk.finance.yahoo.com/news/virus-cost-global-tourism-460-164245989.html


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Private equity groups including TPG and Apax Partners are taking advantage of blockbuster demand for corporate debt by loading companies they own with fresh loans and using the cash to award themselves a bumper payday.

“So-called dividend recapitalisations have become a feature of the loan market in recent weeks, ringing alarm bells since they come on top of already high leverage and weak investor protections and against a backdrop of economic uncertainty.”

https://www.ft.com/content/a9ff463b-01d7-4892-82dc-2dbb74941a16


^^^This makes me so queasy I’m going to have to clumsily juxtapose it with this:

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A pandemic of suffering follows on the heels of Covid-19 in poor countries, and children suffer most.

““If you’re a day laborer and you’re told you can’t leave your shack one day, the next day you’ve got no income to buy food,” noted Mark Lowcock, the United Nations’ humanitarian chief. “I would bet my house that there’s going to be an increase in poverty head count, an increase in child mortality, an increase in maternal mortality.””

https://www.nytimes.com/2020/09/16/opinion/coronavirus-hunger-disease.html?searchResultPosition=1


You can read the previous ‘Economic’ thread here and visit my Patreon page here. I’ll be back tomorrow with a ‘Climate’ round-up.

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