“The European Central Bank is increasingly worried that economic damage from Covid-19 could mutate into a full-blown financial crisis, setting off a second downward leg in the recession and deep scarring of the productive system.
“Christine Lagarde, the ECB’s president, warned that risks are “clearly, clearly, tilted to the downside” and pledged a fresh blast of stimulus in December using “all instruments”. Such a clear signal breaks with the institution’s long-standing rule that it never commits in advance.”
https://www.telegraph.co.uk/business/2020/10/29/ecb-fears-covid-could-trigger-financial-crisis/
“A health crisis triggered a recession. Now it’s triggering an economic calamity [in the Eurozone].
“As health authorities scramble to prevent hospitals from becoming overwhelmed once again, finance ministers and central bankers are wondering where they will find the money to keep unemployment from soaring and prevent the wholesale destruction of small and medium-sized business.
“And what if an economic crisis transforms into a financial crisis? That scenario is no longer unfathomable…”
“Investors will not have to contribute a single euro to finance the vast budget deficits of eurozone governments next year, according to analysts who forecast that the European Central Bank will buy a greater quantity of debt than all the new bonds hitting the market.”
https://www.ft.com/content/29da96b3-8202-466c-b1d5-bc63208a4852
“Another weekend of violent anti-lockdown protests in Europe:
“Clashes in Italy and Spain as Belgium becomes the latest to lock down and restrictions tighten across continent.”
“The furlough program deployed by U.K. Chancellor, Rishi Sunak to avert mass job losses comes to an end today as a resurgence of coronavirus leaves the economy vulnerable to another shock…
“With Prime Minister Boris Johnson under pressure to impose another national lockdown, there are fears that hundreds of thousands of jobs could be axed over the winter.”
“A quarter of nurseries and childminders in deprived areas of England say they will not get by beyond Christmas without additional income, according to a survey.”
“The Fed could face more pressure to act: ‘They don’t have the luxury of time anymore’…
“With inflation still elusive and a host of questions surrounding an economy that just set a single-quarter record for growth, the Federal Reserve faces a choice of whether to wait for conditions to unfold further, or act now to provide some extra help.”
“Bank loan loss provision slows, despite second wave concerns… This slowdown in provisioning would appear to suggest that the major US banks think the worst is behind them.”
“Corporate debt in the U.S. entered 2020 at all-time highs relative to GDP. When accounting for the incremental debt issued in 2020 and netting out restructurings, that ratio seems likely to increase by another 15% this year.
“Effective debt-service ratios remain at levels comparable to 2001 — and above those of 2009 — when default rates on senior loans hit 8%.”
https://www.bloomberg.com/news/articles/2020-10-30/these-are-the-charts-that-scare-wall-street
“Charting America’s Debt: $27 Trillion and Counting.”
https://www.visualcapitalist.com/americas-debt-27-trillion-and-counting/
“The Great Recession of 2007-2009 did such lasting damage to the U.S. labor market that it took several years and a ton of stimulus for growth, jobs and wages to make a meaningful rebound.
“Now, the Covid-19 pandemic is threatening another lost decade for the American economy…”
“Americans have bought nearly 17m guns so far in 2020, more than in any other single year, according to estimates from a firearms analytics company…
““By August, we had exceeded last year’s total. By September, we exceeded the highest total ever,” said Jurgen Brauer, the chief economist of Small Arms Analytics…”
https://www.theguardian.com/us-news/2020/oct/29/coronavirus-pandemic-americans-gun-sales
“Philadelphia remains on high alert after police reportedly found explosives inside a van following multiple nights of protest over the shooting death of a Black man with a history of mental health problems.
“Police recovered propane tanks, torches and possible dynamite sticks from the van Wednesday…”
“Thousands of Muslims in countries around the world have held protests to vent their fury at France over its perceived animosity towards Islam.
“Anti-French rallies erupted after Friday prayers in Pakistan, Bangladesh, Lebanon and other countries. Protesters called for a boycott of French products and condemned President Emmanuel Macron.”
https://www.bbc.co.uk/news/world-54751920
“Advanced economies have a lot more firepower than emerging economies, because they are able to borrow more cheaply, and certainly compared to many low-income countries that have no access to private capital markets.
“For those governments that entered the crisis with vulnerable finances, the risk of debt defaults increased importantly.”
“Zambia’s Looming Default Is Only the Start of a Global Reckoning With Debt.”
“Three private credit rating agencies in New York are worsening the economic consequences of the pandemic in Africa.
“A new report by the African Union (AU) shows that “aggressive downgrades” from US credit rating firms have impaired government abilities to raise funds.”
“The economic crisis of pandemic deepens as 40% of South Africans who applied for a loan are not sure if they can pay it.”
“Zimbabweans turn to sex work amid economic crisis and Coronavirus…
“Dressed in a miniskirt and blouse, Esther Kamupunga stood in semi-darkness waiting for men looking for sex – the latest Zimbabwean to lose her job in a deepening economic crisis, worsened by the new coronavirus.”
“The airline industry is not capable of slashing costs sufficiently in order to neutralize severe cash burn, to avoid bankruptcies and preserve jobs in 2021, the International Air Transport Association (IATA) latest analysis has found…
“The agency has estimated that full-year 2020 traffic will mark a 66 per cent decrease compared to 2019, with December demand 68 per cent down.”
https://www.schengenvisainfo.com/news/iata-airlines-powerless-to-cut-costs-deep-enough-to-save-jobs/
“Franco-Dutch airline group, Air France-KLM (AF.PA) has reported a €1.05bn ($1.2bn, £945m) quarterly operating loss and warned of worse to come as amid tougher COVID-19 travel restrictions.”
“With No Cuts Left to Make, Big Oil Sits and Waits for a Recovery:
“The largest global producers have slashed costs all they can… After months of low oil and gas prices driven by weak demand, the world’s largest international oil companies have largely exhausted their financial defenses, leaving little room to maneuver if they’re dealt further blows.”
“A disturbing new signal from the Credit Default Swaps market:
“Falling prices at auctions suggest trouble ahead for lenders to beleaguered companies… four-fifths of US loans issued last year were “covenant-lite”, that is they had little or no control over borrower behaviour, up from one-fifth at the start of the decade.
“That is because investors are so desperate to chase returns in a zero-rate world that they no longer dare to impose covenants.”
https://www.ft.com/content/43c721a7-03b9-40d1-9d9f-ef319b923909
“The Stock Market Is On The Edge Of A Historic Crash.”
“There are many potentially bearish catalysts today including election uncertainty, a deteriorating economic outlook, and a possible deflationary wave.
“Few assets including alternatives like gold and long-term bonds are safe in a liquidity shock.”
https://seekingalpha.com/article/4382592-vgsh-stocks-are-crashing-cash-is-king
You can read the previous ‘Economic’ thread here and visit my Patreon page here. I’ll be back on Monday with a ‘Climate’ thread.
