15th May 2020 Today’s Round-Up of Economic News

Across the US, worries about having enough to eat are adding to the anxiety of millions of people, according to a survey that found 37 per cent of unemployed Americans ran out of food in the past month and 46 per cent said they worried about running out.

“Even those who are working often struggle. Two in 10 working adults said that in the past 30 days, they ran out of food before they could earn enough money to buy more. One-quarter worried that would happen…

“There is no parallel in U.S. history for the suddenness or severity of the economic collapse, which has cost more than 36 million jobs since the virus struck. The nationwide unemployment rate was 14.7 per cent in April, the highest since the Great Depression.”

https://www.smh.com.au/world/north-america/fears-of-hunger-rise-amid-pandemic-economic-collapse-poll-20200515-p54t7i.html


“Since COVID-19 shuttered much of the global economy, airlines, major retail chains, oil companies and other hard-hit businesses have been able to tap bank facilities and public debt markets for the funds they need to keep paying the bills and stay afloat.

“But many firms now bleeding cash are in for a tough ride until the economy fully rebounds, which will likely come only after a vaccine is developed and broadly employed.”

https://www.globaltimes.cn/content/1188387.shtml


No economic collapse in modern times has ever happened so fast.

“Government cash receipts were $1.3 billion above projections through March with only three months left in the fiscal year; now revenues are projected to miss the mark by $9.7 billion through June 30.”

https://www.latimes.com/california/story/2020-05-14/california-54-billion-coronavirus-deficit-choices-news-analysis


The pandemic has also revived all the worst-case scenarios about U.S.-China ties, edging them closer to confrontation than at any point since the two sides established relations four decades ago.

“From supply chains and visas to cyberspace and Taiwan, the world’s two largest economies are escalating disputes across several fronts that never really fell silent.”

https://www.japantimes.co.jp/news/2020/05/15/world/worst-case-u-s-china-scenarios/#.Xr5H52hKjIU


The World Trade Organization chief announced Thursday he will step down on August 31, a year before his term ends, despite the COVID-19 pandemic ravaging the global economy. Roberto Azevedo said it had been a “personal decision” reached with his family…”

https://www.thejakartapost.com/news/2020/05/15/wto-chief-to-step-down-early-as-global-economic-crisis-rages.html


The economic impact of the coronavirus pandemic will be “far, far worse” than the banking crisis in 2008, a former chancellor has warned.

“Alistair Darling said the UK was already in a “very deep recession”.”

https://www.bbc.co.uk/news/uk-scotland-scotland-politics-52660820


UK Police have said they will break up anti-lockdown protests advertised on social media for this weekend if necessary, amid warnings that the events could be exploited by the far right.”

https://www.theguardian.com/uk-news/2020/may/14/police-vow-to-break-up-planned-anti-lockdown-protests-in-uk-cities


Calle Núñez de Balboa, in the Salamanca district [Madrid, Spain], has seen some of the worst riots in its history tonight

“After four days of street protests against Pedro Sánchez, the National Police has been deployed…”

https://www.euroweeklynews.com/2020/05/14/breaking-news-riots-erupt-in-spains-capital-madrid/


“For years, the Ronda della Solidarieta (Solidarity Patrol) charity has served up free dinners twice a week for Rome’s needy, passed out at twilight in the shadow of the city’s ancient ruins.

“But as Italy begins to feel the effects of its most punishing economic crisis since World War II, triggered by the coronavirus pandemic, the number of those in need has shot up…”

https://www.thelocal.it/20200514/italys-new-poor-the-people-left-in-poverty-by-the-coronavirus-crisis


The fear of multiple bankruptcies and mass unemployment because of measures imposed to contain the covid-19 pandemic is the main reason European governments are subsidising businesses on a vast scale

“Yet rescue measures probably just postpone a surge in bankruptcies…”

https://www.economist.com/business/2020/05/16/a-wave-of-bankruptcies-is-coming-in-europe


Damage from the coronavirus slammed into the European Union’s fastest-growing region in the first quarter, with more pain coming as the bloc’s eastern members head for the worst recession since the fall of the Iron Curtain.”

https://www.bloombergquint.com/global-economics/eastern-eu-tumbles-toward-worst-economic-slump-since-communism


Developing countries face a delicate balancing act of responding forcefully to coronavirus-triggered recessions without causing long-term damage to public finances, currency or inflation-fighting credibility. None more so than Brazil.

“Latin America’s largest economy is hurtling toward its biggest ever downturn already shouldering one of the largest debt loads, widest budget deficits and weakest exchange rates of any emerging market in the world.”

https://uk.finance.yahoo.com/news/brazils-economic-fragility-magnifies-rock-183851135.html


“The spread of global infection is never-ending. The world economy is facing a once-in-a-century crisis and is not even comparable to the Lehman shock,” Abe [Japanese PM] said, referring to the giant investment bank and the financial crisis of 2008.

“He added that even the world’s largest corporations are suffering significant damage and that it is “absolutely necessary to prevent chain bankruptcy.””

https://talkingpointsmemo.com/news/japanese-pm-calls-global-economic-collapse-once-in-a-century-crisis


Oil supply is expected to fall to a nine-year low this month, the International Energy Agency said, as global producers make big cuts to offset a record collapse in demand.”

https://www.ft.com/content/ea63c5da-7b6d-4de9-bba1-0342a20c230b


Saudi Arabia has announced a tripling of its value added tax from July and halted a monthly allowance to state employees from next month as oil prices collapse, while simultaneously going on a buying spree of overseas assets including an English soccer club.”

https://www.japantimes.co.jp/news/2020/05/15/business/saudi-arabia-austerity-drive/#.Xr5OG2hKjIU


In what could potentially be the sharpest drop in global remittances in recent history, money sent to low and middle-income countries is expected to decrease by 19.7 percent to $445 billion.

“This comes after a record-breaking year in 2019 ($554 billion), representing a huge loss for vulnerable people.”

https://www.forbes.com/sites/madhvimavadiya/2020/05/14/the-business-of-sending-money-back-home-could-collapse-how-is-covid-19-affecting-migrants/#4ce06b20684b


The pandemic caused severe disruptions in global supply chains. Cargo containers full of consumer goods are piling up at ports and warehouses

“First, China shut down all of its manufacturing, then retail shops in the U.S., Europe and elsewhere closed. And that has left a lot of consumer goods out there with no place to go.”

https://www.npr.org/2020/05/14/856347538/the-pandemic-disrupts-global-supply-chains-leaving-ports-worldwide-overstuffed


“…a cascade of protectionist restrictions, transport disruptions and processing breakdowns has dislocated the global food supply and put the planet’s most vulnerable regions in particular peril.

““You can have a food crisis with lots of food. That’s the situation we’re in,” said Abdolreza Abbassian, a senior economist at the Food and Agriculture Organization of the United Nations.”

https://www.wsj.com/articles/coronavirus-global-food-crisis-shortages-11589385615


After weeks of relative optimism in financial markets about a re-opening of frozen economies, effectively shut for months to contain the pandemic, a dark cloud has descended once again over the investment outlook

“”We have become increasingly gloomier on the global economy,” Deutsche Bank’s chief economist David Folkerts-Landau told clients…

“”A highly uncertain and worrying outlook lies ahead, and it is likely that any short-term stability will come at a huge long-term cost,” he added. “This crisis is also going to permanently scar government balance sheets, with war-time level deficits likely across the board.””

https://www.smh.com.au/business/markets/increasingly-gloomier-dark-clouds-return-as-world-braces-for-longer-and-deeper-economic-hit-20200515-p54t7b.html


Central banks in about a dozen emerging economies have started their own quantitative easing programmes. Yet without big domestic savings pools, most rely on foreign investors to cover balance of payment deficits and underpin currencies.

“That, along with inflation risks, constrain how much money they can print to support growth. Bond buying programmes in Brazil or South Africa could see real interest rates at the back end of the yield curve push up sharply, said Manik Narain, head of EM strategy at UBS.”

https://uk.reuters.com/article/us-health-coronavirus-world-debt-analysi/coronavirus-to-leave-a-legacy-of-unprecedented-global-debt-idUKKBN22Q2J8


“One of the main policy responses to COVID-19 has been for central banks to flood markets with even more liquidity (that is, over and above the phenomenal cash injections post-GFC) to back additional bank and other lending to governments, businesses and households to cushion the direct impacts of the recession.

“…this has compounded the debt overhang problem – sovereign (eg, Italy, many emerging nations and now bloated budget financing tasks), increasingly “junk” corporate debt and household debt.

“There will be a day of reckoning, and it won’t be pretty.”

https://www.canberratimes.com.au/story/6756398/there-will-certainly-be-no-return-to-usual/?cs=14264


Read the previous ‘Economic’ thread here and visit my Patreon page here.

14th May 2020 Today’s Round-Up of Economic News

The World Health Organisation has warned that coronavirus “may never go away” as its experts predicted that a global mental health crisis caused by the pandemic was looming.

“The global health body on Wednesday cautioned against trying to predict how long coronavirus would keep circulating, and called for a “massive effort” to overcome it.

““It is important to put this on the table: this virus may become just another endemic virus in our communities, and this virus may never go away,” said Michael Ryan, the WHO’s emergencies chief.”

https://www.theguardian.com/world/2020/may/14/global-report-who-says-covid-19-may-never-go-and-warns-of-mental-health-crisis


“After dismissing warnings about risky debt when times were good, many corporations are resorting to a familiar tactic to ride out the recession: borrowing even more money.

The Federal Reserve — once among those sounding the alarm — now is helping corporations pile on debt.”

https://www.washingtonpost.com/business/2020/05/13/with-feds-encouragement-corporations-accelerate-debt-binge-hopes-riding-out-pandemic/


“…a corporate landscape that’s leveraged up to the hilt is simply much more vulnerable to future crises and shocks than one that’s not.

“We’ve still not seen the full repercussions of Covid-19 for businesses and the economic ecosystem. We don’t know how severe the damage will be on a financial and human scale.”

https://www.independent.co.uk/voices/coronavirus-economy-wall-street-debt-boeing-shares-junk-a9513176.html


“…the historic slump that has put some 30 million Americans out of work is likely to get worse — much worse — before it gets better, according to Goldman Sachs.

“The investment bank predicts in a new report that unemployment, which surged to nearly 15% in April, could soar to 25% this year.”

https://www.cbsnews.com/news/unemployment-rate-could-hit-25-percent-great-depression-prediction/


Two prominent retail chains — J.Crew Group Inc. and Neiman Marcus — helped push the U.S. leveraged loan default rate in that struggling sector to 10.34%, a record high that, amid the catastrophic impact of the coronavirus pandemic, will almost certainly continue to climb.”

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/retail-sector-defaults-soar-to-record-high-in-us-leveraged-loan-market-58579317


Did you make your rent payment this month?

If you’re struggling to make that happen, you are not alone. According to Edison Research, over 62% of renters are concerned about being able to make the rent. Welcome to the newest symptom of the coronavirus: the 2020 Rental Housing Crisis.”

https://www.forbes.com/sites/chriswestfall/2020/05/13/why-renters-and-landlords-are-getting-crushed-the-rental-housing-crisis-has-arrived/#791d85807eee


The strains were already starting to show [in Canada] before the pandemic sped up the process… a lot of businesses were struggling amid a slowing economy even before the lockdowns put a freeze on economic activity—meaning some of the businesses laying off workers were already at risk of closing for good.

“Starting last fall, the number of business insolvencies began to rise on a year-over-year basis for the first time since the early 2000s…”

https://www.macleans.ca/economy/the-economy-may-never-return-to-what-it-once-was-coronavirus-canada/


The first step into the deepest recession in living memory has been taken. With only two weeks of lockdown measures accounted for, Britain entered an economic slump unparalleled since the 2008 financial crisis

“…the early evidence from the Office for National Statistics for the first quarter of 2020 shows Covid-19 will easily eclipse the last crisis. And the worst damage is yet to come.”

https://www.theguardian.com/business/2020/may/13/first-quarter-slump-just-a-foretaste-of-worst-to-come-uk-economy-covid-19


Six years of negative interest rates have done as much to boost profitability at eurozone banks as they have to weigh it down, the European Central Bank said in a research paper that is likely to raise eyebrows among financiers

“The findings may be contested by some bank executives, who complain that their sector has paid €25bn in negative rates to the central bank since its deposit rate went below zero in June 2014, eating into their already weak profits.”

https://www.ft.com/content/52de6e70-56bc-4da9-adf7-b228c8da79a0


A group of financial experts from Deutsche Bundesbank, Imperial College London and the US Federal Deposit Insurance Corporation has recently reviewed the European Central Bank’s (ECB) 2014 asset quality review (AQR) data and analyzed whether banks “dress up” for the regulator by changing their assets’ risk composition.

“As it turned out—yes, they totally do.”

https://decrypt.co/28713/german-banks-cheated-on-european-central-banks-stress-tests


A judge in Germany’s highest court has warned that EU infringement proceedings against Berlin over the court’s contentious ruling on the European Central Bank would plunge Europe into crisis.

“Peter M Huber, who drafted last week’s constitutional opinion, told the Frankfurter Allgemeine Zeitung that such a procedure “would trigger a significant escalation, potentially tipping Germany and other member states into a constitutional conflict that would be very difficult to resolve”.”

https://www.ft.com/content/f48e3a6b-6a95-4187-8a7d-0f8dad3fbecb


Italian banks are vulnerable because of their large holdings of bonds issued by the government of Italy, one of the most indebted countries in the world

““Clearly the doom loop is still there,” said Lorenzo Codogno, who was previously the director general at the Treasury Department of the Italian Ministry of Economy and Finance. “If you have this strong link, if you have a widening of spreads, inevitably that puts pressure on the banks.””

http://archive.vn/Nh6yD#selection-675.0-683.287


For Japan’s shell-shocked small businesses, a promised $1.1 trillion in stimulus is proving too little, too late, raising the likelihood of a surge in bankruptcies at companies that employ nearly three-quarters of the workforce…

“…small businesses, which employ 70% of the workforce, are already on the brink of disaster.”

https://business.financialpost.com/pmn/business-pmn/as-japan-slow-walks-stimulus-small-businesses-fear-collapse


India’s shadow lenders are facing fresh turmoil after asset manager Franklin Templeton shut funds late last month, prompting other large investors to dump the financiers’ debt. Mutual funds are big buyers of non-bank financial firms’ bonds and some are struggling to meet redemptions after the biggest-ever forced closure of funds in the country.”

https://finance.yahoo.com/news/fresh-crisis-looms-india-shadow-025655912.html


As much as 20 per cent of Yemen’s total foreign currency deposits were held in Lebanon’s banks as of October 2019, and are now trapped

“Lebanon’s banks have banned all foreign transfers abroad since November 2019, in an attempt to prevent rapid capital flight as the country faces its worst economic and financial crises in 30 years.”

https://www.middleeastmonitor.com/20200513-report-lebanons-financial-collapse-traps-yemeni-banks-money/


Six protesters have died in Guinea during clashes with security forces over roadblocks erected to curb the spread of the coronavirus.

“”There were five deaths in Coyah and one in Dubreka,” police spokesman Mory Kaba told AFP news agency on Tuesday.”

https://www.aljazeera.com/news/2020/05/guinea-protesters-killed-clashes-police-200513071249521.html


Before lockdown regulations halted work in the hospitality industry and the casual labour and domestic work markets, many Karoo [South Africa] residents were already battling poverty.

“The lockdown made the situation desperate.”

https://www.dailymaverick.co.za/article/2020-05-13-hunger-and-desperation-rip-through-the-karoo/


Latin America’s economic history has long been forged through crises and shocks that stem from the global system.

“But there is no historical precedent for the turmoil that is just beginning to unfold in the region.”

https://thewire.in/world/an-economic-storm-is-going-to-devastate-latin-america-very-soon


A rerun of the oil market plunge that took the New York Mercantile Exchange’s now expired May crude contract into negative price territory on the eve of its expiration last month can’t be ruled out, the Commodity Futures Trading Commission warned Wednesday, urging the futures industry to be prepared.”

https://www.marketwatch.com/story/oil-prices-could-go-negative-again-so-be-prepared-cftc-warns-futures-industry-2020-05-13


Financial Secretary Paul Chan has described Hong Kong’s economic challenges as unprecedented.

“In the first quarter, the city had its worst slump on record. Even pillars of the economy that had been holding up, like finance and real estate, are showing signs of softening.”

https://www.theedgemarkets.com/article/hong-kongs-economic-crisis-just-keeps-getting-worse


Global trade is projected to record a quarter-on-quarter slump of 27% in the second quarter of 2020 as a result of the Covid-19 pandemic, after falling by 3% in the first quarter, a new report by the Committee for the Coordination of Statistical Activities (CCSA) warns.”

https://www.miningweekly.com/article/global-trade-set-to-slump-27-in-q2-report-warns-2020-05-13/rep_id:3650


Read the previous ‘Economic’ thread here and visit my Patreon page here.

13th May 2020 Today’s Round-Up of Economic News

World Bank CEO - Kristalina GeorgievaThe head of the International Monetary Fund has warned that the global economy is deteriorating faster than expected and that growth could fall further in the coming months.

“Kristalina Georgieva, the organisation’s managing director, said that it was likely to cut its global growth forecasts as the pandemic was hitting countries even harder than expected.

““Incoming data from many countries is worse than our already pessimistic projections,” Ms Georgieva said at a web conference organised by the Financial Times.”

https://www.thetimes.co.uk/edition/business/worse-is-yet-to-come-imf-head-kristalina-georgieva-warns-6vdmcw6jj


The UK economy shrank at the fastest pace since the financial crisis in the first quarter of 2020 as coronavirus forced the country into lockdown. The Office for National Statistics said the economy contracted by 2% in the three months to March, following zero growth in the final quarter of 2019 [ie the economy was not growing *at all* before the pandemic even started].

“The decline was driven by a record fall in March, and reflects just one full week of lockdown.”

https://www.bbc.co.uk/news/business-52641807


Germany was also teetering on the brink of recession pre-pandemic.

“Berlin is in battle with Brussels after opposing the idea of a common debt instrument issued by the European Commission with the scope to raise funds and benefit mainly the countries that have been the hardest hit by the Covid-19 pandemic.”

https://www.xm.com/germany-to-shrink-the-most-since-financial-crisis-as-the-legal-battle-continues-forex-news-preview-121815


The risk of an uneven economic recovery from the coronavirus crisis poses an “existential threat” to the European Union, one of its most senior economic policymakers has said.”

https://www.theguardian.com/world/2020/may/13/eu-faces-existential-threat-if-coronavirus-recovery-uneven-paolo-gentiloni


European banks have declined the European Central Bank’s offer to pay them to keep loans flowing to eurozone businesses.

““Cheap liquidity…does not insure against credit risk,” said Gilles Moec, chief economist at Axa in London.”

[This goes to the nub of our problem with stimulus, ie liquidity is not ultimately the same thing as solvency. You cannot print *value*].

https://www.verdict.co.uk/retail-banker-international/news/banks-turn-down-ecbs-offer-of-more-money-to-make-loans/


Investment in the eurozone has plummeted in recent weeks, creating a drag on the continent’s economy that economists warn is likely to last even after companies and workers emerge from coronavirus lockdowns.

“Across the region, capital expenditure has contracted sharply…”

https://www.ft.com/content/4c279e4c-05af-4c59-be90-48bf3228c92f


“…US core inflation (excluding food and energy) has recorded consecutive MoM declines for only the second time in the series’ 63-year history

“This reinforces our view that the scale of demand destruction in the economy means inflation is not going to be an issue for a long time.”

https://think.ing.com/snaps/us-deflationary-forces/


It looks as though the long-run trend of stability in the inflation rate is ending, and that we need to prepare for an inflation rate rollercoaster.”

https://www.omfif.org/2020/05/the-inflation-v-deflation-debate/


The American Petroleum Institute (API) estimated on Tuesday another large crude oil inventory build, of 7.58 million barrels for the week ending May 8 even as several U.S. states begin the slow process of reopening certain segments of their battered economies.”

https://oilprice.com/Latest-Energy-News/World-News/Oil-Inventories-Soar-Yet-Again-Despite-Demand-Rebound.html


It’s happened again: Another commodities trader in Singapore has all but collapsed under a pile of debt and alleged fraud now under investigation.

“Last week, police raided the offices of ZenRock Commodities Trading Pte Ltd., after HSBC filed a criminal complaint of fraud. It has been reported ZenRock has debts in excess of $160 million, $49 million of which is owed to HSBC.”

https://www.complianceweek.com/risk-management/analysis-oil-collapse-leaves-singapore-traders-scrambling/28892.article


Hong Kong is bracing for another summer of protest after renewed violence in parliament, shopping malls, and streets over the weekend.

“But after almost a year of Beijing’s escalating anger, a growing sense of impunity among police, and a still-dangerous pandemic the rules of engagement are being redrawn.”

https://www.theguardian.com/world/2020/may/13/the-stakes-are-higher-hong-kongs-battle-lines-redrawn-for-post-covid-protests


South Korean job losses rose at their sharpest pace in two decades last month, despite the country avoiding a nationwide lockdown to combat coronavirus.

“The employment data was released as health officials raced to control an outbreak linked to the popular Itaewon nightlife district in Seoul…”

https://www.ft.com/content/d0fcecf5-7254-45dc-8a87-106aaefa4c54


The [Australian] economy will ‘snap back’ after falling off a 10% cliff no better than the front of your car would snap back after driving off a 10-metre cliff.”

https://www.theguardian.com/commentisfree/2020/may/13/australian-business-cant-lead-us-out-of-this-recession-the-government-must-step-up


The turmoil across emerging-market assets is about to get even worse, according to the world’s biggest publicly listed hedge fund firm.

“Guillermo Osses, a money manager at Man Group Plc, said developing nations are about to pay the price for their ballooning debt loads since the 2008 financial crisis.”

https://www.bloomberg.com/news/articles/2020-05-12/new-champions-of-emerging-markets-warn-pain-is-just-beginning


African leaders are asking what China can do for them as the coronavirus pandemic threatens to destroy economies and wipe out about 20 million jobs.

“Beijing is both the top trading partner and top lender on the continent.”

https://www.aljazeera.com/news/2020/05/african-countries-turn-china-debt-relief-200512131259670.html


India’s factory output plummeted to record lows in March, with the Index of Industrial Production contracting 16.7%, reflecting the drastic impact of the countrywide lockdown that began on March 25.

“This comes after a positive growth of 4.5% recorded in February.”

https://www.thehindu.com/business/Economy/coronavirus-lockdown-industrial-output-shrank-167-in-march-2020/article31569384.ece


Indonesia is backing away from plans to reopen the economy from early June, as the number of new daily cases reported of coronavirus remain in the hundreds…

“The slow down in economic activity has hit day workers in the informal economy hard, with millions of people losing their jobs.”

https://www.smh.com.au/world/asia/plague-or-famine-indonesia-grapples-with-economic-risks-and-infection-rates-20200513-p54sjj.html


Almost half of Colombia’s senators signed off on a proposal to urgently implement a guaranteed minimum income for more than 70% of the population.

“The radical proposal would temporarily guarantee 31 million people a monthly income of $225 (COP877,000), which is equal to the current minimum wage.”

https://colombiareports.com/colombia-considering-guaranteed-minimum-income-as-famine-looms/


“…according to the United Nations, the number of people who are classified as having acute food insecurity… could rise from more than a hundred and thirty million to nearly three hundred million, owing to the coronavirus pandemic

“And this estimate does not even begin to address the millions of people whose means of achieving a decent living have evaporated.”

https://www.newyorker.com/news/our-columnists/the-coronavirus-crisis-will-lead-to-catastrophic-hunger


Today, in New York or London, received wisdom has it that major stock indices have recovered so smartly from the March bug panic lows because investors are somehow “seeing through” the pandemic, making wise and rational decisions about which companies will prosper once we all get through this.

“Maybe. Or is it something to do with governments in leading economies moving the decimal point a couple of figures to the right when planning their deficits?”

https://www.ft.com/content/cbae8143-a941-494b-bbc8-25775db1444e


“After the initial onslaught in March when the coronavirus pandemic caused a crisis of confidence in credit markets, CLO securities have recovered some ground, helped by the Fed’s aggressive interventions.

“However, the worry is that further corporate downgrades and escalating defaults could start to unravel sections of the CLO market, in turn prompting a much deeper sell-off that magnifies the broader impact to the economy.”

https://www.ft.com/content/f10eaaac-0f4e-46bc-8f78-0754028da46a


The financial horizon looks uncertain for the airline industry.

“Air travel has largely ground to a halt as people have grown wary about potentially exposing themselves to coronavirus.”

https://www.marketwatch.com/story/airlines-are-on-the-brink-of-bankruptcy-what-happens-to-your-voucher-travel-miles-and-airline-credit-card-if-they-go-belly-up-2020-05-13


The world’s largest container line is bracing for an historic slump in demand. A.P. Moller-Maersk A/S, which controls about one-fifth of the global fleet used to transport goods by sea, has warned that the fallout from Covid-19 will drive volumes down by as much as 25% this quarter.

“The bleak signal from Maersk follows a warning from the World Trade Organization last month that the pandemic could result in the worst collapse in international trade flows since World War II.”

https://www.bloomberg.com/news/articles/2020-05-13/maersk-sees-volumes-down-as-much-as-25-in-second-quarter


The economic impact of the coronavirus pandemic prompted governments to issue more debt than ever before in April, according to data provided by the Institute of International Finance.”

https://www.cnbc.com/2020/05/13/coronavirus-goverments-issued-more-debt-than-ever-last-month.html


Sovereign Defaults Set to Hit Record in 2020… Fitch Ratings believes further sovereign defaults are probable this year. Argentina, Ecuador and Lebanon already have defaulted on sovereign debt in 2020…”

https://www.fitchratings.com/research/sovereigns/sovereign-defaults-set-to-hit-record-in-2020-12-05-2020-1


Read the previous ‘Economic’ thread here and visit my Patreon page here.

12th May 2020 Today’s Round-Up of Economic News

COVID-19 represents a new kind of mystery when it comes to something as complex and critical to the world’s economy as the global supply chain, for a number of reasons:

  • The global spread of the virus and duration of the pandemic. “We have no idea when it will be under control and whether it will resurface,” Singhal said…

  • Both the demand and supply side of the global supply chain are disrupted…

  • Longer lead times.

  • Supply chains have little slack, and little spare inventory.

https://phys.org/news/2020-05-restarting-global-economy-wont-easy.html


Virtually all hospitals in the U.S. — large and small, urban, suburban and rural, nonprofit and investor owned — will face a financial crisis by fall unless there is a bailout on the order of what we did for our banks in 2008

“The financial crisis that is about to happen must be avoided if the moral covenant we have with those who are there for us is to be respected.”

https://www.marketwatch.com/story/our-hospitals-need-a-bailout-to-cure-a-coronavirus-induced-financial-crisis-2020-05-11


Maj. Gen. Kenneth Hara, incident commander of the state’s [Hawaii] COVID-19 response, said he was frustrated when leaders failed this weekend to come up with a schedule for reopening the economy.

“Hara said if nothing changes, there could be violence.”

https://www.hawaiinewsnow.com/2020/05/12/states-coronavirus-incident-commander-warns-potential-unrest-riots-if-economic-strife-continues/


Bank of England hints at a 16% drop in home prices, matching the 2008 housing bubble crash. The median price of residential listings in the U.S. has already slumped since March.”

https://www.ccn.com/house-prices-could-tumble-as-much-as-2008-crisis-according-to-new-projection/


Economic activity and optimism levels both plummeted to record lows last month due to the UK’s coronavirus lockdown.

“Business output across the UK fell by 35.87 points in April to 44.9, significantly below the 79.28 recorded after the global financial crisis, to the lowest level since records began in 2005.”

https://www.cityam.com/coronavirus-lockdown-economic-activity-and-optimism-plunge-to-record-lows/


Germany’s constitutional court sent shockwaves through Europe last week by ruling that the country’s government and the EU’s top judges failed to properly scrutinise the European Central Bank’s bond-buying programme.

“The judgement threatens to turn the European Commission against Germany, the EU’s biggest member state.”

https://www.ft.com/content/2d4a6959-8bdc-4d74-b617-873bba839807


A collapse in oil prices — Russia’s key export — means a $165bn national reserve fund previously earmarked for Mr Putin’s stimulus programme was instead being rapidly used up to plug the resulting hole in the budget.”

https://www.ft.com/content/59504095-d9db-4a7d-b7aa-58745bcb6f16


On Monday, Saudi authorities announced unprecedented measures to salvage its finances from an imminent meltdown, caused by mismanagement rather than simply the coronavirus pandemic or the collapse of oil prices.

“From July, an increase in VAT from five percent to 15 percent and the suspension of the cost of living allowance (a monthly 1000 rials/ $266) are both desperate attempts to rescue an economy that has been plundered for generations.”

https://www.middleeasteye.net/opinion/how-long-can-saudis-remain-silent-over-their-own-impoverishment


The virus has shattered global tourism and devastated the Maldivian economy… The risk is that this brutal, abrupt recession could translate into the Maldives becoming the latest country to sink into sovereign bankruptcy.

Zambia, Ecuador and Rwanda have all announced in recent weeks that they are struggling to repay their debts. Lebanon has already kicked off its restructuring process…”

https://www.ft.com/content/f7157356-e773-47c4-b05d-8624a5ccfd03


Up to 13.7% of “speculative grade” bonds across emerging markets are at risk of defaulting over the next year – a higher level than that seen during the throes of the 2008 Global Financial Crisis, according to Moody’s latest forecast.”

https://www.investmentweek.co.uk/news/4015067/emd-suffer-defaults-2008-financial-crisis-moody-warns-reports


[Mexico’s] National Council for the Evaluation of Social Development Policy (Coneval) said that between 6.1 million and 10.7 million people could be left in situations of poverty as a result of income loss

“…due to the sharp economic downturn caused by Covid-19 and the measures put in place to contain the disease.”

https://mexiconewsdaily.com/news/coronavirus/coronavirus-could-leave-up-to-10-million-more-in-poverty/


The Argentine government has extended a deadline to restructure $65bn (£53bn) of debt to 22 May in an effort to avert further financial turmoil. Argentina had asked private bondholders to accept significantly lower interest payments and to defer those payments until 2023.

“Most bondholders rejected the offer.”

https://www.bbc.co.uk/news/world-latin-america-52618707


Rio de Janeiro’s iconic Christ the Redeemer statue was lit up on Sunday with messages aimed at ending hunger amid the coronavirus pandemic.

“A food bank program and social services of the city launched the campaign… The program has had a growing demand as a result of the coronavirus pandemic.”

https://www.euronews.com/2020/05/11/brazil-s-most-iconic-landmark-lit-up-with-calls-to-end-hunger


Allegations are flying thick and fast as some desperate eThekwini [South Africa] residents wait for the delivery of food parcels, one of the brutal consequences of government’s draconian and extended Covid-19 lockdown…

““We are aware that there is an increase in demand for social relief support and we will continue to respond within the available resources,” said Zikalala.”

https://www.dailymaverick.co.za/article/2020-05-12-hunger-and-starvation-in-durban/


A man fell to the ground in front of Gandaria City shopping mall in South Jakarta on Monday as a result of starvation

“When local police officers asked him what was wrong, he said his gastric acid levels had risen because he had not eaten.”

https://www.thejakartapost.com/news/2020/05/11/man-collapses-from-starvation-in-south-jakarta.html


Collapsing shipments from South Korea, plunging commodity rates, wildly fluctuating cargo costs and a hollowing out of jobs markets for major trading partners are all ominous signs for China’s industrial base, which has struggled to return to full capacity since a coronavirus-led shutdown in the first quarter.”

https://www.scmp.com/economy/china-economy/article/3083858/coronavirus-evidence-demand-shock-wave-chinas-economy-piles


China’s factory prices fell at the sharpest rate in four years in April, highlighting weakening industrial demand in the world’s second-largest economy as the coronavirus pandemic slams global growth.”

https://www.reuters.com/article/us-china-economy-inflation/chinas-factory-deflation-deepens-as-pandemic-hits-demand-idUSKBN22O073


The coronavirus pandemic has thrown tens of millions out of work in China, piling pressure on the country’s patchy social welfare network and creating a major policy challenge for Beijing.

“It remains unclear whether the Chinese government has the means at its disposal to handle the sharp rise in unemployment…”

https://www.scmp.com/economy/china-economy/article/3083823/coronavirus-china-prepared-handle-unemployment-crisis


A key economic indicator in Japan fell at the fastest pace since 2011 in March and the government warned of a deep recession as the coronavirus crisis takes a heavy toll on business activity and consumer spending….

“…the government maintained its view that the economy was “worsening” in March, backing other data during that month and in April which paint a bleak outlook.”

https://uk.reuters.com/article/us-japan-economy-indicators/key-japan-indicator-drops-at-fastest-pace-in-nine-years-signals-steep-recession-idUKKBN22O0TO


Prime Minister Scott Morrison has praised Australian businesses for their resilience during the coronavirus pandemic but says assistance programs will not be around “forever”.

“Speaking in Canberra this morning, Mr Morrison looked towards the “fourth phase” of the country reopening.”

https://www.9news.com.au/national/coronavirus-scott-morrison-urges-business-confidence-amid-covid19-economic-slump/bc52b73f-a99c-43d9-be14-410faa04055b


JPMorgan Asset Management and Fiera Capital are among those touting the virtues of things like private equity, property and infrastructure in the wake of March’s broad market crash. BNY Mellon says it’s helping managers line up new funds targeting unlisted assets.

Yet these are exactly the type of investments now feeling the full force of the economic crisis brought on by the lockdown of swaths of the world’s population to contain the coronavirus. Some speculate they’re just starting the worst slump in years, spelling trouble for anyone late to the private-asset party.”

https://finance-commerce.com/2020/05/trillions-flowing-to-private-assets-on-recession-front-line/


Using the longest dataset available for the S&P 500 and its predecessor indices, gains this sharp have not occurred over as short of a timespan since a brief period in 1938.

“Before those rapid gains, the only other market rebound this strong occurred during 1932-1933. The Depression-era volatility led to large market swings with historic gains and even larger drawdowns.”

https://seekingalpha.com/article/4345989-gains-this-quick-not-seen-since-great-depression


Almost everything about the Coronavirus Recession of 2020 should worry us more than the GFC.”

https://seekingalpha.com/article/4345953-what-is-different-coronavirus-recession


Read the previous ‘Economic’ thread here and visit my Patreon page here.

11th May 2020 Today’s Round-Up of Economic News

New Covid-19 outbreaks in South Korea, Germany and China have highlighted the challenge faced by governments seeking to loosen social restrictions, as millions of Europeans prepare for the tentative reopening of their economies today

“The Seoul city authorities were forced to shut down bars and clubs in the South Korean capital after a cluster of new infections was linked to the city’s party district…

“Chinese authorities also reimposed restrictions in a city near the border with North Korea on Sunday after recording a handful of new cases.

“Meanwhile, Germany has experienced a rise in the reproduction rate — the average number of people that each confirmed coronavirus patient infects — to above 1, just days after Angela Merkel’s government moved to relax the shutdown on public life in Europe’s biggest economy.

“According to the Robert Koch Institute, the R number was 1.1 as of Saturday evening. Three districts exceeded the government’s self-imposed limit of more than 50 new infections per 10,000 people during the past seven days and will now have to postpone their exit from lockdown.”

https://www.ft.com/content/cf719c42-ff2f-4447-9f1c-346477724433


Warning that the coronavirus crisis will have a more profound impact on the economy than initially expected, senior executives are increasingly concerned with the survival of their companies, a recent survey by consulting firm West Monroe shows.”

https://www.forbes.com/sites/sergeiklebnikov/2020/05/09/us-executives-are-more-worried-about-the-economy-than-last-month-heres-why/#517f901b760e


The worst recession since the Great Depression is prompting indebted companies to default, and increasingly more will do so in a way that’s harder for investors to detect.”

https://business.financialpost.com/pmn/business-pmn/hidden-defaults-set-to-soar-as-recession-squeezes-companies


“As a Brookings report last week detailed:

““By the end of April, more than one in five households in the United States, and two in five households with mothers with children 12 and under, were food insecure. In almost one in five households of mothers with children age 12 and under, the children were experiencing food insecurity.””

https://www.nytimes.com/2020/05/10/opinion/us-hunger-coronavirus.html


UK Retail and property chiefs have warned that the government’s business bailout package of reliefs, grants and loans will not be sufficient to stop the “imminent collapse of many businesses”.

“Retail bosses have formed an unusual alliance with their landlords to lobby the government for help with rental payments, with retailers warning that they will not be able to pay rents for months to come.”

https://www.ft.com/content/630f744a-148a-4955-b75f-e649d908f097


Police in Germany say dozens of people were detained following protests against the pandemic restrictions after some rallies turned violent on Saturday.

“Berlin police said 86 people were detained after bottles were thrown at officers during a demonstration in Alexanderplatz, a large central square in former East Berlin.”

https://www.euronews.com/2020/05/10/more-than-130-detained-after-protests-against-coronavirus-restrictions-in-germany


Several hundred demonstrators gathered in the Swiss capital, Bern, Basel, St Gallen and Zurich to protest against a government-imposed coronavirus lockdown.”

https://www.swissinfo.ch/eng/pandemic-politics_demonstrators-defy-ban-to-protest-against-lockdown/45748938


“…migrant farm workers are considered a problem and are greeted not with gratitude but resentment and suspicion.

“From Ireland to Italy and Germany to Romania there is rising tension over whether such workers should cross borders to harvest crops, and if so how many and under what conditions.”

https://www.theguardian.com/world/2020/may/11/covid-19-crisis-stokes-european-tensions-over-migrant-labour


Iraq’s young protesters returned to the streets of Baghdad and other southern cities on Saturday night to oppose the new government of Mustafa al-Kadhimi, sworn in on Thursday after months of political deadlock.

“Before the coronavirus pandemic placed the country on lockdown, Iraq had been rocked by months of nationwide unrest…”

https://www.rudaw.net/english/middleeast/iraq/100520202


Hundreds of protesters gathered in shopping malls across Hong Kong on Sunday as riot police quashed plans to hold a pro-democracy march before it began.

“The abortive protest – which some dubbed “Mother’s Day outing” to coincide with the annual holiday – was meant to kick off at in Tsim Sha Tsui, according to online posts.”

https://hongkongfp.com/2020/05/10/hong-kong-pro-democracy-protesters-chant-slogans-in-malls-as-police-fan-out-to-prevent-street-demo/


Years of social progress in China are at risk of being undone as the country grapples with the economic fallout of the coronavirus pandemic, a black swan event that has lashed the world’s second biggest economy and driven unemployment to historic highs.”

https://www.scmp.com/economy/china-economy/article/3083513/coronavirus-china-faces-historic-test-pandemic-stokes-fears


South Korean exports and imports suffered a precipitous decline in the first 10 days of May, underlining a bleak outlook for Asia’s fourth largest economy and international trade as the coronavirus crisis slammed global demand.

“The numbers from South Korea, the first major exporting nation to release monthly trade data, underscores the pandemic’s devastating impact across supply chains and businesses, and points to a rough yeah ahead for international trade.”

https://www.reuters.com/article/us-southkorea-economy-trade/south-koreas-may-1-10-exports-dive-as-coronavirus-wipes-out-global-demand-idUSKBN22N0GL


Some Japanese central bankers called for even bolder steps than those announced at last month’s policy decision, a summary of bank views showed on Monday, to prevent the coronavirus triggering an economic slump as bad as the Great Depression.”

https://www.reuters.com/article/us-japan-economy-boj/pandemic-stirs-boj-debate-of-great-depression-like-downturn-idUSKBN22N03O


Indonesian officials are becoming increasingly worried about the stability of the financial system amid an exodus in capital caused by the Covid-19 pandemic that’s already much larger than flows during the global financial crisis.”

https://www.bloombergquint.com/onweb/indonesia-s-economy-hit-by-virus-domino-effect-indrawati-says


Australia has done exceptionally well on the pandemic front… But the financials of the economy are dire, with alarming figures only now starting to surface. Any thought that the economy will quickly bounce back, now that the worst of the health crisis is hopefully over, is very much in the camp of wishful thinking.”

https://www.smh.com.au/national/massive-economic-cost-of-pandemic-becoming-clearer-20200510-p54rky.html


To turn a decent profit, high-end Sydney restaurant Nomad needs an average of 1,500 covers per week, or a full 180-seat restaurant across two sittings from Wednesday to Saturday. When the pandemic hit, executive chef Jacqui Challinor made the difficult decision to put the business into hibernation.

““All of our staffing models, our wage costs, food costs … depend upon us turning over a certain amount of money a week, which isn’t going to happen with the restrictions that they’re proposing,” says Challinor.”

https://www.theguardian.com/food/2020/may/11/its-just-not-worth-opening-restaurants-in-australia-can-trade-again-but-will-they


The global oil market witnessed a doomsday scenario on April 20… The oil prices have since rebounded. Market sentiment, however, is still fragile and oil price continues a volatile trajectory.”

https://www.pressreader.com/singapore/the-straits-times/20200510/282870847994480


Big Oil emerged from first-quarter earnings battered and bruised, but things are only going to get uglier.”

https://www.bloomberg.com/news/articles/2020-05-10/big-oil-earnings-battered-by-virus-but-worst-is-yet-to-come?utm_source=google&utm_medium=bd&cmpId=google


Avianca Holdings AVT_p.CN, Latin America’s second-largest airline, filed for bankruptcy on Sunday, after failing to meet a bond payment deadline, while its pleas for coronavirus aid from Colombia’s government have so far been unsuccessful.”

https://www.reuters.com/article/us-avianca-holding-bankruptcy/latin-americas-second-biggest-airline-avianca-driven-to-bankruptcy-by-coronavirus-idUSKBN22M0N1


Our analysis suggests that these changes in the world economy make a V-shaped recovery from the recession unlikely. Most international organisations such as the IMF and the OECD assume a V-shaped recovery in their outlook for the next year. This narrative may have been influenced by the experience of the great recession of 2008/2009, in which Global Value Chains recovered quickly after the crisis.

But our analysis suggests that this recession is different.”

https://voxeu.org/article/how-covid-19-transforming-world-economy


We cannot avoid our problems forever.”

https://citizen.co.za/business/business-insight/2281927/covid-19-the-trigger-of-global-recession-not-the-cause/


Read the previous ‘Economic’ thread here and visit my Patreon page here.

8th May 2020 Today’s Round-Up of Economic News

United Nations chief António Guterres has said the coronavirus pandemic has unleashed a “tsunami of hate and xenophobia, scapegoating and scare-mongering”, and appealed for an all-out effort “to end hate speech globally.”

“…As speculation swirled about where the virus originated, Guterres said migrants and refugees have been vilified as a source of the virus and then denied access to medical treatment.”

https://www.theguardian.com/world/2020/may/08/global-report-china-open-to-cooperate-with-who-on-virus-origin-as-trump-repeats-lab-claim


The U.S. economy likely lost a staggering 22 million jobs in April

“…the Labor Department’s monthly employment report on Friday is also expected to show the jobless rate surging to at least 16% last month. That would shatter the post-World War Two record of 10.8% touched in November 1982.”

https://www.reuters.com/article/us-usa-economy/great-depression-like-u-s-job-losses-unemployment-rate-expected-in-april-idUSKBN22K0E1


After falling sharply in March, housing confidence among consumers took an even deeper dive in April

“Consumers suddenly have a much more pessimistic view of buying and selling conditions. In addition, more consumers said their household income is now significantly lower than it was a year ago.”

https://www.cnbc.com/2020/05/07/consumer-confidence-in-housing-falls-to-lowest-level-since-subprime-crash.html


For the first time in a while, bond traders are fretting over the U.S. government’s yawning fiscal deficits.

Investors had been bracing for a deluge of new debt issuance in anticipation that the fiscal stimulus measures, healthcare spending, and hit to local and state budgets, resulting from the coronavirus pandemic, would require the Treasury Department to find buyers for trillions of government debt.”

https://www.marketwatch.com/story/analysts-warn-a-deluge-of-new-us-government-debt-could-spark-bond-market-tantrum-2020-05-07


The Fed may not be explicitly buying equities, but its purchases have indirectly caused hundreds of billions to flow into them by pushing bond prices higher.

“As they expand from government to corporate bonds, this very well may continue a cascading effect that’s already been occurring.”

https://www.thestreet.com/investing/fed-bond-buying-driving-stock-market-rally


U.S. banks are tightening standards on business and credit-card loans at a rate comparable rate to 2008, according to the latest Senior Loan Officer Opinion Survey on Bank Lending Practices, which is published every few months by the Federal Reserve.

“Banks are also tightening standards on every other category of loan, including auto loans and mortgages.”

https://www.barrons.com/articles/banks-are-tightening-lending-standards-like-it-was-2008-again-51588881348?mod=md_home_pan_mkt_news


The European Central Bank has offered to pay eurozone banks if they keep loans flowing to eurozone businesses. But many banks—still struggling with bad loans left over from the last crisis—have turned the central bank down

“…the stimulus relies on a eurozone banking sector that is weak, fragmented and burdened with problem debts from its last crises.”

https://www.wsj.com/articles/ecb-offers-to-pay-banks-to-keep-credit-flowing-but-lenders-say-no-11588797428


The world is already experiencing the worst global economic recession in the postwar period, so the last thing its global economy needs is another round of the Italian sovereign debt crisis.

“Yet that seems to be what the German constitutional court now has set it up to experience by throwing into question the legality of the European Central Bank’s bond-buying program.”

https://nationalinterest.org/feature/could-italy-default-its-debt-due-coronavirus-151791


Japan’s household spending plunged in March and service sector activity shrank at a record pace in April, reinforcing expectations that the COVID-19 pandemic is tipping the world’s third-largest economy into deep recession.”

https://www.japantimes.co.jp/news/2020/05/08/business/economy-business/pandemic-recession-spending/#.XrULtqhKjIU


Australia’s central bank on Friday predicted the country is facing its biggest economic contraction on record and said it was committed to supporting jobs and incomes as the government announced plans to relax pandemic-related restrictions by July.”

https://uk.reuters.com/article/us-australia-economy-rba/australia-central-bank-sees-worst-economic-slump-on-record-as-government-lays-out-reboot-plans-idUKKBN22K07N


Brazil’s President and Economy Minister have warned that Latin America’s largest economy is on the verge of collapse, underlining the Government’s controversial view that the fallout from social-distancing measures could be worse than the novel coronavirus itself…

“Brazil’s currency sank to an all-time low on Thursday…”

https://www.abc.net.au/news/2020-05-08/coronavirus-warnings-brazil-economy-on-verge-of-collapse/12227298


More cases are starting to come in as we observe Argentina moving toward a default on $323 billion worth of its debt toward the end of May. The concern is that defaults or bankruptcies will begin to accumulate into a plethora of unhappy situations, highlighting the fact that the current concern should be solvency, not just liquidity.

“The question then becomes, do central banks and governments really have the means to fight a cumulative collapse in the debt markets?”

https://seekingalpha.com/article/4344024-world-debt-crisis-be-sure-to-add-argentina


The international community has mobilised $9trn in fiscal and monetary stimulus, but Africa’s share will amount to a meagre 2% – and even that is a generous estimate.”

https://www.theafricareport.com/27617/coronavirus-africa-given-shortest-end-of-global-stimulus-stick/


It’s difficult to quantify the number of people in need during a crisis, but early indications suggest as many as 34% of people in South Africa have gone to bed hungry during the lockdown.

“There were millions of people living in poverty before Covid-19 and millions more now need food, urgently.”

https://www.dailymaverick.co.za/article/2020-05-08-hunger-numbers-millions-millions-millions-need-food/


With most informal workers having no other means of support, they face an almost unsolvable dilemma: to die from hunger or from the virus, the briefing says.

“This has been exacerbated by disruptions in food supplies, which has particularly affected those in the informal economy.”

https://www.africanews.com/2020/05/07/contagion-or-starvation-the-stark-choice-for-informal-workers-during-the-covid-19-pandemic/


International tourism faces its worst crisis since records began, with up to 1.1bn fewer people taking trips globally in 2020.

“The scale of the coronavirus pandemic’s impact is outlined in a report by the World Tourism Organization (UNWTO), which predicts a decline in international arrivals of between 58% and 80% this year.”

https://www.theguardian.com/travel/2020/may/07/world-tourism-faces-worst-crisis-since-records-began-says-unwto-report


Makes you wonder what they will look like for April…

It doesn’t take an expert automotive market analyst to realize that the COVID-19 outbreak and the ensuing lockdowns across the globe would leave deep scars on new car sales. However, we do need analysts to give us the lowdown on sales numbers and, as you would expect, they’re catastrophic.”

https://www.carscoops.com/2020/05/march-global-car-sales-down-39-worse-than-during-2008-financial-crisis/


The current upheaval caused by the coronavirus (COVID-19) pandemic and the Opec oil price war has sent marine gas oil (MGO) prices collapsing at the fastest pace even exceeding the demise of the global financial crisis in 2008 and oil crash in 2014, Bimco noted in a recent analysis report.”

https://www.seatrade-maritime.com/bunkering/volatile-oil-market-sends-bunker-prices-collapsing-fastest-rate


Read the previous ‘Economic’ thread here and visit my Patreon here.