Economic news from last week

May 28 – Bloomberg (Molly Smith and Priscila Azevedo Rocha): 

“Companies are selling more bonds than ever with the backing of central banks, putting supply in the U.S. and Europe on track to reach records. 

Any one of eight U.S. investment-grade companies expected to issue debt Thursday could tip year-to-date supply past $1 trillion at the fastest rate ever, while European borrowers passed 900 billion euros ($991 billion) on Wednesday, two months earlier than in 2019.”

May 27 – Reuters (Marc Jones): 

“The number of companies or countries at risk of having their credit ratings cut has been pushed to an all-time high by the coronavirus pandemic, S&P Global analysis shows. A total of 1,287 of S&P’s ratings are now on a downgrade warning — either with ‘negative outlooks’ where a move might take two years, or on ‘CreditWatch with negative implications’ where the risk is almost immediate. It tops 1,028 in the wake of the financial crisis in 2009 and comes despite nearly 700 downgrades already being impacted by COVID-19 in recent months. ‘Almost two-thirds of issuers face downgrade potential due to the unprecedented challenges posed by COVID-related containment measures,’ S&P said…”

May 25 – Bloomberg: 

“China condemned the U.S. adding 33 Chinese entities to a trade blacklist, a move that risks potential retaliation from Beijing as tensions between the world’s two-biggest economies deteriorate further. The U.S. Department of Commerce… expanded its so-called entities list, which restricts access to American technology and other items, to include 24 Chinese companies and universities it said had ties to the military and another 9 entities it accused of human rights violations in Xinjiang. China’s foreign ministry… expressed ‘strong dissatisfaction’ and ‘firm opposition’ to the move as it defended the government’s crackdown in Xinjiang, saying that ‘counter-terrorism measures’ were taken ‘to prevent the breeding of terrorism and extremism at the source.’”

May 28 – Associated Press (Christopher Rugaber): 

“ About 41 million people have now applied for unemployment aid since the virus outbreak intensified in March, though not all of them are still unemployed. The… report… includes a count of all the people now receiving unemployment aid: 21 million. That is a rough measure of the number of unemployed Americans. The national jobless rate was 14.7% in April, the highest since the Great Depression, and many economists expect it will near 20% in May.”

May 25 – Wall Street Journal (Andrew Ackerman and Nick Timiraos): 

“With interest rates falling to the lowest level on record, this should be a banner time for households in search of a new mortgage. It isn’t. 

Mortgage availability has tightened sharply as lenders impose tougher income, credit-score and down-payment conditions and drop some loan types altogether, such as home-equity lines of credit. The economic shock from the coronavirus pandemic explains some of this credit crunch. But the economic factors have been exacerbated by policy decisions in Washington, industry officials say. As part of its March relief bill, Congress let homeowners suspend mortgage payments for up to a year but provided no way to pay for this, potentially saddling lenders with the burden.”

May 26 – CNBC (Diana Olick): 

“Home prices were still gaining steam in March, as the country began shutting down in the face of the coronavirus pandemic. 

On a national level, prices in March rose 4.4% annually, up from 4.2% in February, according to the S&P CoreLogic Case-Shiller index. The 10-City Composite rose 3.4% annually, up from 3% in the previous month. The 20-City composite increased 3.9%, up from 3.5% in February.”

May 25 – Financial Times (Myles McCormick): 

“The biggest independent shale oil groups in the US reported a record combined loss of $26bn in the first quarter as the sector braces itself for a wave of bankruptcies over the next two years. The collapse in crude demand brought about by the coronavirus pandemic forced more than $38bn in write-offs among top producers, according to … Rystad Energy, sending net losses tumbling well below an average of $2.9bn in the past six years.”

May 27 – Wall Street Journal (David Hodari): 

“Investment in the U.S. shale sector will drop by half this year, the International Energy Agency said…, predicting a period of pain for producers, even as oil prices rally. T he forecast body blow to the availability of capital for U.S. producers comes as part of an expected world-wide decline in broader energy investment during 2020. The…organization expects global investment in oil and gas to decrease by one-third and the financing of all energy projects to decline by 20%. ‘We see a historic fall in global energy investment, but the biggest hit is to the shale industry,’ said the agency’s executive director, Fatih Birol. ‘It has always been under pressure, but now access to capital and investment confidence is drying up.’”

May 24 – Wall Street Journal (Patrick Thomas): 

“Junior workers seeking seasonal employment are striking out so much that the April unemployment rate for teens aged 16 to 19 hit 32%, marking a high not seen since at least 1948… As more teens hit the job market in June and July, when school is generally out, that rate typically climbs higher.”

May 24 – Reuters (Mike Spector): 

“The more than a century old car rental firm Hertz Global Holdings Inc filed for bankruptcy protection… after its business was decimated during the coronavirus pandemic and talks with creditors failed to result in much needed relief. Hertz’s board earlier in the day approved the company seeking Chapter 11 protection in a U.S. bankruptcy court in Delaware…”

May 28 – Bloomberg (Jeremy Hill and James Crombie): 

“In May alone, some 27 companies reporting at least $50 million in liabilities sought court protection from creditors -- the highest number since the Great Recession… In May 2009, 29 major companies filed for bankruptcy… And year-to-date, there have been 98 bankruptcies filed by companies with at least $50 million in liabilities -- also the highest since 2009, when 142 companies filed in the first four months.”

May 27 – Bloomberg (Nikos Chrysoloras and Viktoria Dendrinou): 

“The European Commission unveiled an unprecedented stimulus plan to tackle the worst recession in living memory and underwrite struggling Italy’s membership of the 27-nation bloc. The government in Rome stands to receive 82 billion euros ($90bn) in emergency grants and up to 91 billion euros in low-interest loans from the package that could be worth as much as 750 billion euros in total… The program, which still needs to win the backing of member states, would be funded by joint debt issuance in a significant step toward closer financial integration… ‘This is Europe’s moment,’ Commission President Ursula von der Leyen said. ‘Our willingness to act must live up to the challenges we are all facing.’”

May 27 – Bloomberg (Carolynn Look):

 “The euro-area economy is faring worse than hoped ... Output is set to shrink between 8% and 12%, ECB President Christine Lagarde and Vice President Luis De Guindos both said…, calling a milder scenario out of date. The remarks highlight the severity of the repercussions for Europe after businesses were forced to close because of the coronavirus pandemic, costing hundreds of thousands of jobs and furloughing millions more.”

May 25 – Bloomberg (Julia Leite and Martha Viotti Beck): 

“As Brazil’s accelerating caseload propels it into the second worst coronavirus hotspot, one of the most alarming aspects is the epidemic’s path -- spreading into areas so poor they lack not only intensive care units but often clean water. Restricted at first to Brazil’s rich neighborhoods and capitals in close contact with international travelers, the virus has migrated inland, and also to states like Maranhao, where 20% of the population live in extreme poverty and most workers have unregulated jobs.”

May 26 – Bloomberg (Kartik Goyal): 

“Foreign funds have slashed their holdings of India’s government bonds to the lowest in three years amid dwindling returns, just as the nation embarks on a mammoth borrowing plan. The amount of sovereign securities held by global funds has slumped 767 billion rupees ($10bn) from this year’s peak in February as steep hedging costs diminished pay-offs in one of Asia’s highest-yielding markets. The rupee’s plunge by about 6% in 2020 further reduced the appeal of Indian debt.”

May 26 – Reuters (Takaya Yamaguchi and Tetsushi Kajimoto): 

“Japanese Prime Minister Shinzo Abe’s cabinet approved… a new $1.1 trillion stimulus package that includes significant direct spending… 

The record stimulus of 117 trillion yen… followed another 117 trillion yen package rolled out last month. The new package takes Japan’s total spending to combat the virus fallout to 234 trillion yen ($2.18 trillion), or about 40% of gross domestic product.”

May 27 – Financial Times (Jamil Anderlini): 

“By imposing a draconian national security law on Hong Kong, China’s leaders have clearly decided that stamping out dissent in the territory is more important than preserving its status as Asia’s premier financial centre. That title is now under direct threat after the Trump administration said… it no longer considered the former British colony to be autonomous from mainland China. This ruling opens the door for more sanctions that could punish individuals and companies and remove a range of special trade and investment privileges. Hong Kong could be left with very little to differentiate it from any other big Chinese city. Hong Kong is now the main battleground in an escalating cold war between China and what is left of the US-led liberal world order.”

May 28 – Reuters (Yew Lun Tian and Yimou Lee): 

“China will attack Taiwan if there is no other way of stopping it from becoming independent, one of the country’s most senior generals said on Friday, in a rhetorical escalation from China aimed at the democratic island Beijing claims as its own. Speaking at Beijing’s Great Hall of the People on the 15th anniversary of the Anti-Secession Law, Li Zuocheng, chief of the Joint Staff Department and member of the Central Military Commission, left the door open to using force… ‘If the possibility for peaceful reunification is lost, the people’s armed forces will, with the whole nation, including the people of Taiwan, take all necessary steps to resolutely smash any separatist plots or actions,’ Li said.”