Economic News from last week

   News  From  Last  Week:

Total Debt 

Securities

-to-GDP:

225% of GDP

in 1Q 2020 

for a new record 

     note:

End of 1990s - 162% 

End of 1980s --- 75%

Total Equities

-to-GDP

198% of GDP, 

in 1Q 2020, 

down from 

a record 251% 

in Q4 2019

      note:

Previous cycle peaks

181% in Q3 2007 

202% in Q1 2000 

Total Debt 

and Equities

Securities-to-GDP 

422% of GDP

in 1Q 2020, 

down from 

Q4 2019’s 

record 469%.

       note:

Previous cycle peaks 

379% in Q3 2007 

359% in Q1 2000

June 12 – Bloomberg (Kate Kelland): 

“Fears of a second wave of COVID-19 

infections grew on Friday with a record daily increase in India, warnings against complacency in Europe and word from half a dozen U.S. states that their hospital beds were filling up fast. Health officials worldwide have expressed concerns in recent days that some countries grappling with the devastating economic impact of lockdowns may lift restrictions too swiftly, and that the coronavirus could spread during mass anti-racism protests.”

June 11 – CNBC (Thomas Franck): 

“Treasury Secretary Steven Mnuchin told CNBC… that shutting down the economy for a second time to combat the spread of Covid-19 isn’t a viable option and could cause even more headaches for Americans… Texas has reported three consecutive days of record-breaking Covid-19 hospitalizations while nine California counties are reporting a spike in new cases or hospitalizations of confirmed cases… ‘We can’t shut down the economy again. I think we’ve learned that if you shut down the economy, you’re going to create more damage,’ Mnuchin said…”

June 9 – Reuters (April Joyner): 

“The U.S. presidential election is re-emerging as a potential risk to markets after a shift in polls that has seen President Donald Trump lose ground to Democrat Joe Biden. Concerns over election-fueled volatility have regained prominence in recent weeks, even as broader market swings have subsided and stocks have surged. Futures on the Cboe Volatility Index , known as Wall Street’s ‘fear gauge,’ show a visible bump in volatility expectations near the election.”

June 8 – Reuters (Yoruk Bahceli): 

“Italy’s debt is unsustainable in the long term and will eventually require a restructuring, Schroders’ senior European economist said… The southern European economy, hit hard by the coronavirus pandemic, is having to raise even more debt on top of its hefty debt pile at 134% of GDP. This ratio is expected to rise to as high as 159% this year.”

June 10 – Reuters (Thyagaraju Adinarayan and John McCrank): 

“A raft of small cap stocks has soared by hundreds of millions of dollars in value in recent weeks as frenzied retail traders piled in to a blistering stocks rally. Increased savings, stimulus checks from the government, and ultra-low interest rates due to the coronavirus pandemic have led to a flood of money into the markets from punters, leading to chaotic trades via mobile phone apps… ‘In my 20 years of experience I’ve never seen retail traders push stocks around like they’re doing right now,’ said Dennis Dick, a trader with Bright Trading LLC.”

June 10 – CNBC (Maggie Fitzgerald): 

“Retail investors are snatching up any piece of the market to get in on the major comeback rally — this time its penny stocks. Stocks trading below $1 per share have an average gain of nearly 80% in the past week, according to… Institutional Equity Derivatives team at Citadel Securities…”

June 8 – AFP (Heather Scott): 

“The coronavirus pandemic inflicted a ‘swift and massive shock’ that has caused the broadest collapse of the global economy since 1870 despite unprecedented government support, the World Bank said… The world economy is expected to contract by 5.2% this year -- the worst recession in 80 years -- but the sheer number of countries suffering economic losses means the scale of the downturn is worse than any recession in 150 years, the World Bank said in its latest Global Economic Prospects report. ‘This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,’ said World Bank Group Vice President for Equitable Growth, Finance and Institutions Ceyla Pazarbasioglu.”

June 8 – Financial Times (James Politi): 

“Emerging and developing economies will shrink this year for the first time in at least six decades, according to the World Bank… The bank’s forecast is that as many as 100m people in the developing world will be tipped into extreme poverty by a projected 2.5% contraction in emerging markets’ gross domestic product, with incomes per capita set to shrink 3.6% globally. The bank defines extreme poverty as an income of less than $1.90 a day. In recent weeks coronavirus has spread… to major emerging nations including Brazil, Russia and India, and shutdowns to tackle the spread of the disease are taking an increasing economic toll.”

June 10 – Bloomberg (Vince Golle): 

“The U.S. federal budget deficit almost doubled in May from a year earlier, as government spending surged amid efforts to limit the economic fallout from the coronavirus while revenue slumped. The shortfall increased to $398.8 billion last month from $207.8 billion in May 2019… Government spending rose 30% from a year earlier to $572.7 billion… Revenue dropped to $173.9 billion from $232 billion a year earlier, reflecting the economic slowdown… In the first eight months of fiscal year 2020, the U.S. budget deficit was $1.88 trillion, compared with $738.6 billion at the same point last year.”

June 10 – Bloomberg (Craig Torres and Matthew Boesler): 

“Federal Reserve Chairman Jerome Powell sent a powerful message… that the central bank will keep pumping stimulus into the U.S. economy until its traumatized labor market has healed from the harm of the coronavirus pandemic. ‘We’re not even thinking about thinking about raising rates,’ he told a video press conference… ‘We are strongly committed to using our tools to do whatever we can for as long as it takes,’ Powell said. ‘The Fed is clearly very sensitive to the fact that the Great Depression was made worse by not taking action, and they don’t want to make that mistake again,’ said Stephen Stanley, chief economist at Amherst Pierpont Securities. ‘The Fed, at least right now, wants everyone to believe that it will be easy for as far as the eye can see.’”

June 8 – Wall Street Journal (Kate Davidson and Richard Rubin): 

“The U.S. budget gap more than doubled in May, pushing the deficit for the fiscal year to near $2 trillion… For the past 12 months, the deficit as a share of gross domestic product stood at roughly 10%, the highest level since February 2010… CBO has estimated the deficit could reach $3.7 trillion for the fiscal year that ends in September, easily surpassing the high-water mark hit during the last downturn.”

June 8 – Reuters (Howard Schneider): 

“The U.S. economy ended its longest expansion in history in February and entered recession as a result of the coronavirus pandemic, the private economics research group that acts as the arbiter for determining U.S. business cycles said…”

June 10 – Associated Press (Martin Crutsinger): 

“U.S. consumer spending plunged by a record-shattering 13.6% in April… Last month’s spending decline was far worse than the revised 6.9% drop in March, which itself had set a record for the steepest one-month fall in records dating to 1959…. Even with employers cutting millions of jobs, though, incomes soared 10.5% in April, reflecting billions of dollars in government payments in the form of unemployment aid and stimulus checks.”

June 8 – Bloomberg (Kim Bhasin): 

“As many as 25,000 U.S. stores could close permanently this year after the coronavirus pandemic devastated an industry where many mall-based retailers were already struggling. The number would shatter the record set in 2019, when more than 9,800 stores closed their doors for good, according to… Coresight Research. Most of the closures are expected to occur in malls, with department stores and clothing shops predicted to be among the hardest hit.”

June 11 – CNBC (Diana Olick): 

“Barely a week ago it looked like mortgage rates were finally breaking higher, but in a sudden reversal, they just set a new record low. The average rate on the popular 30-year fixed mortgage hit 2.97% Thursday…”

June 11 – Bloomberg (Sally Bakewell, Claire Boston, and Katherine Doherty): 

“A massive wave of corporate distress is pitting beleaguered companies against their lenders in brawls that are shaping up to be nastier than ever before. Desperate firms and their private equity owners are seeking to take advantage of years of weakening creditor protections to help cut obligations and raise cash after the coronavirus outbreak brought businesses to a standstill. Be it via allowances written into borrowing documents when times were good or simply loopholes in deal terms, they’re siphoning collateral and transferring assets while pushing deeply discounted debt swaps onto investors… Still, money managers aren’t just rolling over. Credit powerhouses like GSO Capital Partners, BlackRock Inc. and HPS Investment Partners have lined up scores of lawyers and financial advisers to defend their interests…”

June 11 – Bloomberg (Reade Pickert): 

“U.S. nonfinancial business debt soared in the first quarter by the most in records back to 1952, as bank loans and corporate bond issuance jumped in companies’ all-out effort to stay liquid during the coronavirus pandemic. Firms boosted debt by $754.8 billion, or at an 18.8% annualized rate, in the first quarter to a total outstanding $16.8 trillion that surpassed the level of household borrowing, according to a Federal Reserve report…”

June 10 – Financial Times (Sun Yu): 

“China is facing a public outcry over its claim that Beijing had ‘basically won’ the war against poverty after Premier Li Keqiang admitted that more than two-fifths of the population made less than $140 a month. A week after Mr Li announced the figure, saying it was ‘hardly enough’ to rent a home in a big city, academics and netizens raced to question Beijing’s pledge to eradicate poverty by the end of this year. ‘Given the current price level, the premier is suggesting 600m Chinese people are having trouble maintaining a basic living standard,’ said a Beijing-based policy adviser… ‘The poverty relief [campaign] needs to carry on.’”

June 6 – Reuters (Yawen Chen, Stella Qiu, and Ryan Woo): 

“China’s exports contracted in May as global coronavirus lockdowns continued to devastate demand, while a sharper-than-expected fall in imports pointed to mounting pressure on manufacturers as global growth stalls… Overseas shipments in May fell 3.3% from a year earlier, after a surprising 3.5% gain in April…”

June 11 – Associated Press (Zen Soo):

 “China’s auto sales surged 14.5% in May, a second straight month of growth as the global industry’s biggest market gradually recovers… The China Association of Automobile Manufacturers said… sales of passenger cars jumped 7% from a year earlier to 1.67 million, an improvement over April’s 2.6% contraction.”

June 8 – Bloomberg: 

“The Chinese government said it has agreed to delay debt repayments for low-income countries, as part of the Group of 20 nations debt relief program. The country has suspended debt repayments from 77 developing countries and regions, Ma Zhaoxu, Vice Minister of Foreign Affairs, said…”

June 8 – Financial Times (Martin Arnold): 

“German industrial production plunged by a record 18% in April, as the coronavirus lockdown caused major disruption to factories across most manufacturing sectors of Europe’s biggest economy. The vast German auto industry was hit hardest by the pandemic after its output collapsed to a quarter of its level the previous month.”

June 8 – Reuters (Madeline Chambers):

 “German exports and imports slumped in April, posting their biggest declines since records began in 1990 as demand dried up in the coronavirus lockdown, casting further gloom over the outlook for Europe’s biggest economy… Exports plunged 24% on the month, far more than economists expected, while imports slid 16.5%.”

June 8 – Reuters (Stefanie Eschenbacher): 

“Mexico is facing its deepest recession in decades and prominent investors believe it could soon follow state oil company Pemex in seeing its credit rating relegated to ‘junk’ territory as the COVID-19 pandemic rages on. Losing the investment-grade rating that Latin America’s second-largest economy has held for almost two decades would be a bitter blow for leftist President Andres Manuel Lopez Obrador.”

June 9 – Bloomberg (Muneeza Naqvi): 

“India’s capital of 16 million people is set to be the latest city overwhelmed by Covid-19, and the worst may be yet to come. The defense ministry has closed its doors, its top bureaucrat is in quarantine, while a senior finance ministry official and the government’s top spokesman have the coronavirus. Authorities have requisitioned more hotels and community centers to be used as Covid-19 wards, while bodies are piling up in hospital morgues and crematoriums.”

June 12 – Bloomberg (Julia Leite): 

“Brazil surpassed the U.K. in number of deaths from Covid-19 as the pandemic continues to spread in Latin America’s largest nation. The country reported 909 new deaths on Friday…, bringing the total death count to 41,828. The number of infections rose by 25,982, pushing the toll to 828,810. A new study showed the illness may be far more widespread in Brazil than official data suggests. Researchers at the University of Pelotas in southern Brazil estimate there are six unreported cases for every one confirmed diagnosis across 120 cities included in the study.”

June 8 – Reuters (Leika Kihara): 

“Japanese bank lending rose at the fastest annual pace on record in May as cash-strapped companies tapped loans to meet immediate funding needs to survive slumping sales from the coronavirus pandemic… Total bank lending by banks and ‘shinkin’ credit unions rose 4.8% in May from a year earlier to 562.5 trillion yen ($5.13 trillion), accelerating from a 2.9% gain in April and marking the fastest pace of increase since comparable data became available in 2001…”

June 8 – Bloomberg (Cormac Mullen):

 “Speculative excess has surged to the highest in at least 20 years among U.S. options traders…, according to Sundial Capital Research Inc. Traders established fresh bullish positions last week by buying 35.6 million new call options on equities, according to Sundial founder Jason Goepfert. That’s up from a peak of 28.7 million in February, when speculative activity was rampant… ‘Options traders make stunning bets on rising prices,’ Goepfert wrote. ‘This kind of activity has a strong tendency to lead to negative returns in the S&P 500 and other indexes over a multi-week to multi-month time frame.’”

June 8 – CNBC (Weizhen Tan): 

“From a trade fight to a war of words over the origin of the coronavirus, to greater scrutiny of Chinese firms on Wall Street — relations between the U.S. and China have nosedived in recent years. A new ‘cold war’ is here and things could get uglier as other countries get dragged into the conflict, analysts warn. ‘Things will get worse — perhaps much worse — before they get better. Decoupling is underway,’ said Dan Ikenson, director of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute… Beijing could also start targeting America’s allies, as it embarks on what analysts call the ‘wolf warrior diplomacy.’”