Economic News from last week

July 13 – The Hill (Rebecca Klar): 

“A study found that 60% of the patients had a ‘potent’ antibody response at peak of their battle with the coronavirus. After about two months, however, just 16.7% of the patients had a potent antibody response. 

     In some cases, the antibody response to the virus later became undetectable. ‘People are producing a reasonable antibody response to the virus, but it’s waning over a short period of time and depending on how high your peak is, that determines how long the antibodies are staying around,’ Katie Doores, lead author on the study at King’s College London, told The Guardian…”

July 13 – Reuters (Gayle Issa): 

“The number of coronavirus infections around the world hit 13 million…, 

climbing by a million in just five days. … 

     World Health Organization (WHO) chief Tedros Adhanom Ghebreyesus said there would be no return to the ‘old normal’ for the foreseeable future, especially if preventive measures were neglected. "

July 14 – Reuters (Ann Saphir): 

“California Governor Gavin Newsom’s decision… to reimpose restrictions on bars, restaurants, gyms and even ordinary office work to tamp down a surge of coronavirus infections is dimming economic growth prospects for the nation as a whole… 

     The Golden State, with 40 million people, employs more workers than any other state in the nation, and its production of goods and services is about equal to the combined output of Florida and Texas, two others states that have also seen resurgences of the virus.”

July 12 – Wall Street Journal (Annie Gasparro and Jaewon Kang): 

“Grocers are having trouble staying stocked with goods from flour to soups as climbing coronavirus case numbers and continued lockdowns pressure production and bolster customer demand. 

     Manufacturers… say they are pumping out food as fast as they can, but can’t replenish inventories. Popular items such as flour, canned soup, pasta and rice remain in short supply. As of July 5, 10% of packaged foods, beverages and household goods were out of stock, up from 5% to 7% before the pandemic, according to… IRI.”

July 16 – Bloomberg (Jeanny Yu): 

“The rally in Chinese shares is unraveling almost as quickly as it began, with losses accelerating Thursday after state media criticized one of the country’s most popular stocks. 

     The CSI 300 Index closed 4.8% lower, its biggest loss since markets reopened in February following the Lunar New Year break… The ChiNext Index, which had earlier this week turned hotter than any benchmark in the world, fell as much as 6.2%. This month’s frenzy in Chinese stocks had pushed the value of the country’s equity market to almost $10 trillion, a level that marked the top of the bubble five years ago.”

July 14 – Financial Times (Joshua Oliver): 

“Fund managers are increasingly nervous about the rush into US tech stocks, with almost three-quarters of investors surveyed by Bank of America describing the popular bet on the sector as the markets’ ‘most crowded trade’.

      In its monthly survey of investors, who between them manage $570bn, BofA described US tech and growth stocks as ‘the longest ‘long’ of all time’, as no other trade, such as positive bets on US government bonds or on bitcoin, has ever been singled out by such a large proportion of respondents.”

July 13 – Bloomberg (Sarah Ponczek): 

“Robinhood users can’t get enough of Tesla Inc. Almost 40,000 Robinhood accounts added shares of the automaker during a single four-hour span on Monday… 

     All told this year, Tesla’s market cap has surged by $202 billion, pushing Elon Musk past Warren Buffett in rankings of the world’s wealthiest people and burning shorts who have as much as $20 billion in bets the stock will fall. The stock is trading at 166 times estimated earnings over the next year, 20 times book value and seven times sales.”

July 14 – Bloomberg (Yakob Peterseil): 

“Amazon.com Inc. is still seeing historic demand for call contracts so bullish they only have an estimated one-in-ten chance of paying off. 

     With the company’s shares up 66% this year, traders are bidding up the price of options that have it jumping another 50% in the next three months. Contracts betting on the online retailer to reach $4,600 by October were among the most-traded calls for that expiry month on Monday.”

July 16 – Reuters (Andrea Shalal): 

“Global debt surged to a record $258 trillion in the first quarter of 2020 as economies around the world shut down to contain the coronavirus pandemic, 

    and debt levels are continuing to rise, the Institute for International Finance said… The IIF…, said the first-quarter debt-to-GDP ratio jumped by over 10 percentage points, the largest quarterly surge on record, to reach a record 331%.”

July 12 – Reuters (Marc Jones): 

“Companies around the world will take on as much as $1 trillion of new debt in 2020, as they try to shore up their finances against the coronavirus, a new study of 900 top firms has estimated. 

     The unprecedented increase will see total global corporate debt jump by 12% to around $9.3 trillion, adding to years of accumulation that has left the world’s most indebted firms owing as much as many medium-sized countries. Last year also saw a sharp 8% rise… But this year’s jump will be for an entirely different reason - preservation as the virus saps profits.”

July 15 – Reuters (Ana Nicolaci da Costa): 

“One small firm in three around the world was obliged to cut jobs to stay open through the coronavirus pandemic in May, a survey showed…, underlining how hard the outbreak has slammed the world economy.”

July 17 – Associated Press (Eric Tucker): “

The United States has become overly reliant on Chinese goods and services, including face masks, medical gowns and other protective equipment designed to curb the spread of the coronavirus, Attorney General William Barr said 

     Thursday as he also cautioned American business leaders against promoting policies favorable to Beijing. Barr asserted that China had not only dominated the market on protective gear, exposing American dependence on Beijing, but had also hoarded supplies and blocked producers from exporting to them to countries in need.”

July 14 – Politico (Sabrina Rodriguez): 

“President Donald Trump… signed into law a bill to impose sanctions on Chinese officials, businesses and banks that help China restrict Hong Kong’s autonomy, 

     a move that is likely to worsen already-strained diplomatic ties and prompt retaliation from Beijing. ‘This law gives my administration powerful new tools to hold responsible the individuals and the entities involved in extinguishing Hong Kong's freedom,’ Trump said in a Rose Garden appearance.”

July 14 – Reuters (Eric Beech): 

“U.S. President Donald Trump… shut the door on ‘Phase 2’ trade negotiations with China, saying he does not want to talk to Beijing about trade because of the coronavirus pandemic. 

     ‘I’m not interested right now in talking to China,’ Trump replied when asked in an interview… whether Phase 2 trade talks were dead. ‘We made a great trade deal,’ Trump said, of the Phase 1 agreement signed in January. ‘But as soon as the deal was done, the ink wasn’t even dry, and they hit us with the plague,’ he said…”

July 13 – Reuters (Kate Duguid): 

“The Federal Reserve’s $3 trillion bid to stave off an economic crisis in the wake of the coronavirus outbreak is fuelling excesses across U.S. capital markets. 

     The U.S. central bank has pledged unlimited financial asset purchases to sustain market liquidity, increasing its balance sheet from $4.2 trillion in February to $7 trillion today. ... ‘COVID-19 is now inversely related to the markets."

July 14 – Reuters (Lindsay Dunsmuir, Jonnelle Marte and Kanishka Singh): 

“The U.S. economy will recover more slowly than expected amid a surge in novel coronavirus cases across the country, 

      and a broad second wave of the disease could cause economic pain to deepen again, Federal Reserve officials warned”

July 13 – Associated Press: 

“The federal government incurred the biggest monthly budget deficit in history in June… The… deficit hit $864 billion last month, 

      an amount of red ink that surpasses most annual deficits in the nation’s history and is above the previous monthly deficit record of $738 billion in April. For the first nine months of this budget year, which began Oct. 1, the deficit totals $2.74 trillion, also a record for that period.”

July 13 – Wall Street Journal (Kate Davidson): 

“The U.S. budget deficit reached $3 trillion in the 12 months through June as stimulus spending soared and tax revenue plunged, putting the federal government on pace to register the largest annual deficit as a share of the economy since World War II. 

     As a share of gross domestic product, the 12-month deficit came to 14% last month, compared with 10.1% in February 2010, when the U.S. was still recovering from the last recession… The Congressional Budget Office has projected the annual deficit could total $3.7 trillion in the fiscal year that ends Sept. 30.”

July 14 – Reuters: 

“U.S. consumer prices increased by the most in nearly eight years in June as businesses reopened, but the underlying trend suggested inflation would remain muted 

      and allow the Federal Reserve to keep injecting money into the ailing economy. The… consumer price index increased 0.6% last month, the biggest gain since August 2012, after easing 0.1% in May. The increase… was driven by rises in the prices of gasoline and food. In the 12 months through June, the CPI climbed 0.6%...”

July 16 – Reuters: 

“U.S. retail sales in June ... rose 7.5%. 

That was on top of the 18.2% jump in May, 

which was the biggest gain since 

the government started tracking in 1992. 

Economists… had forecast retail sales 

advancing 5% in June.”

July 15 – CNBC (Leslie Josephs): 

“American Airlines… warned about 25,000 front-line employees — roughly 29% of its U.S. mainline workforce — that they could be furloughed this fall, 

     the latest carrier to prepare staff for job cuts as surges in coronavirus cases dash hopes for a quick rebound in travel demand. The airline also urged employees to take new extended leaves that can last up to two years or early retirement packages to get as many people off payroll as possible… American’s revenue in June was down more than 80% than a year ago…”

July 14 – Wall Street Journal (Ben Foldy): 

“General Motors Co. and Ford Motor Co. are continuing to struggle with keeping workers on the job as coronavirus cases surge nationwide, 

     forcing the auto-making giants to cut shifts, hire new workers and transfer others to fill vacant roles. The absences are hampering efforts to recover from the economic havoc wreaked by the pandemic… A GM assembly plant in Wentzville, Mo., that has been running three shifts to restock the company’s depleted supply of midsize pickups is cutting one of the shifts to better cope with worker absences…”

July 15 – Bloomberg (Denise We): 

“The New York University professor who developed one of the best-known formulas for predicting corporate insolvencies has a warning for U.S. credit investors: this year’s spate of ‘mega’ bankruptcies is just getting started. 

     More than 30 American companies with liabilities exceeding $1 billion have already filed for Chapter 11 since the start of January, and that number is likely to top 60 by year-end after businesses piled on debt during the pandemic, according to Edward Altman, creator of the Z-score… Companies globally have sold a record $2.1 trillion of bonds this year, with nearly half coming from U.S. issuers… ‘There was a huge buildup in corporate debt by the end of 2019 and I thought the market would gain some much needed de-leveraging with the Covid-19 crisis,’ said Altman… ‘Now, seems like companies again are exploiting what seems to be a crazy rebound.’”

July 15 – New York Times (Steven Lee Myers): 

“China… sharply criticized President Trump’s moves to strip Hong Kong of its preferential trading status with the United States and clear the way for new sanctions on officials and companies there, 

     vowing to retaliate with punitive measures of its own. ... Those moves, along with his remarks, underscored the extent to which relations with Beijing have become intertwined with the American presidential election.”

July 13 – Bloomberg: 

“Three months after China started to emerge from its coronavirus restrictions, its army of shoppers that help power the global economy are still nervous of travel, reticent to spend and forming habits that may change the face of consumption permanently… "

July 15 – Reuters (Huizhong Wu and Gabriel Crossley): 

“China’s industrial output rose 4.8% in June from a year earlier…, expanding for the third straight month and offering some relief to an economy trying to regain its footing 

      from the shock of the coronavirus outbreak earlier in the year… Fixed asset investment fell 3.1% in the first half of the year from the same period last year, compared with a forecast 3.3% fall and a 6.3% decline in the first five months of the year.”

July 15 – Bloomberg (Yvonne Yue Li): 

“A Wuhan-based jewelry maker said officials in China are investigating allegations the Nasdaq-listed company used fake gold bars to secure loans from Chinese financial institutions. 

       Reports in Chinese media in the past month raised questions about whether Kingold Jewelry Inc. had pledged 83 tons of gold that mainly consisted of copper alloy to secure loans."

July 11 – Bloomberg (Kartik Goyal and Suvashree Ghosh): 

“Indian banks, which are already struggling with one of the world’s worst bad-loan ratios, are set to face more pain as the coronavirus pandemic slams growth, the central bank’s chief warned, urging lenders to gird up their defenses. 

       ‘The economic impact of the pandemic, due to the lockdown and the anticipated post-lockdown compression in economic growth, may result in higher non-performing assets and capital erosion of banks,’ Reserve Bank of India Governor Shaktikanta Das said… ‘A recapitalization plan for state-run and private banks has, therefore, become necessary.’”