Economic News From Last Week

Coronavirus  News:

July 21 – Reuters (Jane Wardell and Gayle Issa): 

“Global coronavirus infections surged past 15 million on Wednesday, according to a Reuters tally, with the pandemic gathering pace even as countries remain divided in their response to the crisis.”

July 21 – Associated Press (Carla K. Johnsn, Matt Sedensky and Candice Choi): 

“The coronavirus rocketed around the world. It first flared in central China and, within three months, was on every continent but Antarctica. The rapid spread baffled health authorities and undermined early containment efforts — the virus could be spread by seemingly healthy people.”

July 20 – Financial Times (David Crow):

 “The largest laboratory company in the US has warned it will be impossible to increase coronavirus testing capacity to cope with a surge in demand during the autumn flu season … Long delays in processing test results — which are taking more than a week to return — are exacerbating the situation and the time lag is expected to worsen in the autumn, when millions of Americans catch common colds and the flu.”

July 21 – Bloomberg (Michelle Fay Cortez and Niclas Rolander): 

“Recovering from Covid-19: Antibodies taken from the blood of 34 patients who had recovered after suffering mainly mild symptoms… The first analysis was done on antibodies taken an average of 37 days after symptoms began, with a second after about 86 days… The researchers found that antibody levels fell quickly, with a half-life of about 73 days between the two time frames. The loss of antibodies occurred more quickly than with SARS, an earlier type of coronavirus infection.”

Markets:

July 20 – Bloomberg (Jeran Wittenstein and Sarah Ponczek): 

“The stay-at-home trade roared back on Monday after a rough week, sending the Nasdaq 100 to its best gain in three months and pushing one measure of momentum to the highest in two decades… The rally has pushed the Nasdaq 100 further away from its recent trend line. Trading 21% above its average price over the past 100 days, the gap is the widest since the dot-com peak in March 2000.”

July 21 – Bloomberg (Stephen Spratt, Liz Capo McCormick and James Hirai): 

“There’s still about $1 trillion of sovereign bonds coming to market in the months ahead that will be looking for buyers. The flood of fresh debt, sold by governments to fund pandemic-rescue packages, threatens to dwarf central-bank buying and swamp markets in the U.K., Canada and Australia, according to Bloomberg calculations.”

July 20 – Reuters (Joori Roh): 

“South Korean exports fell during the first 20 days of July by a larger percentage than in June as protracted a lockdown and delay in economic reopenings across the world cut global demand. The country’s overseas sales during July 1-20 dropped 12.8% from the same period a year earlier, while imports slid 13.7%...”

July 22 – Reuters (Swati Pandey): 

“Australia’s budget is set to plunge into its biggest deficit since World War Two this year… Although Australia has managed the pandemic better than most developed nations, the shattering global impact of the outbreak has left its trade-exposed A$2 trillion ($1.43 trillion) economy grappling with skyrocketing unemployment as many businesses sink in red ink.”

United  States -- President  Trump:

July 22 – Bloomberg (Nick Wadhams and Peter Martin): 

“The unexpected order Wednesday to close the Chinese consulate in Houston made one thing clear: the hawks are now in charge. Eager to blame China for the Covid-19 pandemic and fed up with what U.S. officials call a history of espionage and intellectual-property theft, Trump has allowed a small group of advisers led by Secretary of State Michael Pompeo to push U.S. policy toward its most antagonistic in decades. The result is a series of sanctions, restrictions and condemnations that culminated in the Houston decision.”

July 23 – CNBC (Amanda Macias): 

“Capping a string of searing speeches by Trump administration officials, Secretary of State Mike Pompeo slammed the Chinese government in a sweeping address…, saying the United States will no longer tolerate Beijing’s playbook to usurp global order.”

July 21 – Reuters (Chris Sanders and Christopher Bing): 

“The U.S. Justice Department… indicted two Chinese nationals over their role in what the agency called a decade-long cyber espionage campaign that targeted defense contractors, COVID researchers and hundreds of other victims worldwide. U.S. authorities said Li Xiaoyu and Dong Jiazhi stole terabytes of weapons designs, drug information, software source code, and personal data from targets that included dissidents and Chinese opposition figures. They were contractors for the Chinese government, rather than full-fledged spies, U.S. officials said.”

July 23 – Reuters (Fred Imbert): 

“The number of Americans who filed for unemployment benefits rose more than expected last week as the coronavirus pandemic inflicted more damage to the U.S. economy. …Initial jobless claims came in at 1.416 million for the week ending July 18. Economists polled by Dow Jones expected 1.3 million. It was the 18th straight week in which initial claims totaled more than 1 million, and it snapped a 15-week streak of declining initial claims.”

July 20 – New York Times (Matt Phillips): 

“Since the 2008 global financial crisis, American corporations have taken advantage of historically low interest rates to gorge themselves on debt. Then came the pandemic and the sharpest economic downturn in history, which resulted in an odd solution for the companies that did all that borrowing: more debt. Through late June, giant U.S. companies had borrowed roughly $850 billion in the bond markets this year, double the pace from last year. Analysts at JPMorgan… anticipate that investment-grade companies will borrow roughly $1.6 trillion from investors by the time 2020 is over. It has turned conventional wisdom on its head. ‘During a standard recession, and that would include the global financial crisis as well, you would expect to see corporate debt as a percentage of G.D.P. begin to come down,’ said Paul Ashworth, chief U.S. economist at Capital Economics…”

July 23 – Bloomberg (Hailey Waller and Allison McNeely): 

“One of the key sources of funding for American shale is evaporating, just as the sector needs it more than ever. Banks lending against the oil and natural gas reserves of hundreds of independent U.S. drilling companies have pulled back from the sector at an unprecedented rate this year… There’s every indication they’re not done: Many in the industry expect further reductions to credit facilities in the fall, with higher costs and more stringent protections for lenders.”

July 22 – Reuters (Lucia Mutikani):

 “U.S. home sales increased by the most on record in June, boosted by historically low mortgage rates, but the outlook for the housing market is being clouded by low inventory and high unemployment amid the COVID-19 pandemic… Existing home sales jumped 20.7% to a seasonally adjusted annual rate of 4.72 million units last month… June’s increase ended three straight months of decreases, though home resales remained 18% below their pre-pandemic level.”

China:

July 19 – Bloomberg: 

“China’s cash-strapped small lenders are expanding their pile of the riskiest kind of bank debt to shore up their capital levels, bracing against an economic slowdown and rising loan defaults. A total of 19 banks have sold 339.6 billion yuan ($48.5bn) perpetual bonds, high-yielding subordinated bonds with no maturity dates, as of July 10 this year… Smaller lenders including Chongqing Three Gorges Bank Co., Bank of Rizhao Co., and Huarong Xiangjiang Bank Corp. accounted for more than 70% of the issuance.”

July 20 – Reuters (David Lague): 

“China launched its military build-up in the mid-1990s with a top priority: keep the United States at bay in any conflict by making the waters off the Chinese coast a death trap. Now, China’s People’s Liberation Army (PLA) is preparing to challenge American power further afield. China’s shipyards have launched the PLA Navy’s first two Type 075 amphibious assault ships, which will form the spearhead of an expeditionary force to play a role similar to that of the U.S. Marine Corps. And like the Marines, the new force will be self-contained - able to deploy solo with all its supporting weapons to fight in distant conflicts or demonstrate Chinese military power.”

Europe:

July 21 – Wall Street Journal (Bojan Pancevski and Laurence Norman): 

“Europe’s €750 billion economic rescue was secured by an unlikely champion: German Chancellor Angela Merkel, who after years of opposition to such handouts, was the driving force behind the deal. With her prodding, European Union leaders took a step… they have shunned for years—agreeing to issue common debt on a large scale—to fund an attempt to lift member countries out of economic crises brought on by the coronavirus. The agreement puts all 27 EU nations on the hook for debt to help prop up the finances of poorer EU nations, a move Germans, led by Ms. Merkel, have balked at for over a decade. Ms. Merkel’s Damascene conversion, unthinkable a few months ago, raises the prospects of a reversal of fortune for the EU.”

India:

July 24 – Bloomberg (Suvashree Ghosh): 

“The bad loan ratio in India’s banking sector is forecast to swell to the highest level in more than two decades after a prolonged lockdown hurt businesses and left millions jobless. Soured assets will rise to 12.5% of total advances by March 2021 -- highest since the financial year started 1999 -- from 8.5% a year earlier… It warned that if the macroeconomic environment worsens further, the ratio may escalate to 14.7% under the very severely stressed scenario.”

Japan:

July 19 – Bloomberg (Yoshiaki Nohara and Yuko Takeo): 

“Japanese exports fell by more than 20% for a third straight month even as key markets started to reopen from virus shutdowns. The value of Japan’s overall shipments overseas slid 26.2% in June from a year earlier, led by steep declines in exports of cars and auto parts…”

July 18 – Bloomberg: 

“Japan’s government will start subsidizing some companies to invest in factories in Japan and South-East Asia as part of efforts to reduce reliance on manufacturing in China. Fifty-seven companies including privately-held facemask-maker Iris Ohyama Inc. or Sharp Corp. will receive a total of 57.4 billion yen ($536 million) in subsidies from the government to invest in production in Japan…”