Financial and economic news from last week

Coronavirus  News:
(1)
August 28 –
Bloomberg
(Riley Griffin and
Jeannie Baumann):
“... Hundreds of thousands of doses of coronavirus vaccines have already been manufactured in hopes that at least one of the candidates might succeed in clinical trials.  The Trump administration’s ‘Operation Warp Speed’ program has reached agreements for eight coronavirus vaccine candidates that are in various stages of development, none of which have yet been approved or authorized for use.”



(2)
August 24 –
Financial Times
(Michael Stott):
“Latin America has been the global epi-center of the Covid pandemic since early June, accounting for more than 40% of the world’s new Covid-19 deaths despite having only 8% of the population.
While Brazil and Mexico took a more laissez-faire approach to coronavirus, most of Latin America’s other economies were crippled by strict lockdowns lasting far longer than those in Europe or Asia.”



Economic  and  Financial  News:
(3)
August 27 –
Bloomberg:
“In China ... borrowing costs in the world’s second-largest economy are spiking, driving down bonds and stocks,  as the central bank holds back on aggressive easing. While the People’s Bank of China has stepped up actions to mitigate the liquidity shortage, injecting the most funds this month since January, that’s done little to alleviate the relative drought. A gauge of interbank borrowing costs is close to a six-month high and an indicator of liquidity tightness in the foreign-exchange market has touched its highest level since 2017. The yield on 10-year government debt is above 3%, approaching a record gap with Treasuries…”



(4)
August 23 –
Wall Street Journal
(Paul Vigna):
“The price/earnings ratio
on the S&P 500,
measured against
the past 12 months
of earnings,
stands at 25.26,
according to FactSet.
 That is the highest
level since 2002.

The forward P/E,
measured against earnings
expectations for the next year,
is at 25.98—a mark last hit
in September 2000.

And the valuation
of the median stock
in the S&P 500,
measured by forward P/E,
is now in the 100th percentile
of historical levels,
according to Goldman Sachs
…, going back four decades
—the highest level possible.
The index itself is trading
at the 98th percentile.”



(5)
August 24 –
Bloomberg
(Alan Mirabella):
“The Federal Reserve has created a speculative bubble that has pushed debt levels beyond what the U.S. economy can support, Leon Cooperman said. ... Who pays for the party when the party is over?’
It took the U.S. ‘244 years to go from zero national debt to $21 trillion,’ he said. ‘We will probably end this year with $27 trillion. That’s a growth rate in debt far in excess of what the economy is growing at and I think that’s going to be a problem down the road.’”



(6)
August 26 –
Bloomberg
(Björn van Roye):
“Economic activity ... in emerging markets excluding China remained 33% below the pre-virus level at the end of August,
according to Bloomberg Economics gauges that integrate high-frequency data such as credit-card use, travel and location information.
China, Russia, Turkey and Brazil have made the most progress, while the rate of recovery in major Latin American countries -- particularly in Argentina and Colombia -- has been much slower and has recently declined further.”



(7)
August 24 –
Reuters
(Scott Murdoch and
Patturaja Murugaboopathy):
“Companies raised the most funds in global equity and debt markets for the month of August in a decade as homebound bankers spend their summer fixing deals off the back of trillions of dollars of stimulus worldwide to fight the coronavirus pandemic.
Companies have raised $65.5 billion through initial public offerings (IPOs) and high-yield bond issuances globally so far in August, the highest for that month in at least 10 years, according to Refinitiv"



(8)
August 26 –
Reuters
(Susan Heavey, Idrees Ali,
Daphne Psaledakis,
Raphael Satter and
David Brunnstrom):
 “The United States… blacklisted 24 Chinese companies and targeted individuals it said were part of construction and military actions in the South China Sea, its first such sanctions move against Beijing over the disputed strategic waterway.  The U.S. Commerce Department said the two dozen companies played a ‘role in helping the Chinese military construct and militarize the internationally condemned artificial islands in the South China Sea.’ Separately, the State Department said it would impose visa restrictions on Chinese individuals ‘responsible for, or complicit in,’ such action and those linked to China’s ‘use of coercion against Southeast Asian claimants to inhibit their access to offshore resources.’”



(9)
August 25 –
Associated Press
 (Martin Crutsinger):
“U.S. consumer confidence fell for the second consecutive month, sinking to the lowest levels in more than six years as a resurgence of COVID-19 infections in many parts of the country heightened pessimism.  
The Conference Board… reported… its Consumer Confidence Index declined to a reading of 84.8 in August, the lowest level since May 2014. The drop, which followed a July decline to 91.7, put the index 36% below its high point for the year reached in February”



(10)
August 27 –
CNBC
(Fred Imbert):
“The number of Americans who filed for unemployment benefits for the first time came in above 1 million for the 22nd time in 23 weeks as the economy struggles to recover from the coronavirus pandemic… Initial U.S. jobless claims totaled just over 1 million for the week ending Aug. 22, down from 1.104 million in the previous week… Continuing claims… fell by 223,000 to 14.535 million for the week ending Aug. 15.”



(11)
August 25 –
Bloomberg
(Prashant Gopal):
“New-home sales in the U.S. jumped to the highest level in almost 14 years in July as low mortgage rates helped fuel a suburban construction boom. Purchases of new single-family houses climbed 13.9% from June to a 901,000 annualized pace from an upwardly revised 791,000… The median forecast… called for a 790,000 rate of sales. The median selling price rose 7.2% from a year earlier to $330,600…"



(12)
August 25 –
CNBC
(Diana Olick):
“Home prices rose 4.3% annually in June, unchanged from the gain seen in May, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index… The 10-City Composite increased 2.8% annually, down from 3% in the previous month. The 20-City Composite rose 3.5% year over year, down from 3.6% in the previous month.”



(13)
August 22 –
Financial Times
(Chris Flood):
“The total funding gap for the 143 largest US public pensions plans is on track to reach $1.62tn this year, significantly higher than the $1.16tn recorded in 2009  in the aftermath of the global financial crisis, according to Equable Institute… The weak financial condition of the US public pension systems poses severe risks for the living standards of millions of employees and retired workers.”



(14)
August 23 –
Wall Street Journal
(Jimmy Vielkind and
Katie Honan):
“New York City faces a $9 billion deficit over the next two years, high levels of unemployment and the prospect of laying off 22,000 government workers if new revenue or savings aren’t found in the coming weeks. The growing economic crisis ... has alarmed New York Gov. Andrew Cuomo so much that he recently asserted greater control over a panel overseeing the finances of the nation’s largest city.”



(15)
August 24 –
Bloomberg
(John Gittelsohn):
“Some of the largest real estate investors are walking away from debt on bad property deals, even as they raise billions of dollars for new opportunities borne of the pandemic.  The willingness of Brookfield Property Partners LP, Starwood Capital Group, Colony Capital Inc. and Blackstone Group Inc. to skip payments on commercial mortgage-backed securities backed by hotels and malls illustrates how the economic fallout from the coronavirus has devalued some real estate while also creating new targets for these cash-loaded investors.”



(16)
August 26 –
Bloomberg
(Jon Gittelsohn):
“U.S. commercial real estate prices are falling as the economic toll of the Covid-19 pandemic worsens -- and the decline is just getting started. Indexes for office, retail and lodging properties all slipped year-over-year in July, data from… Real Capital Analytics Inc. show. Transaction volume plummeted to $14 billion across all sectors, down 69% from July 2019. ‘The worst is yet to come,’ Real Capital Senior Vice President Jim Costello said… ‘We’re not seeing the fallout yet of owners selling properties and taking a loss.’”



(17)
August 25 –
Bloomberg
(John Gittelsohn):
“More than $54.3 billion in U.S. commercial mortgage backed securities have been transferred to loan workout specialists mostly because of payment delinquencies, a 320% increase since the start of the Covid-19 pandemic, according to Moody’s… Hotel and retail properties, the sectors hit hardest by restrictions on travel and public gatherings to reduce virus transmissions, make up the vast majority of the debt transferred to special servicers… The rate of severely delinquent loans -- more than 121 days late -- nearly tripled in August, jumping to 2.3% from 0.8% in July.”



(18)
August 23 –
Bloomberg:
“With the Chinese economy now strong enough for policy makers to dial back financial support but still too weak to save the most distressed borrowers, some fund managers are bracing for defaults on domestic Chinese debt to hit record highs this year. Delinquencies have already started rising after a remarkably quiet second quarter, and pressure on borrowers is set to grow as 3.65 trillion yuan ($529bn) of notes mature by year-end.”



(19)
August 26 –
Reuters
(Anthony Esposito and
Miguel Angel Gutierrez):
“Mexico’s economy could contract by almost 13% this year, the central bank warned ... after GDP data showed the pandemic lockdown had thrown the country into the deepest slump since the Great Depression… Gross domestic product fell 17.1% in seasonally adjusted terms in the April-June period from the prior quarter…”



(20)
August 26 –
Reuters
(Ben Blanchard and
Yew Lun Tian):
“Numerous Chinese and U.S. military exercises, Taiwan missiles tracking Chinese fighters and plummeting China-U.S. ties make for a heady cocktail of tension that is raising fears of conflict touched off by a crisis over Taiwan. In the last three weeks. ... Meanwhile Taiwan, claimed by China as its ‘sacred’ territory, said its surface-to-air missiles had tracked approaching Chinese fighters - details Taiwan does not normally give - as U.S. Health Secretary Alex Azar was visiting the island this month.”



(21)
August 27 –
Financial Times
(Kathrin Hille,
Christian Shepherd
and Emma Zhou):
“Military tension between Washington and Beijing is surging after China launched missiles capable of hitting US warships and military bases into the disputed South China Sea. The People’s Liberation Army on Wednesday ‘fired four medium-range missiles into [an] area between Hainan and the Paracel Islands,’ said a US military official… Another US military official said the launch included a Dongfeng-21D, an anti-ship missile built to threaten US aircraft carriers, and several Dongfeng-26B medium-range missiles, known as the ‘Guam express’ because they can reach air force and naval bases in the US Pacific territory.”



(22)
August 27 –
Financial Times
(Henry Foy and
James Shotter):
“Russia has created a reserve police force for use in neighbouring Belarus on the request of its embattled strongman leader, President Vladimir Putin said, warning that he would deploy it across the border if protests in the country turn violent.  
 The show of support for President Alexander Lukashenko came with a reiterated warning from Mr Putin that western countries should refrain from attempting to influence the situation in Belarus. It is almost three weeks since mass protests against Mr Lukashenko’s 26-year regime erupted after he was declared the winner of his sixth consecutive presidential election…”