World economy

The Gap Between The US Stock Market And The Real Economy Has Increased Sharply Due To Covid19

Last week there were sharp falls in the stock markets (-4%/-5% in Europe, -6%/-7% in the US), with the biggest drops since March. In a context of a significant disconnection between prices and fundamentals after the sharp rises from the March lows, which were discounting an unlikely “V” recovery, these downward moves seem logical. Also the upward excesses, which until last week were the protagonists. Our correspondent in Washington, Pablo Pardo, analyses this stock market and economic chaos.

How Important Is International Tourism To The Global Economy?

James Reilly (Schroeders) | Tourism contributed 10.4% to global GDP in 2018; however, with many countries worldwide currently operating travel restrictions, the sector is now facing serious challenges. Scenarios produced by the United Nations World Tourism Organisation (UNWTO) point to a fall in international tourist journeys of between 58% and 78% for 2020. Such an outcome could potentially see 100-120 M direct tourism jobs at risk in what is one of the most labour-intensive sectors of the global economy.

5G Is Going To Change The World

Andy Budden (Capital Group) | The impact 5G will have on a wide range of industries is likely to be bigger than we’ve seen with any previous generation of mobile telecoms. Each previous new generation of network has produced a big jump in speed. And we will certainly see this with 5G, which is estimated to be between 10 and 100 times faster than 4G. But 5G is about much more than quicker phone downloads.

The Fed And The OECD Have Doubts About The V-Shaped Recovery Discounted By The Markets

Santander Corporate & Investment | The Fed does not expect the economy to fully recover until 2022 and expects GDP to fall by 6.5% and unemployment of 9.3% in 2020. The OECD also distances itself from V-shaped scenarios and warns of the worst peacetime recession in 100 years. In scenarios without second waves of Covid-19, the OECD anticipates a global contraction of 11.5% in H1’20 and neither does it expect world GDP to approach the pre-coronavirus level by end-2021.

From Flattening the Epidemiological Curve to Flattening the Carbon Emissions Curve?

Citi GPS | As Earth day celebrated its 50 th anniversary on April 22, 2020, the coronavirus pandemic was inadvertently slashing global carbon emissions so much that they could be down 4-9% YoY for 2020 as a whole, on n the recommended path to achieve climate goals. After Covid-19, some of the drop in oil demand may be longer lasting, keeping carbon emissions lower, notably for aviation.

Gold In Times Of Economic Crisis And Social Revolution

Degussa | Unfortunately, those blaming capitalism are barking up the wrong tree. For all their critique of inflationary money, economic hardship and rising inequality are the direct results of governments’ successful war against capitalism, which has been replaced by a system of interventions; the free market system was replaced by a system of decrees and prohibitions, all of which are incompatible with capitalism in the true sense. Against this backdrop, the question arises: How come that people put all the blame on capitalism rather than interventionism-socialism? 

OPEC+ Will Extend Supply Cuts And Continue To Monitor Their Effects

Renta 4 | Finally OPEC+ may have reached a tentative agreement to extend production cuts and the member countries could meet as soon as this weekend to sign it. Saudi Arabia and Russia wanted a firm commitment from those countries which were evading their quotas. So they have finalised an accord with Iraq to meet not only its share of the cuts, but even to compensate for past breaches.

US Stimulus Should Limit GDP Contraction This Year To 3.8% And An Above-Consensus 5.3% Rebound Next

David Page (AXA IM) | Yet even on our relatively bullish assessment the US economy will close 2021 1.7% below the level of GDP it would have achieved with potential growth from end-2019. This suggests the US economy would still exhibit spare capacity – a higher level of unemployment than at the start of 2020 and lower capacity utilisation, something that is likely to leave the Federal Reserve struggling to achieve its 2% inflation target – let alone anything higher.

Why The US Dollar Remains Crucial For Hong Kong’s Economic Prosperity

via The Conversation | One important pillar of Hong Kong’s economy remains unchanged and outside of Chinese government control – its currency, which is pegged to the US dollar via a currency board. This could have significant benefits for the city as it tries to deal with pressing socioeconomic challenges. But this also requires more public spending from the special administrative region’s government.

Earlier OPEC+ Meeting Could Set Stage For Production Cut Extension

Nitesh Shah (Wisdoom Tree) | OPEC+ had been readying itself for an earlier-than-originally scheduled meeting. That drove oil prices higher. However, disputes about compliance levels with quotas are casting doubt on moving the meeting to 4th June. If the meeting does go ahead this week, oil prices are likely to recoup intra-day losses on 3rd June. That could take Brent above US$40/bbl and WTI above US$38/bbl.