Jun Du , Agelos Delis, Mustapha Douch & Oleksandr Shepotylo via The Conversation | Although the global economy was fragile at the start of 2020, many hoped for increased international trade following the US-China Phase One trade deal. COVID-19 has scuppered those hopes, bringing the world’s factories to a standstill and severely disrupting global supply chains.
Addam Vettese (eToro) | Samsung has made it easier for users of its smartphones to buy and trade cryptoassets. Yesterday, the smartphone company announced a partnership with cryptocurrency exchange Gemini, with Samsung’s Blockchain Wallet now integrating with the Gemini mobile app, allowing users to buy and sell cryptocurrencies. Users will also be able to view their Gemini account balances in the Samsung Blockchain Wallet app, as well as transfer their crypto into cold storage through Gemini’s Custody feature.
Yves Bonzon (Julius Baer)| The tensions between Washington and Beijing seem to be increasing almost every day. After the US administration ratcheted up its criticism of China’s response to the coronavirus outbreak, trade tensions have again heated up. News has emerged that China would like to renegotiate the phase-1 trade agreement signed earlier this year as it is increasingly viewed as unfair domestically. This has categorically been ruled out by US President Donald Trump.
Philippe Waechter (Natixis AM) | The CFNAI index, calculated by the Chicago Fed, is the best measure of the economic situation as it is. It is a composite of 85 indicators published in one month. It includes industrial production, retail sales, employment and many more. It is published late compared to the surveys, but it perfectly reflects the state of the business cycle. It reads on average over 3 months and when it is greater than -0.7, the probability of recession is almost zero. Below this threshold, the risk of recession is high. See here for more details. In April, the index dropped more than 10 points to -16.74 from -4.97 in March. Its three-month average was -7.22 compared to -1.69 in March. The indicator is well below the threshold of -0.7. As the graph shows, The index is also well below the measures observed in 2008/2009. The shock is of a different kind and magnitude never before seen. This curve has the same pace as that of employment which in April contracted by 20.5 million.
Ricard Murillo Gili (via Caixabank Research ) | The paralysis of economic activity will lead to a fall in global GDP not seen since 1930. Are there latent financial fragilities that could amplify this decline? In a more demanding financial environment, the high levels of debt will be put to the test, its quality will deteriorate and mechanisms that amplify economic stress could be activated due to the interconnections that exist between different assets.
Olivia Álvarez (Monex Europe) | The Mexican economy shrank by 1.2% in Q1 on a quarterly basis, or 1.4% when compared with last´s year same period (not seasonally adjusted). The fallout in Q1 follows a series of 5 quarterly contractions over the last year and a half, further deepening the ongoing economic recession in Mexico. The coronavirus shock is mainly to blame for the Q1 contraction as external demand dropped sharply, with domestic activity only being affected in the last week of the quarter by the implementation of social distancing measures. Even so, quarterly GDP was dragged down to its worst performance since the financial crisis in 2009, with the March GDP contraction of 1.25% adding to a monthly decline of 0.59% in February and stalemate in January.
Miguel Navascués | The Fed is continuing to buy assets and issue money to chosen subjects (for the first time not just the banks). The purchases made so far are more than double those made in 2008. However, the speed of money circulation (i.e., GDP/M2), shows a decline to levels never seen before: each unit of money in circulation moves just $1.4 of GDP. Or, in other words, more and more money is needed to move the same amount of GDP.
David A. Meier (Julius Baer) | Preliminary purchasing managers’ indices (PMIs) show that economic momentum has bottomed out from record-low levels in May, after corona-containment measures were eased. Nevertheless, levels are still in contraction territory. Even if PMIs recover to expansion in the next months, it will take some quarters until growth is restored at pre-crisis levels.
Emma-Lou Montgomery (Fidelity Investments) | The pandemic has slowed the global economy, it has also accelerated change in other areas that, in ‘normal’ times, would have probably taken months, if not years to come about and therein lies a source of opportunity for investors in particular. One obvious contender is retail. We are still very much in the midst of it all, but once the pandemic threat has passed sufficiently enough to allow the economy to fully reopen, the differential between high street and online retailers will become even more stark than before the pandemic.
DWS | Trade wars are rarely good, and never easy to win. Instead, they tend to produce economic losses on all sides, causing both short-term pain and long-term damage. Recent trade conflicts between the United States and China may prove hard to reverse, harming U.S. consumers and businesses alike. As our “Chart of the Week” shows, Chinese exports to the United States have held up pretty well in value terms since both sides started to impose tariffs in July 2018.