S&P Predicts Global Recession This Year, Warns Of Downside Risks

Trading 17 mar 2020 Commentaire »

The global economy is set to see a recession this year due to the severe economic shock caused by the coronavirus, or Covid-19, and the risks remain on the downside, S&P Global said Tuesday. "As the coronavirus pandemic escalates and growth heads sharply lower against a backdrop of volatile markets and growing credit stress, we now forecast a global recession this year, with 2020 GDP rising just 1.0 percent -1.5 percent," S&P's global chief economist Paul Gruenwald said.

"The risks remain firmly on the downside."

The Chinese economy was hit much harder than projected, though a tentative stabilization has begun, S&P said citing initial data.

Severe impact is seen in Europe and the US as containment measures such as social distancing and travel bans are set to lead to a demand collapse and hence, economic activity is expected to be sharply lower in the second quarter, the rating agency said. A recovery is likely later this year, S&P added.

The rating agency forecast China's growth for this year at 2.7-3.2 percent. Economic growth is set to be flat in the second quarter and a recovery is seen in the second half, the firm said. Chinese authorities don't appear to be planning a big fiscal stimulus, though targeting spending will continue, and the People's Bank of China will intervene to keep liquidity flowing, S&P said. In the euro area, where many countries have gone into lock-down as the virus spreads, the economy is expected to contract in the first quarter, and shrink more significantly in the second quarter, which is likely to be followed by a modest recovery. S&P projected 0.5-1 percent contraction for the Eurozone economy this year. "The European Central Bank seems unlikely to lower policy rates much, but it will use cheap long-term refinancing operations (LTROs) and targeted LTROs to smooth the operation of the financial sector," S&P said. "We also expect stepped-up EU-level fiscal efforts to support the hardest-hit firms and populations."

In the US, the sectoral hits should be similar to that of Europe, with the key addition of the oil and gas sector, given the plunge in global prices, the firm said. The contraction is likely to be marginal in the first quarter, thanks to a strong start to the year and the lag in many key metrics. But, the hit would be much severe, as much as an annualized 6 percent contraction, in the second quarter before recovery in the second half of the year.

"The Fed has already acted, and its intentions are clear," S&P said.

"We expect short-term, targeted fiscal stimulus at the federal level soon."

The severity of the economic shock in the emerging markets will largely depend on capital flow and commodity dependency.

Emerging economies with external imbalances such as huge current account deficits and those with a high stock of external debt, and oil exporters are especially at risk, S&P said. Meanwhile, oil imports should benefit, the firm added.


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*Poland CB Cuts Key Interest Rate By 50 Bps To 1%

Trading 17 mar 2020 Commentaire »

Poland CB Cuts Key Interest Rate By 50 Bps To 1%


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Euro Weakens As German Economic Confidence Slumps Most Since 1991

Trading 17 mar 2020 Commentaire »

The euro fell sharply against its major counterparts in the European session on Tuesday, after German economic confidence plunged to its lowest level since December 2011 amid fears about the economic fallout from the coronavirus outbreak. Survey results from the ZEW - Leibniz Centre for European Economic Research showed that the economic sentiment index plunged 58.2 points to -49.5 in March

This was the biggest fall since the survey began in 1991 and reached its lowest level since December 2011. The score was also worse than the economists' forecast of -27.2.

At the same time, the index measuring current economic situation declined 27.4 points to -43.1 in March. The expected reading was -30.0.

Sentiment deteriorated as coronavirus worries offset expectations of more stimulus.

The deadly coronavirus has so far infected 181,580 people worldwide and killed more than 7,100, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University.

The euro declined to near a 3-week low of 1.0973 against the greenback from yesterday's closing value of 1.1180. The euro is seen finding support around the 1.08 mark.

The euro weakened to 117.35 against the yen and 1.0545 against the franc, from its early high of 119.69 and a 4-day high of 1.0605, respectively. Next key support for the euro is likely seen around 116.00 against the yen and 1.04 against the franc.

The single currency pared gains to 1.8331 against the kiwi and 1.5486 against the loonie, from its early highs of 1.8560 and 1.5672, respectively. The euro is poised to challenge support around 1.78 against the kiwi and 1.52 against the loonie.

The euro marginally dropped to 1.8231 against the aussie, after rising to 1.8404 at 2:45 am ET, which was its strongest level since April 2009. Immediate support for the euro is possibly seen around the 1.61 level.

The euro was trading at 0.9077 against the pound, down from a high of 0.9134 seen at 2:45 am ET. Should the euro slides further, 0.88 is likely seen as its next support level.

Data from the Office for National Statistics showed that the UK unemployment rate increased at the start of the year.

The jobless rate gained 0.2 percentage points from the preceding quarter to 3.9 percent. This was above the forecast of 3.8 percent.


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U.S. Business Inventories Show Modest Decrease In January

Trading 17 mar 2020 Commentaire »

A report released by the Commerce Department on Tuesday showed a modest decrease in business inventories in the U.S. in the month of January.

The Commerce Department said business inventories edged down by 0.1 percent in January after coming in unchanged in December. The slight drop in inventories matched economist estimates.

The modest decrease in business inventories was partly due to a continued decline in wholesale inventories, which fell by 0.4 percent in January after slipping by 0.3 percent in December.

Manufacturing inventories also dipped by 0.1 percent in January after climbing by 0.4 percent in December, while retail inventories were unchanged after edging down by 0.1 percent in the previous month.

Meanwhile, the report said business sales climbed by 0.6 percent in January after inching up by 0.1 percent in December.

Wholesale sales led the way higher, spiking by 1.6 percent during the month, while retail sales also increased by 0.6 percent.

On the other hand, the Commerce Department said manufacturing sales fell by 0.5 percent in January after rising by 0.5 percent in December.

With inventories edging lower and sales climbing, the total business inventories/sales ratio slipped to 1.38 in January from 1.39 in December.


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U.S. Homebuilder Confidence Drops More Than Expected In March

Trading 17 mar 2020 Commentaire »

Homebuilder confidence in the U.S. has deteriorated by slightly more than anticipated in the month of March, according to a report released by the National Association of Home Builders on Tuesday.

The report said the NAHB/Wells Fargo Housing Market Index fell to 72 in March after edging down to 74 in February. Economists had expected the index to dip to 73.

"Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus," said NAHB Chairman Dean Mon

He added, "Interest rates remain low, and a lack of inventory creates market opportunities for single-family builders."

NAHB Chief Economist Robert Dietz noted more than half of the builder responses were collected prior to March 4, so the recent stock market declines and the rising economic impact of the coronavirus will be reflected more in next month's report.

The bigger than expected decrease by the headline index reflected decreases by all three components, with the component measuring sales expectations in the next six months slumping to 75 in March from 79 in February.

The index gauging current sales conditions also dipped to 79 in March from 81 in February, while the gauge charting traffic of prospective buyers edged down to 56 from 57.

On Wednesday, the Commerce Department is scheduled to release its report on new residential construction in the month of February.

Housing starts are expected to drop to an annual rate of 1.520 million in February after pulling back to a rate of 1.567 million in January.


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U.S. Industrial Production Rebounds More Than Expected In February

Trading 17 mar 2020 Commentaire »

Industrial production in the U.S. rebounded by more than anticipated in the month of February, according to a report released by the Federal Reserve on Tuesday.

The Fed said industrial production climbed by 0.6 percent in February after falling by a downwardly revised 0.5 percent in January.

Economists had expected industrial production to increase by 0.4 percent compared to the 0.3 percent drop originally reported for the previous month.

The stronger than expected growth was partly due to a substantial rebound in utilities output, while spikes by 7.1 percent in February after plunging by 4.9 percent in January as temperatures returned to more typical levels.

Manufacturing output also inched up by 0.1 percent in February after slipping by 0.2 percent in January, although the Fed noted factory output was unchanged when excluding a large gain for motor vehicles and parts and a large drop for civilian aircraft.

Meanwhile, the report showed a sharp pullback in mining output, which tumbled by 1.5 percent in February after jumping 1.0 percent in the previous month.

"Although the services sector is ground-zero for the coronavirus crisis, industry will not escape unscathed," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "With oil prices sharply lower over recent weeks, mining output will drop sharply in the coming months, while the shutdown of swathes of the economy will sharply reduce demand for manufactured goods too."

The Fed also said capacity utilization for the industrial sector rose to 77.0 percent in February from 76.6 in January. Economists had expected capacity utilization to increase to 77.1 percent.

Capacity utilization in the utilities sector spike to 75.8 percent from 71.0 percent, while capacity utilization in the manufacturing sector was unchanged at 75.0 percent and capacity utilization in the mining sector dipped to 88.4 percent from 89.9 percent.


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*S&P Sees Global Recession This Year; 2020 GDP Growth Forecast At 1-1.5%

Trading 17 mar 2020 Commentaire »

S&P Sees Global Recession This Year; 2020 GDP Growth Forecast At 1-1.5%


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*U.S. Housing Market Index Drops To 72 In March

Trading 17 mar 2020 Commentaire »

U.S. Housing Market Index Drops To 72 In March


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*U.S. Business Inventories Edge Down 0.1% In January

Trading 17 mar 2020 Commentaire »

U.S. Business Inventories Edge Down 0.1% In January


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U.S. Retail Sales Unexpectedly Decrease Amid Slump In Gas Prices

Trading 17 mar 2020 Commentaire »

Partly reflecting a steep drop in sales by gas stations, the Commerce Department released a report on Tuesday showing an unexpected decrease in U.S. retail sales in the month of February.

The Commerce Department said retail sales fell by 0.5 percent in February after climbing by an upwardly revised 0.6 percent in January.

The pullback came as a surprise to economists, who had expected retail sales to edge up by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

Excluding a 0.9 percent decrease in auto sales, retail sales still slid by 0.4 percent in February after rising by an upwardly revised 0.6 percent in January. Ex-auto sales had been expected to tick up by 0.2 percent.

The unexpected drop in sales came as sales by gas stations plummeted by 2.8 percent in February amid a steep decline in gasoline prices.

Sales by electronics and appliance stores, clothing and accessories stores and building material and supplies dealers also showed significant decreases.

On the other hand, the report showed a 1.4 percent jump in sales by miscellaneous store retailers as well as notable growth in sales by non-store retailers.

Closely watched core retail sales, which exclude autos, gasoline, building materials and food services, were unchanged in February after climbing by an upwardly revised 0.4 percent in January.

Economists had expected core sales to increase by about 0.4 percent compared to the unchanged reading originally reported for the previous month.

Looking ahead, Andrew Hunter, Senior U.S. Economist at Capital Economics, said retail sales are likely to fall sharply in March amid escalating coronavirus fears, stepped up containment measures and consumers avoiding public places like restaurants and cinemas.

"That will drag first-quarter consumption growth lower too, though the hit probably came too late to cause an outright decline in the first quarter," Hunter said.

He added, "With spending likely to continue falling sharply over the coming weeks, the only question now is how severe the second-quarter decline will be."


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