The IMF’s managing director, Kristalina Georgieva, has warned that recent economic reports for many countries were coming in below the IMF’s already pessimistic forecast for a 3 percent contraction in 2020.
“With no immediate medical solutions, more adverse scenarios might unfortunately materialize for some economies. It is the unknown about the behavior of this virus that is clouding the horizon for projections,” she said.
From her side, Gita Gopinath, the IMF’s chief economist, said the situation had worsened since March when the IMF projected that emerging markets and developing countries would need $2.5 trillion in external financing to manage the health and economic crisis, Bloomberg reported.
“This crisis is likely to last longer, and so the needs will go up, even above that number.”
Interestingly, the U.S. stock markets don’t seem to be too concerned about the IMF’s view as it’s probably being reflected in the share prices.
Instead, maybe, investors seem to be more focusing on the nature of the second half “bounce back” and how the economy will structurally adapt.
Anyway, Citi’s U.S. economic surprise index, which measures whether key economic indicators are coming in above or below forecasts, has tumbled to multi-year lows, and that’s not a positive sign.
Yes, something seems to be disconnected. Take care!
Investors should recall what happened on March 10, 2000 when the "Dotcom Bubble" burst and the Nasdaq collapsed 76.81 percent after having risen five-fold between 1995 and 2000, Investopedia explained.
For example, share prices of blue-chip technology stocks like Intel, Cisco and Oracle lost more than 80 percent of their value, Investopedia explained.
As Mark Twain said: “History doesn't repeat itself but it often rhymes”…
Of course, it’s also a fact, there is also a tendency to underestimate the ability of people to adapt to shocks.
Meanwhile, the Bureau for Labor Statistics said the unemployment rate jumped to 14.7 percent in April, the highest in the history of the series and up from 4.4 percent in March.
Yes, history was written, unfortunately not in the positive sense.
The number of unemployed rose by 15.9 million to 23.1 million, while the number of employed declined by 22.4 million to 133.4 million. The labor force participation rate decreased by 2.5 percentage points over the month to 60.2 percent, the lowest rate since January 1973.
We also should know that the U.S. unemployment rate is estimated at over 20 percent, MarketWatch said.
However, it is similar to the furlough rates that are being seen in Europe, and furloughed workers in the U.S. are unemployed. The numbers are not directly comparable as someone can legitimately appear in a European furlough statistic more than once, but in the U.S. initial jobless claims, these numbers only count once.
We also know that someone unemployed Americans will be receiving a higher income than they did when they were employed as the unemployment benefit is currently worth around about $1,000 a week.
It’s important in supporting the economic bounce back and frankly it is more likely to be more important than the $1,200 checks that are signed by President Donald Trump.
All that said, and amid all the noise from the presidential campaign trail, the China bashing has been increasing in volume last week, which has been causing some understandable concerns to investors.
However, Chinese state media reported on Friday on a conference call between Vice Premier Liu He, U.S. Treasury Secretary Steven T. Mnuchin and Ambassador Robert Lighthizer, the parties discussed the ongoing process of implementing the Phase One agreement between China and the U.S. that went into effect February 14.
Both sides agreed that good progress is being made on creating the governmental infrastructures necessary to make the agreement a success. They also agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner. USTR reported.
Trump has threatened to tear up the phase one deal should China not stick to the terms, including purchasing $200 billion in U.S. goods, on top of 2017’s import levels.
Speaking in a town hall hosted by Fox News, Trump had said: “If they do not buy, we'll terminate the deal. Very simple.” the South China Morning Post reported.
Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.
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