New Zealand hikes interest rates to seven-year high

WELLINGTON - New Zealand's central bank on Wednesday delivered its eighth consecutive interest rate hike, sending the country's borrowing costs to their highest level in more than seven years, as it joins a global battle against surging inflation.

The Reserve Bank of New Zealand stayed true to its course of the past 18 months, unveiling another 50 basis point increase in its key rate to 3.5 percent -- a level not seen since May 2015 -- and warned of more rises in a bid to stymie price rises.

The move came as its counterparts in the United States, Europe and elsewhere ramp up rates to curtail decades-high inflation, fuelling concerns they could trigger a prolonged global downturn.

The central bank warned inflation could climb beyond the current 7.3 percent rate, which is already a 32-year high.

Wednesday's announcement came on the same day New Zealand's government unveiled a better financial position than expected in its accounts to the end of June.

A rise in tax revenue and slower growth in spending resulted in a deficit of NZ$9.7 billion (US$5.6 billion), considerably less than the forecast deficit of NZ$19 billion.

Agence France-Presse

BoE intervenes as IMF criticises UK budget

LONDON - The Bank of England stepped in Wednesday to shore up market confidence after the International Monetary Fund criticised Britain's inflation-fighting budget.

Reacting to markets turmoil, the BoE announced it was temporarily buying up long-dated UK government bonds "to restore orderly market conditions".

However, the pound promptly slumped 1.7 percent to $1.0552.

The BoE intervention followed criticism Tuesday from the IMF, which argued that Britain's budget could increase inequality and worsen inflation.

Credit ratings agency Moody's also waded in overnight with a warning about soaring debt.

Finance minister Kwasi Kwarteng's big tax cuts and energy price freeze, aimed at boosting the UK's recession-threatened economy, appeared to have had the opposite effect as traders warn of ballooning debt to pay for the incentives.

Following last Friday's budget, UK government bond yields have soared and the pound hit a record low at $1.0350.

Critics added that Kwarteng's measures would benefit the rich more than the poorest, as millions of Britons suffer from a cost-of-living crisis.

"We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise," the Treasury said as it sought to defend itself.

"We are focused on growing the economy to raise living standards for everyone," it added, blaming sky-high oil, gas and electricity prices on Russia's invasion of Ukraine.

IMF ADVICE

In a highly unusual intervention, the IMF late Tuesday said it was "closely monitoring" developments and urged the government in London led by new Prime Minister Liz Truss to change tack.

The Fund added: "We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.

"However, given elevated inflation pressures in many countries... we do not recommend large and untargeted fiscal packages at this juncture."

The IMF said the "UK measures will likely increase inequality" and stressed the importance of fiscal policy not working "at cross purposes to monetary policy".

Analysts warned that Britain's controversial measures could force the Bank of England to hike interest rates far higher than forecast.

"Expectations that there will be a super-size interest rate hike coming from the Bank of England to try and counter the government splurge on tax cuts and spending have increased," Hargreaves Lansdown analyst Susannah Streeter noted Wednesday.

Many central banks, including the BoE, are aggressively hiking interest rates in a bid to cool decades-high inflation. 

TAX CUTS 

In his budget, Chancellor of the Exchequer Kwarteng cut the highest rate of income tax and scrapped a cap of banker bonuses.

He also, however, announced a plan to lower income tax for all workers.

Conservative party head Truss appointed Kwarteng to replace Rishi Sunak, who reached the final two in the race to be prime minister.

Sunak had hit out strongly at Truss's promise of tax cuts, arguing that the UK priority was to first bring down the nation's inflation rate that stands at a near 40-year high of 9.9 percent. 

Moody's called Britain's new fiscal policy regime "credit negative", adding that a sustained confidence shock could "permanently" weaken its debt affordability.

Kwarteng has said he would wait until November 23 to outline plans on controlling government debt.

Agence France-Presse

Bank of England hikes rate again as UK enters recession

LONDON - The Bank of England hiked its interest rate again on Thursday to combat soaring inflation as it warned that the UK's economy had already slipped into recession.

The BoE's decision caps a busy week for central banks as its peers in the United States and elsewhere in Europe further tightened their own monetary policies in global efforts to tame runaway inflation.

The British central bank's decision had been postponed from last week following the death of Queen Elizabeth II.

The BoE met most market expectations as it lifted its key rate by 0.5 percentage points to 2.25 percent, repeating its August increase that had been the biggest rise since 1995.

Some commentators had speculated that the BoE could mirror the European Central Bank and the US Federal Reserve and spring a jumbo hike of 0.75 percentage points -- which would have been the BoE's largest in three decades.

Across the world, consumer prices have galloped to their highest levels in decades on rampant energy and food prices in the wake of Russia's war on Ukraine.

Central banks have responded by increasing their rates, fanning recession fears because they push up loan repayments for consumers and companies alike, thereby exacerbating the UK's cost-of-living crisis.

The BoE said the UK had already entered recession.

The Fed on Wednesday unveiled a 0.75-percentage-point increase, its third straight jumbo hike, one day after Sweden's Riksbank shocked markets with a jump of a full percentage point.

On Thursday, the Swiss National Bank unleashed a 0.75-percentage-point hike that lifted its policy rate out of negative territory for the first time since 2015, meaning depositors no longer have to pay to park their money at the bank.

On Thursday, the Norwegian central bank raised its rate by 0.5 percentage points, taking it to its highest level in more than a decade.

Bucking the trend, the Bank of Japan kept its ultra-loose monetary policy unchanged, sending the yen to a fresh 24-year low against the dollar.

The BoE earlier this month defended itself against accusations of being too slow to tackle sky-high inflation, after new Prime Minister Liz Truss proposed to review its operational independence.

- Tax cuts -

UK inflation eased to 9.9 percent in August but remains near a 40-year high.

Truss on Wednesday launched a six-month plan, starting in October, to pay about half of energy bills for businesses, charities, hospitals and schools, as she sought to soften the economic blow of sky-high prices.

The premier had already announced plans for a two-year energy price freeze for cash-strapped households.

Finance minister Kwasi Kwarteng will unveil Friday a mini-budget of tax cuts designed to boost economic activity, and will also outline the vast cost of the energy assistance.

Yet the package threatens to ultimately push inflation higher as a result of strengthening demand, according to US bank Citi.

"While the capping of energy prices is disinflationary in the first instance, we continue to see many of these measures as boosting demand and increasing the risk of more embedded inflation," wrote Citi analysts in a research note.

Commentators also warn the measures will ravage public finances that are already reeling from huge spending during the deadly Covid pandemic.

Barclays bank analysts estimate that the government's total cost-of-living expenditure could reach a colossal £235 billion ($267 billion).

Agence France-Presse

Germany faces recession as energy crisis bites: think-tank

FRANKFURT, Germany - Germany will fall into recession next year, a leading think-tank warned Monday, with Europe's biggest economy facing soaring inflation as Russia slashes energy supplies.

The Ifo institute expects the German economy to shrink 0.3 percent in 2023 -- slashing its forecast by four percentage points from a previous prediction in June.

Inflation is expected to hit 8.1 percent this year and 9.3 percent next year, it said. 

"We are heading into a winter recession," said Timo Wollmershaeuser, Ifo's head of forecasts.

"The cuts in gas supplies from Russia over the summer and the drastic price increases they triggered are wreaking havoc on the economic recovery following the coronavirus."

Real household incomes and purchasing power will drop sharply, the think-tank warned.

There is likely to be a "return to normal" in 2024 with 1.8 percent growth and 2.5 percent inflation, Wollmershaeuser said. 

At the start of September, Russian energy giant Gazprom halted gas deliveries to Europe via the key Nord Stream 1 pipeline saying it would be under repair for an unspecified period. 

The shutdown accentuates an energy crisis in Germany, long reliant on Russian gas, and across Europe, with Moscow accused of using energy as a weapon amid tensions over the Ukraine war.

German inflation hit 7.9 percent in August, and earlier this month the government unveiled a new multi-billion-euro relief package to help households cope with soaring prices.

Last week, the European Central Bank hiked interest rates by a record 75 basis points as its seeks to battle sky-high inflation across the eurozone and said more increases were to come. 

Agence France-Presse

UK inflation jumps to new 40-year high

LONDON - British inflation surged to a new 40-year high in July on rising food prices, official data showed Wednesday, adding to a cost-of-living crisis as the country faces the prospect of recession.

The Consumer Prices Index (CPI) accelerated to 10.1 percent last month from 9.4 percent in June, the Office of National Statistics said.

The Bank of England warned earlier this month that inflation will climb to just over 13 percent this year, the highest level since 1980.

It also projected that the country would enter a recession that would last until late 2023.

The central bank raised its key rate by 0.50 percentage points to 1.75 percent at its last policy meeting, the biggest hike since 1995.

The BoE move mirrors aggressive monetary policy from the US Federal Reserve and the European Central Bank last month, as the world races to cool red-hot inflation that has been fuelled by Russia's invasion of Ukraine.

The UK's statistics office said the "largest movements" in the CPI in July came from food.

Bread and cereals were the largest contributors to the rise in food prices, followed by milk, cheese and eggs.

Agence France-Presse

Japan growth slows in Q4 as economy shrinks 4.8 percent

TOKYO - Japan's economy grew at a slower 3 percent in the October-December quarter, government data showed Monday, as the coronavirus pandemic weighed on the world's third-largest economy.

The economy shrank 4.8 percent in 2020 -- its first annual contraction since 2009.

Last year, virus restrictions and a 2019 consumption tax hike forced Japan into recession before a third-quarter rebound to 5.3 percent growth, a figure revised upwards slightly on Monday.

Japan emerged from recession in November after recording its worst contraction since comparable figures began to be collected in 1980, exceeding even the pain of the 2008-9 global financial crisis.

Domestic demand and net exports contributed to growth in the fourth quarter, the cabinet office said, adding that spending on housing and corporate investment rebounded.

While Monday's figure for the fourth quarter was above the 2.4 percent predicted by economists polled by Bloomberg, it sounds the alarm for the first quarter of 2021.

Covid-19 cases began surging in Japan in late December, prompting the government to impose a virus state of emergency in much of the country including Tokyo and Osaka.

"A decline in GDP appears unavoidable in Q1 2021 due to the state of emergency declared by the government in a number of Japanese prefectures," said Naoya Oshikubo, senior economist at SuMi Trust, in a note published ahead of Monday's figure.

Japan's virus measures are limited, with bars and restaurants requested but not obliged to close by 8 p.m. and working from home strongly recommended. There are no blanket stay-at-home orders. 

Oshikubo said the relative leniency of these emergency measures could help mitigate the expected contraction in the first quarter.

Agence France-Presse

China's Q4 GDP growth beats forecast after COVID-19 shock

BEIJING - China's economy grew at a faster-than-expected pace in the fourth quarter of last year, ending a rough coronavirus-stricken 2020 in remarkably good shape and remained solidly poised to expand further this year.

The gross domestic product (GDP) expanded 6.5 percent, data from the National Bureau of Statistics showed on Monday, faster than the 6.1 percent forecast by economists in a Reuters poll, and followed the 4.9 percent growth in the third quarter.

GDP grew 2.3 percent in 2020, the data showed, making China the only major economy in the world to avoid a contraction last year as many nations struggled to contain the COVID-19 pandemic.

Aided by strict virus containment measures and policy stimulus, the economy has recovered steadily from a steep 6.8 percent slump in the first three months of 2020, when an outbreak of COVID-19 in the central city of Wuhan turned into a full-blown epidemic.

The world's second-largest economy has been fuelled by a surprisingly resilient export sector, but consumption - a key driver of growth - has lagged expectations amid fears of a resurgence of COVID-19 cases.

Data on Thursday showed Chinese exports grew by more than expected in December, as coronavirus disruptions around the world fuelled demand for Chinese goods even as a stronger yuan made exports more expensive for overseas buyers.

Despite the steady recovery in quarterly growth, 2020 GDP growth was the weakest pace in more than four decades.

The slew of bright economic data has reduced the need for more monetary easing this year, leading the central bank to scale back some policy support, sources told Reuters, but there would be no abrupt shift in policy direction, according to top policymakers.

On a quarter-on-quarter basis, GDP rose 2.6 percent in October-December, the bureau said, compared with expectations for a 3.2 percent rise and a revised 3.0 gain in the previous quarter.

Analysts expect economic growth to rebound to 8.4 percent in 2021, before slowing to 5.5 percent in 2022.

While this year's predicted growth rate would be the strongest in a decade, led by a big jump in the first quarter, it is rendered less impressive coming off the low base set in pandemic-stricken 2020.

Some analysts also cautioned that a recent rebound in COVID-19 cases in China could impact activity and consumption in the run-up to next month's long Lunar New Year holidays.

China reported more than 100 new COVID-19 cases for the sixth consecutive day, with rising infections in the northeast fuelling concerns of another national wave ahead of a major holiday season.

(Reporting by Gabriel Crossley and Kevin Yao Editing by Shri Navaratnam)

-reuters-

World shares mixed as investors eye virus counts, stimulus

Shares were mixed in Europe and Asia on Tuesday, after buying of technology stocks nudged the S&P 500 closer to the record high it set in February before the pandemic crunched the global economy.

Britain’s FTSE 100 slipped 0.1% to 6,122.05, while the DAX in Frankfurt lost 0.2% to 12,892.19. In Paris, the CAC 40 lost 0.3% to 4,957.26. The future for the S&P 500 edged 0.1% lower, to 3,376.30. The future for the Dow industrials lost 0.2% to 27,734.00.

Markets were buoyed by developments in Washington, after Speaker Nancy Pelosi called the House back into session, cutting short the lawmakers’ summer recess for a vote expected Saturday on legislation to prohibit changes in the U.S. Postal Service amid growing concerns that the Trump administration is trying to undermine the agency ahead of the November election.

The proposed package will also include $25 billion to shore up the Postal Service, which is suffering losses. But prospects for additional economic aid for American workers and businesses remain uncertain after talks on a fresh stimulus package stalled.

Investors say it’s crucial that the support comes, particularly after $600 in weekly unemployment benefits and other stimulus from the U.S. government expired.

Without more help for the U.S. economy, analysts say the recovery that investors have been assuming is on the way won’t materialize. And that assumption is a huge reason the stock market is as high as it is.

Still, on Monday the S&P 500 picked up 0.3% to 3,381.99. Earlier in the day, it briefly crossed above its record closing level of 3,386.15, which was set on Feb. 19 before the pandemic shut down businesses worldwide and created the worst recession in decades.

“The markets are in ‘show me the money’ mode, perhaps erring on the side of caution, not holding their breath for an imminent deal in Congress,” Stephen Innes of AxiCorp said in a commentary. “Sadly, this leaves the U.S. real economy waddling and many businesses and millions of consumers getting the short shrift.”

In Asia, South Korea’s Kospi led regional losses, slumping 2.5% to 2,348.24 amid worries over surging coronavirus cases.

South Korean health officials said Tuesday they had found 457 coronavirus cases linked to a huge northern Seoul church led by a bitter critic of the country’s president, driving an alarming rise in infections in the greater capital area.

During a virus briefing, Kwon Jun-wook, director of South Korea’s National Health Institute, said the outbreaks could create a situation comparable to the “miserable scenes of the United States or European countries.”

There’s concern that the virus’s spread could worsen after thousand of protesters, including members of the church and its ultra-right pastor, Jun Kwang-hun, marched in downtown Seoul Saturday despite official pleas to stay home.

Elsewhere, Hong Kong’s Hang Seng index lost 0.2% to 25,367.38. Japan’s Nikkei 225 slipped 0.2% to 23,051.08. Australia’s S&P/ASX 200 gained 0.8% to 6,123.40, while the Shanghai Composite index edged 0.4% higher, to 3,451.09.

Treasury yields moderated a bit, following a big rally for the 10-year yield last week. It dipped to 0.67% from 0.71% late Friday. It had zoomed upward from 0.56% through last week.

Higher yields suggest investors are upgrading their expectations for inflation and the economy. But they can also pull some buyers away from stocks into bonds, hurting stock prices.

Benchmark U.S. crude oil was flat at $42.89 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, picked up 6 cents to $45.43.

In currency dealings, the U.S. dollar weakened to 105.58 Japanese yen from 105.98 yen. The euro rose to $1.1890 from $1.1873.

Gold for delivery in December climbed $17.60 cents to $2,016.30 per ounce.

Associated Press

Hong Kong economy shrinks record 8.9 percent in first quarter

HONG KONG - Hong Kong suffered its worst quarterly contraction since modern records began, official figures showed Monday, as the coronavirus outbreak hammered an economy already mired in recession from political unrest and trade war woes.

The financial hub is now experiencing its third-straight quarter of negative growth -- its longest financial downturn since the aftermath of the 2008 global financial crash. 

Months of debilitating street protests and the tit-for-tat tariff battle between Washington and Beijing had weighed on the local economy for months before the pandemic helped push the city deeper into recession.

Advance figures released Monday showed an 8.9 percent on-year contraction in the first quarter -- the worst decline since the government began compiling data in 1974.

The result was a bigger fall than the 8.3 percent recorded during the Asian financial crisis in 1998 and the 7.8 percent seen in early 2009.

"Faced with a collapse in global demand, Hong Kong's small, open economy is taking a severe hit," Bloomberg Intelligence economist Qian Wan said in a note to clients ahead of the results.

The figures were worse than most projections, even though the city has made impressive headway against the coronavirus outbreak. 

Despite its proximity and links with the Chinese mainland, confirmed infections have been kept to around 1,000 with just six deaths. 

The financial hub has managed to largely end local transmissions of the disease, with almost all new cases coming from people returning to the city from overseas who are quickly quarantined. 

Officials are beginning to ease some social distancing measures, in a move that will boost the local economy. 

But in an international finance hub so dependent on the rest of the world, plenty of headwinds remain as the coronavirus continues to wreak economic chaos elsewhere.

"Even if there is improvement, it will be gradual and small," said financial secretary Paul Chan, who estimates the economy will contract between four to seven percent this year.

There is also little sign of an end to the political uncertainty hanging over Hong Kong in the aftermath of last year's civil unrest. 

Despite vowing to heal divides at the start of the year, the city's government has not unveiled any policies aimed at reconciliation, while Beijing has ramped up its rhetoric against the local pro-democracy movement.

There has also been little mood for compromise among protesters who largely organise online and the few figures from the movement with a public profile are now being prosecuted.

As a result, political tensions are rising just as the city moves towards ending some anti-virus movement restrictions.

In the last fortnight small protests have begun bubbling up again after four months of comparative clam imposed by the pandemic.

More global economic damage from the virus and a resurgence of local unrest would both result in "major downside risks" to Hong Kong's economy, said Oxford Economics senior economist Tommy Wu. 

Agence France-Presse

US processes over $500 billion in small business loans to stem virus fallout

The US Small Business Administration has processed over 3.8 million loans for more than half a trillion dollars since the launch of the Paycheck Protection Program on April 3 to deal with the economic fallout of the coronavirus outbreak, according to a joint statement by the SBA and the Treasury Department.

SBA has processed about 2.2 million loans, whose value is over $175 billion, since the start of the second round of the PPP loan processing on April 27, the statement added.

The second round of the SBA's Paycheck Protection Program was launched on Monday, allowing lenders to issue forgivable, government-guaranteed loans to small businesses shuttered by the outbreak.

The average loan size in the second round of the PPP loan processing has been $79,000, according to the statement released on Sunday.

The US government's $660 billion small business rescue program has stumbled on missing paperwork, technology failure, and the misdirection of funds to big corporations. It also faces the hurdle of forgiving those hastily arranged loans.

(Reporting by Kanishka Singh in Bengaluru; Editing by Lisa Shumaker)

-reuters-

US GDP contracts 4.8 percent as virus hit, ends decade of growth

WASHINGTON - The decade of US economic expansion ended dramatically in the first quarter when GDP shrank 4.8 percent as the coronavirus hit, according to government data released Wednesday.

It was the biggest decline in GDP in 12 years as the pandemic forced businesses to close, halting purchases and investment, the Commerce Department reported.

The drop in the January-March quarter was slightly worse than expected, but the report noted it could not quantify the full economic effects of the virus. Most of the business shutdowns and stay-at-home orders only took effect in the final weeks of March.

The data was a sharp reversal from the last quarter of 2019, when the economy grew by 2.1 percent at a time when analysts were more concerned about whether President Donald Trump's trade policies would continue to weigh growth down in 2020

The arrival of the coronavirus pandemic has upended that, leading to more than 50,000 deaths and about 26 million job losses since mid-March as the economy came undone.

As stores, offices and restaurants were shuttered, personal consumption plunged 7.6 percent in the first quarter, the Commerce Department said, as spending collapsed in a wide variety of sectors, including healthcare, motor vehicles and parts.

Exports fell as people traveled less, the report said, while imports also decreased.

However, analysts expect GDP to contract by double digits in the second quarter, when the data will show the full effects of the pandemic's shutdowns.

"Thus ended the expansion which began in the third quarter of 2009; killed by COVID-19," Ian Shepherdson of Pantheon Macroeonomics said. 

"But these data capture only the squall before the second quarter hurricane, so it's not going to change anyone's mind on the future trajectory of the economy."

news.abs-cbn.com

World faces worst crisis since Great Depression: IMF chief

WASHINGTON -- The global coronavirus pandemic has inflicted an economic crisis unlike any in the past century and will require a massive response to ensure recovery, IMF chief Kristalina Georgieva said Thursday.

The warnings about the damage inflicted by the virus already were stark, but Georgieva said the world should brace for "the worst economic fallout since the Great Depression."

With nearly 89,000 deaths in 192 countries and territories and the number of cases now surpassing 1.5 million worldwide, much of the global economy has been shut down to contain the spread of the virus.

The International Monetary Fund expects "global growth will turn sharply negative in 2020," with 170 of the fund's 180 members experiencing a decline in per capita income, Georgieva said.

Just a few months ago, the fund was expecting 160 countries to see rising per capita income, she said in a speech previewing next week's spring meetings of the IMF and World Bank, which will be held virtually due to the restrictions imposed due to the COVID-19.

'IT COULD GET WORSE'

Even in the best-case scenario, the IMF expects only a "partial recovery" next year, assuming the virus fades later in 2020, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted.

But she added this ominous caution: "It could get worse."

There is "tremendous uncertainty around the outlook" and the duration of the pandemic, Georgieva said.

The IMF will release its latest World Economic Outlook on Tuesday, with grim forecasts for its members this year and next. In January, the IMF projected global growth of 3.3 percent this year and 3.4 percent in 2021.

But that was a different world.

The US economy has purged 17 million jobs since mid-March, with the latest weekly data issued Thursday showing 6.6 million workers filed for unemployment benefits, and economists projecting a double-digit jobless rate this month.

The World Bank said Thursday the pandemic might cause the first recession in Africa in 25 years.

Researchers at the Institute for International Finance (IIF), a global banking association, expect a 2.8 percent plunge in global GDP, compared to a decline of 2.1 percent in 2009 during the global financial crisis.

That is a sharp reversal from October, when the IIF predicted 2.6 percent growth.

Recovery depends on decisive actions now, Georgieva said. The IMF has $1 trillion in lending capacity and is responding to unprecedented calls from 90 countries for emergency financing.

SEND MORE LIFELINES

Countries already have taken steps worth a combined $8 trillion, but Georgieva urged governments to do more.

"Lifelines for households and businesses are imperative" to "avoid a scarring of the economy that would make the recovery so much more difficult."

The IMF board approved a doubling of emergency lending facilities that will provide about $100 billion, and is moving ahead with debt relief for the poorest countries and also help for countries with unsustainable debt levels.

"The bleak outlook applies to advanced and developing economies alike. This crisis knows no boundaries. Everybody hurts," Georgieva said.

She noted that about $100 billion in investments already had fled emerging markets -- more than three times the capital exodus seen in the 2008 global financial crisis.

US officials have scrambled to apply a tourniquet to stem the bleeding of jobs in the world's largest economy and keep the financial system from freezing up.

The Federal Reserve rolled out another series of lending programs Thursday totaling $2.3 trillion to help small and medium businesses as well as state and local governments facing cash shortages.

The US is moving "with alarming speed" from unemployment near a 50-year low, to a "very high" rate, Fed chair Jerome Powell said in a speech Thursday.

And like Georgieva, he indicated the US government will have to provide more direct support, since the Fed is limited to lending to solvent entities.

"All of us are affected, but the burdens are falling most heavily on those least able to carry them," Powell said.

But he also tried to offer some reassurance, saying the US economic rebound could be "robust."

Agence France-Presse

JPMorgan CEO Dimon calls 'bad recession', mulls suspending 2020 dividend

JPMorgan Chase & Co's top boss Jamie Dimon on Monday said he sees a "bad recession" in 2020, and that the largest US bank could suspend its dividend if the coronavirus crisis deepens.

Dimon, widely regarded as the face of the US banking sector, is the most prominent voice on Wall Street so far to project that the economic cost of the coronavirus will not evaporate quickly, and said the bank's earnings will be down "meaningfully in 2020."

JPMorgan could look at suspending dividends if the gross domestic product (GDP) were to fall by as much as 35 percent in the second quarter and the unemployment rate were to rise further to 14% in the fourth quarter of the year, the chief executive officer wrote in his annual letter to shareholders.

Questions are mounting about whether big US banks will have to cut dividends later this year as the coronavirus crisis puts a record portion of Americans out of work, making it difficult for borrowers to pay back loans.

"If the board suspended the dividend, it would be out of extreme prudence and based upon continued uncertainty over what the next few years will bring," Dimon said.

Dimon, who returned to work last week after undergoing emergency heart surgery in March, highlighted several other challenges that the bank is facing, saying its call centers have struggled in the current environment, with many of them effectively shutting down due to local restrictions.

JPMorgan will extend benefits to customers hit hard by the health crisis, by introducing measures such as waivers for late fees and a 90-day grace period for mortgage and auto loan payments, according to the letter.

Dimon also said that the vast majority of the bank's 16,850 ATMs were "well-stocked and still functioning" to provide cash for customers.

RELIEF MEASURES

The bank said it had extended about $950 million in new loans to small businesses and would still extend credit to small businesses.

"In both our central case scenario for 2020 results and in our extremely adverse scenario, we are lending – currently or plan to do so – an additional $150 billion for our clients' needs," Dimon said.

Even with that lending, Dimon wrote JPMorgan currently has over $500 billion in total liquid assets and $300 billion in incremental borrowing capacity from the Federal Reserve and Federal Home Loan Banks.

Dimon did not pass up the opportunity to suggest regulatory and fiscal policy reform, as he has often done in past annual letters.

"After the crisis subsides (and it will), our country should thoroughly review all aspects of our preparedness and response. And we should use the opportunity to closely review the economic response and determine whether any additional regulatory changes are warranted to improve our financial and economic system. There will be a time and place for that – but not now."

JPMorgan will also nominate former International Business Machines Corp Chief Executive Officer Virginia "Ginni" Rometty for election to its board. Rometty will become the executive chairman of IBM on April 6. (Reporting by Anirban Sen in Bangalore; Editing by Sriraj Kalluvila, Bernard Orr)

-Reuters-

Coronavirus pandemic battering global economy: surveys

PARIS/WASHINGTON -- Business activity collapsed from Australia, Japan and Western Europe to the United States at a record pace in March as measures to contain the coronavirus pandemic hammer the world economy, cementing economists' views of a deep global recession.

The highly contagious coronavirus, which causes a respiratory illness called COVID-19, has caused entire regions to be placed on lockdown and in some places soldiers are patrolling the streets to keep consumers and workers indoors, halting services and production and breaking supply chains.

"The global health crisis is rapidly morphing into a global recession, as there is a clear tension between preventing infections and ruining the economy," said Edoardo Campanella, an economist at UniCredit Bank in Milan. "However, a wise policy coordination between health and fiscal authorities should allow a V-shaped recovery once containment measures are relaxed."

Data firm IHS Markit said on Tuesday its flash US Composite Output Index, which tracks the manufacturing and services sectors, dropped to a reading of 40.5 this month. That was an all-time low and followed a reading of 49.6 in February.

Last month's decline in the index, which is seen as a good measure of economic health, was the largest in the series' history. A reading below 50 indicates contraction in business activity. The survey underscored the rapidly deteriorating economy, highlighted last week by a government report showing the biggest rise since 2012 in the number of Americans filing claims for unemployment benefits during the week ended March 14.

Economists are predicting claims will accelerate to a record 1.5 million or more when data for last week is published on Thursday.

The message was equally grim from the 19 countries that use the euro. IHS Markit's flash composite PMI for the euro zone plummeted to a record low of 31.4 in March.

That was by far the biggest one-month fall since the survey began in mid-1998 and below all forecasts in a Reuters poll which gave a median prediction of 38.8.

In France, services activity fell to a record low and manufacturing saw its steepest drop since the global financial crisis more than a decade ago.

A PMI for the services sector in Germany, Europe's largest economy, showed a record contraction in activity, while sister surveys showed Britain's economy shrinking at a record pace.

IHS Markit said the March figures suggested the euro zone economy was shrinking at a quarterly rate of around 2 percent, and the escalation of measures to contain the virus could steepen the downturn.

With most asset markets tanking, global central banks have been rolling out extraordinary measures on an almost daily basis to stop the rot. But some analysts say infinite monetary policy easing may not be enough and fiscal steps are crucial.

There was some optimism on that front, with senior Democrats and Republicans saying on Tuesday they were close to reaching a deal on a $2 trillion stimulus package to aid the US economy.

Hopes for a large fiscal stimulus sparked a sharp rebound in global stock markets, with the Dow Jones raking up its biggest one-day percentage gain since 1933.

EXTRAORDINARY MEASURES

After an initial outbreak in China brought the world's second-largest economy to a virtual halt last month, an ever-growing number of countries and territories have reported a spike in infections and deaths, leading to "social distancing" policies aimed at containing the spread of COVID-19.

Goldman Sachs is predicting that the global economy will shrink 1 percent this year, with gross domestic product in China estimated to contract at a 42 percent annualized rate in the first quarter and GDP in the United States dropping at a record 24 percent rate in the April-June period.

"The coronacrisis has pushed the world economy into a deep recession," said Goldman Sachs chief economist Jan Hatzius. "The response to that crisis represents a physical constraint on economic activity that is unprecedented in postwar history."

The bleak US economic picture ahead of the November presidential election has prompted President Donald Trump to push for businesses to reopen by Easter. Given rising infections and death toll, health experts, economists and politicians have cautioned against such a move, which they say could backfire, with Americans remaining fearful of going out.

Trump and Vice President Mike Pence held a conference call with major Wall Street investors on Tuesday.

"Sending the public back to work at this time would be premature," said Joe Brusuelas, chief economist at RSM in New York. "The US is better off taking a one-time hit to economic growth, as efforts to terminate the virus continue, rather than run the risk of multiple economic shutdowns."

Mirroring the emptying of supermarket shelves around the world, indebted corporates have rushed into money markets to hoard dollars, with a global shortage of dollar funding threatening to cripple firms from airlines to retailers.

PMI surveys from Japan showed the services sector shrinking at its fastest pace on record this month and factory activity contracting at its quickest in a decade.

This was consistent with a 4 percent contraction in 2020, Capital Economics senior economist Marcel Theliant said. The postponement of the Tokyo Olympics is expected to deal a heavy blow to the world's third-largest economy.

The US Federal Reserve on Monday promised bottomless dollar funding and an array of programs to help keep companies afloat. For the first time, the Fed will back purchases of corporate bonds, backstop direct loans to companies and "soon" will roll out a program to get credit to small and medium-sized businesses. It will also expand its asset purchases by "as much as needed."

The Fed last week slashed borrowing costs to zero and took other emergency steps to keep the commercial paper, US Treasury debt and foreign dollar funding markets functional.

G7 finance ministers and central bank governors on Tuesday pledged to expand fiscal and monetary actions for as long as necessary to restore growth and confidence.

With the International Monetary Fund predicting a global recession, the world's 20 largest economies agreed on Monday to develop an "action plan," but without specifics.

source: news.abs-cbn.com

Global economy already in recession due to COVID-19: Reuters poll

BENGALURU -- The global economy is already in a recession as the hit to economic activity from the coronavirus pandemic has become more widespread, according to economists polled by Reuters amid a raft of central bank stimulus actions this week.

The spread of the disease caused by the virus, COVID-19, has sent financial markets into a tailspin despite some of the biggest emergency stimulus measures since the global financial crisis announced by dozens of central banks across Europe, the Americas, Asia and Australia.

The panic was clear in stocks, bonds, gold and commodity prices, underlining expectations of severe economic damage from the outbreak.

More than three-quarters of economists based in the Americas and Europe polled this week, 31 of 41, said the current global economic expansion had already ended, in response to a question about whether the global economy was already in recession.

"Last week we concluded that the COVID-19 shock would produce a global recession as nearly all of the world contracts over the three months between February and April," noted Bruce Kasman, head of global economic research at JP Morgan.

"There is no longer doubt that the longest global expansion on record will end this quarter. The key outlook issue now is gauging the depth and the duration of the 2020 recession."

Economists have repeatedly cut their growth outlook over the past month and have increased their forecast probabilities for recession in most major economies.

The worst-case views on growth taken just weeks ago in some cases have already into the central scenario for private sector economists in Reuters polls.

"The evolving news on COVID-19 has triggered 'forecast leap frogging,' with economists and strategists repeatedly lowering their forecasts. Among the big 3 economies, the US and the euro area will see negative growth, while Chinese growth is expected to come in at a paltry 1.5 percent," said Ethan Harris, head of global economics at BofA.

"Our first piece on the virus shock was titled 'bad or worse'; now we amend that to 'really bad or much worse.' We now expect COVID-19 to cause a global recession in 2020, of similar magnitude to the recessions of 1982 and 2009."

The global economy was forecast to expand 1.6 percent this year, about half the 3.1 percent predicted in the January poll, and the weakest since the global financial crisis of 2007-09. Forecasts for 2020 global GDP ranged from -2.0 percent to +2.7 percent.

"As cases of coronavirus spiral upward, disruptions to the global economy are increasing. We have cut our global GDP growth forecast to 1.25 percent for the year - less severe than the deep recessions of 1981-82 and 2008-09, but worse than the mild recessions of 1991 and 2001," noted Goldman Sachs' economics research team.

"Consistent with this, our economists now expect recessions in Europe, Japan, Canada and possibly the United States."

The US economy was almost certain to enter a recession this year, if it is not in one already, according to a poll published on Thursday and taken after the Federal Reserve's emergency move on Sunday.

"The US economy is going to have a shock from this coronavirus and I think that there's still a lot of uncertainty around the size and the depth and the prolonged period of the shock," said Tiffany Wilding, North American economist at Pacific Investment Management Co (PIMCO).

"We're still getting our heads wrapped around that. We think it's quite likely that the US has a small technical recession this year."

As for the world's second largest economy, China, where the virus outbreak originated, a Reuters poll published on March 6 showed the outlook was once again cut significantly for this quarter, next quarter, and for 2020.

Since then, economists have been slashing their forecasts even more.
The economic damage from the outbreak was predicted to reverberate through other major economies in Asia too, with most forecast to slow significantly, halt or shrink outright in the current quarter according to a Feb. 26 Reuters poll.

Japan's economy, which already contracted sharply toward the end of 2019, was expected to grow only 0.1 percent in the new fiscal year that begins in April, a March 6 Reuters survey found, revised down from 0.5 percent projected in February.

Following the rapid spread of virus infections from China to other countries, including Europe, the risk of a euro zone recession doubled in a poll taken earlier this month.

It was not very different for the UK, where the Bank of England cut rates to near-zero on Thursday and re-started its asset purchases.
The British economy was expected to expand 0.1 percent this quarter and then contract 0.3 percent next quarter, a sharp revision from the 0.3 percent expansion they had expected before for both the quarters in the previous poll.

In a worst case scenario, the economy was forecast to contract 1 percent next quarter and by 0.7 percent in 2020. Forecasts were as low as -5 percent and -3 percent, respectively, with no economist expecting growth in either period in the worst case.

source: news.abs-cbn.com

Australia declares emergency, warns coronavirus crisis could last 6 months

SYDNEY - Australian Prime Minister Scott Morrison on Wednesday declared a "human biosecurity emergency" and said the country's citizens should abandon all overseas travel because of the coronavirus epidemic that he warned could last at least 6 months.

The formal declaration gives the government the power to close off cities or regions, impose curfews and order people to quarantine, if deemed necessary to contain the spread of the virus.

The upgrade in official advice to an unprecedented "Level 4: Do not travel" to any country in the world, was accompanied by a ban on any non-essential indoor gatherings of more than 100 people.

"Life is changing in Australia, as it is changing all around the world," Morrison said during a televised news conference. "Life is going to continue to change, as we deal with the global coronavirus. This is a once in a hundred year type event."

Australia has recorded more than 500 coronavirus infections and 6 deaths, a relatively small number compared to other countries, but officials are growing increasingly concerned about the prospect of an exponential rise in cases.

New South Wales, the country's most populous state, reported its biggest 1-day surge in new cases on Wednesday, along with the country's latest death, an 86-year-old man who died in a Sydney hospital.

Morrison said the tighter ban on indoor social gatherings, down to 100 people from 500 people, did not include essential services like schools, public transport and shopping centers.

The Australian leader cited expert health guidance as the rationale for keeping schools open, a strategy that has been questioned by some experts. Several private schools have made the unilateral decision to close ahead of the upcoming Easter break.

Morrison reiterated the need for social distancing and good hand hygiene to curb the spread of the virus and announced restricted access to aged care homes.

Anybody who travels during a Level 4 ban is warned that the Australian government may not be able to assist if they get into trouble while abroad, according the government's official SmartTraveller website. It also recommends people already in a "do not travel" area consider leaving.

Shortly before Morrison's statement, the government unveiled a A$715 million ($430 million) aid package for airlines, including waivers on domestic air traffic control fees. Virgin Australia Holdings Ltd has suspended all international flights from March 30 to June 14, while Qantas Airways Ltd has cut its international capacity by 90 percent.

The widening restrictions on travel and domestic movement are expected to take a significant toll on Australia's tourism, retail and entertainment sectors.

Economists are predicting the country will slip into its first recession in nearly 3 decades in the first half of 2020, prompting a rapid jump in unemployment.

'IT'S UN-AUSTRALIAN'

The expectations have weighed on Australia's financial markets, with the local share market falling more than 6 percent on Wednesday. Earlier this week, the Australian share market posted its biggest 1-day loss since 1987.

Morrison has already flagged a stimulus package worth around A$17 billion and said on Wednesday the government was "considering quite extensive further economic measures" to dull the impact on the economy.

The Reserve Bank of Australia this week pumped liquidity into money markets and said it will make a monetary policy announce on Thursday at 0330 GMT.

However, while the epidemic is expected to crimp consumer spending in the long run, data from the official statistics agency released on Wednesday showed a 0.4 percent rise in retail sales in February as people bought up staples in preparation for shortages.

The country's major grocers, Coles Group Ltd and Woolworths Group Ltd, have increased sales restrictions in response to the panic buying on goods including toilet paper, milk, meat, flour, rice, hand sanitizer, eggs and frozen vegetables.

They have also introduced exclusive shopping sessions for the elderly and the disabled early in the day, when stores have been restocked.

Morrison issued blunt advice on Wednesday that the hoarding was unnecessary and counter-productive.

"Stop doing it. It’s ridiculous," he said. "It’s un-Australian, and it must stop."

source: news.abs-cbn.com

World stocks ease back on trade tensions

NEW YORK - Global stock markets mostly dropped Thursday as China-US trade tensions resurfaced, with gloomy sentiment exacerbated by news of a recession in Hong Kong.

Analysts pointed to a Bloomberg article that Chinese officials are skeptical of a long-term trade deal with the United States as a drag on sentiment.

The Bloomberg report "has certainly taken some of the buzz out of the markets," Oanda analyst Craig Erlam told AFP.

A manufacturing indicator for the Chicago region also tumbled to its lowest in four years.

The Paris market was dogged by heavy losses for French auto maker PSA, whose stock tanked as investors remained unconvinced by a proposed mega-merger with the US-Italian Fiat Chrysler. Fiat's share price rose in Milan.

Corporate earnings disappointment hurt London stocks with sizable falls for energy major Royal Dutch Shell, as well as lenders Lloyds Banking Group and Standard Chartered.

US stocks also declined, with the S&P 500 retreating from a record due in part to unease over the Federal Reserve's announcement the day before.

The US central bank cut interest rates but signaled it would hold off on further interest rate cuts.

"The market now is concerned we are still seeing some slowness," said Stephanie Lewicky, a senior manager of futures and forex at TD Ameritrade.

"And with Fed Chair Powell saying that we're probably going to pause for December, there's a little bit of concern."

RECESSION IN HONG KONG

Investors dumped risky equities for safer assets after Beijing slammed US Secretary of State Mike Pompeo for a speech it said had "viciously attacked" China.

In the latest hawkish take on China by the Trump administration, Pompeo had Wednesday called Beijing "truly hostile" to the United States and vowed to ramp up pressure on China on multiple fronts.

"This deliberate distortion of the facts and slandering of China's domestic and foreign policies fully exposes the deep political bias and anti-communist mindset of a small number of US politicians," Foreign Ministry spokesman Geng Shuang said at a news briefing.

Hong Kong's stock market rallied by 0.9 percent but after the close came gloomy news of an official recession.

Official figures showed Hong Kong's gross domestic product in the third quarter shrank 3.2 percent from the previous quarter, which had already seen a drop of 0.4 percent.

The technical definition of a recession is two successive quarters of economic contraction.

The semi-autonomous Chinese city has been upended by nearly five months of huge, often violent, pro-democracy demonstrations with little end in sight as Beijing and city leaders adopt a hardline approach.

Clashes between protesters hurling bricks and petrol bombs at police wielding tear gas and rubber bullets have become a weekly occurrence.

Unrest has hit the city's tourist and entertainment industries hard, compounding trade war woes.

KEY FIGURES AROUND 4:40 A.M. FRIDAY


New York - Dow: DOWN 0.5 percent at 27.046.23 (close)

New York - S&P 500: DOWN 0.3 percent at 3,037.56 (close)

New York - Nasdaq: DOWN 0.1 percent at 8,292.36 (close)

London - FTSE 100: DOWN 1.1 percent at 7,248.38 (close)

Frankfurt - DAX 30: DOWN 0.3 percent at 12,866.79 (close)

Paris - CAC 40: DOWN 0.6 percent at 5,729.86 (close)

EURO STOXX 50: DOWN 0.4 percent at 3,604.41 (close)

Tokyo - Nikkei 225: UP 0.4 percent at 22,927.04 (close)

Hong Kong - Hang Seng: UP 0.9 percent at 26,906.72 (close)

Shanghai - Composite: DOWN 0.4 percent at 2,929.06 (close)

Pound/dollar: UP at $1.2946 from $1.2902 at 2100 GMT

Euro/pound: DOWN at 86.12 pence from 86.43 pence

Euro/dollar: DOWN at $1.1149 from $1.1151

Dollar/yen: DOWN at 108.00 yen from 108.85 yen

Brent North Sea crude: DOWN 0.6 percent at $60.23 per barrel

West Texas Intermediate: DOWN 1.6 percent at $54.18 per barrel

source: news.abs-cbn.com

US economists more pessimistic, citing trade as major risk: survey

WASHINGTON - Economists have become more concerned about US growth prospects, citing trade friction as the major worry, but recession risks have receded slightly, according to a survey released Monday.

Nearly half of the panel surveyed by the National Association for Business Economics expect a recession before the end of next year, down from 60 percent in the prior survey.

The panel expects the world's largest economy to slow, with growth falling below 2 percent for the first time since 2016, the survey showed.

Recent data have shown the US labor market remains strong, but manufacturing is in recession while the larger services sector is slowing, giving rise to fears about the health of the US economy, especially amid President Donald Trump's grinding trade war with China and increasing tensions with Europe.

The NABE panel "turned decidedly more pessimistic about the outlook over the summer, with 80 percent of participants viewing risks to the outlook as tilted to the downside," said Gregory Daco, the group's survey chair and chief US economist at Oxford Economics.

"The rise in protectionism, pervasive trade policy uncertainty, and slower global growth are considered key downside risks to US economic activity," he said in a statement on the findings in the quarterly survey.

Looking further out, 69 percent of the panel expects a recession by mid-2021.

The Federal Reserve has cut interest rates twice this year and many market analysts expect more stimulus to be announced later this month, but the NABE panel was less convinced.

Daco said over 40 percent anticipate at least one more rate cut this year, while three-quarters of respondents expect at least one rate cut by the end of 2020.

The median forecast by the panel is for growth of 2.3 percent this year, slowing to 1.8 percent next year after 85 percent of the panel cut their real GDP projections.

source: news.abs-cbn.com

US unemployment falls to 50-year low of 3.5 pct in September

WASHINGTON - America's jobless rate tumbled in September to its lowest level in 50 years, according to government data released Friday, delighting the White House even though it may not assuage recession fears as President Donald Trump's trade wars persist.

Meanwhile, with a strong dollar and slowing global economy, the US trade deficit widened in August, as the trade conflicts ate into export growth.

Trump immediately cheered the good jobs data, claiming his economic record should shield him from efforts to impeach him, and shortly after said a trade deal with China was possible soon.

But there was less-than-stellar news as well: The pace of job creation was the slowest in four months and wages fell, while the manufacturing workforce also shrank for the second time this year.

Wall Street was reassured by the news, with the benchmark Dow Jones Industrial Average ending the day with a gain of 1.4 percent.

Unemployment fell two-tenths of a point to 3.5 percent, matching the rate last recorded in December 1969, and well below what analysts had forecast, according to the Labor Department.

Employers added a total of 136,000 net new positions, which was below expectations, with notable slowdowns in education, government, finance and business services.

The August job gain was revised up sharply to 168,000, nearly 40,000 more than originally reported.

But signs of the slowdown were unambiguous: At 157,000, the average for the last three months is now well below the 223,000 a month recorded during 2018.

"Breaking News: Unemployment Rate, at 3.5%, drops to a 50 YEAR LOW. Wow America, lets impeach your President (even though he did nothing wrong!)," Trump tweeted.

The hotly anticipated jobs report also landed amid a raft of worrisome economic data showing Trump's trade wars have put a dent in the business environment and suggesting hiring should slow in the coming months.

But Federal Reserve chief Jerome Powell said Friday that although the economy "faces some risks, overall it is... in a good place."

The Fed's job "is to keep it there as long as possible," he said.

Average hourly wages fell by a penny to $28.09 last month, well below economists' expectations, putting an end to a year-long string of steady gains and limiting consumers' spending power in the coming months.

AS GOOD AS IT GETS

Despite the slight drop in the month, Trump hailed the increase in wages over the past 12 months.

"Wages are up by almost 3 percent. That's a fantastic increase for everybody out there working. We're very happy about those numbers," Trump told reporters at the White House.

But meanwhile the mining sector added no workers after three straight months of layoffs, and the auto sector shed workers for the fourth month in a row.

"Job growth is set to slow much further," Ian Shepherdson of Pantheon Macroeconomics said in a note to clients.

"This is as good as it's likely to get until the trade war is resolved."

But given the dwindling supply of workers in the US economy, some groups continue to benefit: Unemployment among Hispanics fell to its lowest level since records began in 1973.

And for workers without a high school diploma, the jobless rate fell to the lowest since records began in 1992.

The latest data did not reflect the nationwide strike launched last month by General Motors employees, who walked off the job the week after the survey for the September jobs report was conducted.

EXPORTS SLOW

In a separate report also released Friday, the Commerce Department said the yawning US trade deficit rose by nearly $1 billion in August as weakening foreign demand and the churning trade conflict ate into US export growth.

However, Trump said there is a "very good chance" to reach a trade deal with China soon.

"Right now we're in a very important stage in terms of possibly making a deal. If we make it, it will be the biggest trade deal ever made," Trump said.

But the unexpected trade deficit increase could weigh on GDP calculations for the third quarter, with a global economic slowdown expected to weaken US exports while the strong US dollar has fueled imports.

As a result, the US trade balance crept 1.6 percent higher to $54.9 billion for the month, surpassing economists' expectations.

Imports increased 0.5 percent, while exports rose 0.2 percent, rising more slowly than in July.

source: news.abs-cbn.com