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Rising debts are a danger despite low service costs - Economo

Rising debts are a danger despite low service costs - Economo

An innocent explanation for the tremendous rebound in global stock markets in the second quarter was that investors concluded that the worst of the pandemic was over and that the recovery was on the way.A less innocent – but plausible – alternative interpretation is that investors now believe that central banks will exercise full control over asset prices in the foreseeable future. In other words, the strong imperative of regulators doing “what is necessary” to deal with the current crisis could ensure a lasting separation of stock prices from ailing economies.Support for this second view...

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3d ago
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US jobless claims fell more than expected - Economo

US jobless claims fell more than expected - Economo

The US jobless claims fell more than expected last week, easing fears of a new downturn in the labor market after several major states reported an increase in coronavirus cases.The number of applications for financial assistance under regular state programs fell by 99,000 to 1.31 million in the week ending July 4, according to data from the Ministry of Labor. On the other hand, economists expected applications to reach a level of 1.375 million.Re-applications, which show the total number of Americans receiving benefits over a longer period, fell to 18.1 million in the week ended June 27,...

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1d ago
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The Fed is reasonably cautious about controlling the yield curve - Economo

The Fed is reasonably cautious about controlling the yield curve - Economo

The Federal Reserve is following at a furious pace in support of the US economy and the global financial system. What if he has to do more?Regulators shudder at the idea of ​​negative interest rates. However, stronger control over the US government bond market is one possible option.Restricting the yield on government securities, also known as controlling the yield curve, would repeat a policy that the Fed last used during and after World War II. To some extent, the market is already behaving as if it has been undertaken. Yields on 5-year government securities stabilized below 0.4% after...

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3d ago
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We can’t expect the usual thing to happen on Wall Street - Economo

We can’t expect the usual thing to happen on Wall Street - Economo

Nothing has been normal on Wall Street for a long time. So expectations “for the usual” to happen are particularly difficult.Yet this is exactly what strategists and analysts continue to do as the pandemic and its economic pressures develop. They turn to their only guide – the past. It’s a technique that showed how old it really is in March when the fastest decline in history turned into the fastest 50-day market growth in nine decades – a rally that those with a penchant for history described as doomed.Now that the momentum has returned, history suggests that the heights are here to...

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3d ago
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The Bank of Japan presented its gloomiest economic forecasts in 12 years - Economo

The Bank of Japan presented its gloomiest economic forecasts in 12 years - Economo

The Central Bank of Japan lowered its economic forecasts for all nine regions of the country for the second consecutive quarter. This is the first such decline since the collapse of Lehman Brothers in 2008 and supports fears that the country’s economy may fall deeper than originally expected.In its quarterly report released on Thursday, the Bank of Japan proposed a gloomier forecast for most regions than three months ago due to the latest data showing a decline in production, consumption, and capital expenditures.“Exports are declining further as COVID-19 has led to a decline in global car...

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2d ago
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Employment data suggest a difficult recovery in the US labor market - Economo

Employment data suggest a difficult recovery in the US labor market - Economo

The latest employment data in the United States shows that the significant recovery in the labor market continued in June, although only about a third of the jobs lost during the coronavirus shock were restored.The improvement is good news, but it should not be implied that the labor market will quickly return to normal, either in macroeconomic terms or as employment opportunities among the population. Women have been hit harder by job losses, a situation different from previous recessions. A full return to pre-coronavirus employment will be long and difficult.First, the macro picture. In...

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4d ago
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Will the supply and demand for safe assets get balanced? - Economo

Will the supply and demand for safe assets get balanced? - Economo

One of the long-term consequences of the financial crisis in 2008 was the lack of secure assets that could be used by institutions to store their wealth, meet regulatory requirements and provide collateral for borrowing additional funds.This problem has been identified as an important reason for low capital investment and slow growth in the global economy over the past decade. It was also a major cause of the European sovereign debt crisis, which peaked in 2012.But the positive of Covid-19’s shock is that the regulatory response may actually alleviate the shortage of safe assets, according...

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4d ago
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The world emerges from the hegemony of the United States, but does not take its eyes off them - Economo

The world emerges from the hegemony of the United States, but does not take its eyes off them - Economo

In the middle, 2020 turned out to be one of the darkest years in US peacetime history. But it also confirmed without a doubt the nation’s paramount global importance. Do not question my ability to think logically. These opposing claims are compatible.The first comes from a simple look at the facts. The United States accounts for a quarter of the world’s Covid-19 deaths. Americans are shamefully barred from entering the EU and other allied territories. Unemployment is the highest since the population remembers. The assassination of George Floyd exposed racial inequalities and highlighted...

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3d ago
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Don’t fight the Fed, but don’t rely on it - Economo

Don’t fight the Fed, but don’t rely on it - Economo

With or without a crisis, the rules of the game for investors have changed. Prior to quantitative easing, investors could rely on government bonds and stocks to work together throughout the cycle to reduce portfolio volatility.The central bank would cut interest rates in difficult economic times, with bleak prospects for corporate profits and when stock prices are under pressure. As interest rates fall, rising government bond prices would support a portfolio affected by falling stocks.The connection worked in the opposite direction. As the benefits of lower interest rates stabilized the...

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4d ago
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The ECB expects two years of deflation and economic transformation due to the crisis - Economo

The ECB expects two years of deflation and economic transformation due to the crisis - Economo

The governor of the European Central Bank (ECB) Christine Lagarde said that the Eurozone is facing two years of downward pressure on prices, but there may be a reversal after that because the coronavirus crisis will accelerate the transformation of the economy.The head of the ECB said during a webinar on Saturday that the pandemic would stimulate the earlier transition to greater digitalization and automation, shorter supply chains, and greener industries.At the same time, the central bank will have to maintain its extremely loose monetary policy and financial instruments will have to be...

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6d ago
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Austria accused Italy of financial failure even before the coronavirus crisis - Economo

Austria accused Italy of financial failure even before the coronavirus crisis - Economo

The billion-dollar dispute escalates: According to the will of the European Commission, the 27 Member States will use 750 billion EIR to rebuild their economies after the coronavirus crisis. In addition, the countries have long been discussing the EU’s medium-term financial framework (MFF) – the EU’s budget for the next seven years – which is expected to amount to 1.1 trillion EUR.Austria is now publicly accusing Italy, Europe’s “problem child”, of fiscal failure. “The virus is not to blame for their financial situation over the last ten years”, said Austrian Finance Minister Gernot...

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4d ago
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Valdis Dombrovskis: EU budget rules will return after the crisis - Economo

Valdis Dombrovskis: EU budget rules will return after the crisis - Economo

Budget constraints for European Union (EU) member states will apply again after the coronavirus-related recession, said the European Commission Vice-President Valdis Dombrovskis.The EU’s Stability Pact – the right to ensure that member states have sound public finances and coordinated fiscal policy – remains active, added Valdis Dombrovskis in an interview.Governments advancing with deficits during the crisis must keep in mind the sustainability of such budgetary policies, warns the European Commission Vice-President, noting that Italy’s previous deficit has left the country with little...

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6d ago
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Retail sales in Australia reported а record growth in May - Economo

Retail sales in Australia reported а record growth in May - Economo

Australian retail sales recorded a record jump in May, according to official data released on Friday. The large-scale easing of coronavirus blockades has allowed all sectors to reopen, allowing for a recovery from the historic decline in April.Retail sales rose 16.9% in May compared to 17.7% in April. Sales also increased by more than 5% on an annual basis, according to the data from the Australian Bureau of Statistics. This is the largest increase in the indicator for the 38-year history of keeping statistics on retail trade.Also in May, there was a huge increase of 129.2% in sales of...

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7d ago
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Fitch Ratings downgraded a record 33 sovereign ratings - Economo

Fitch Ratings downgraded a record 33 sovereign ratings - Economo

Fitch Ratings downgraded a record 33 sovereign ratings in the first half of this year and the agency is not over yet, as the coronavirus pandemic threatens the sustainability of public finances.James McCormack, global head of Fitch’s sovereign ratings, said the agency had rated the credit ratings of 40 countries or sovereign entities as “negative”. This means that these ratings may be lowered.“Never in the history of Fitch Ratings have we had 40 countries with negative prospects at the same time”, said James McCormack. “This is happening after we have already lowered 33 sovereign ratings in...

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6d ago
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Romania allocates 1.16 billion EUR to help SMEs - Economo

Romania allocates 1.16 billion EUR to help SMEs - Economo

The Romanian government unveiled a large-scale pandemic recovery plan, which envisions setting aside 1.16 billion EUR to help small and medium-sized enterprises (SMEs) to resume operations.“This plan will change Romania’s development strategy in terms of modernization and competitiveness, and I am convinced that through it we will be able to ensure accelerated development and economic growth based on sustainable pillars”, said Prime Minister Ludovic Orban in a brief statement before the weekly government meeting.The plan envisions investing 1.5 billion RON (310 million EUR) a year by 2023...

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Jul 2
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How to achieve the best economic recovery from Covid-19? - Economo

How to achieve the best economic recovery from Covid-19? - Economo

The June update of the IMF’s global economic outlook is not an optimistic document. Still, it contains one positive point: the second quarter of 2020 should be the lowest point in the economic crisis because of Covid-19. If so, the challenge is to get the best possible recovery.The downgrade of the IMF forecasts from April is large, as the forecast for global growth for this year is minus 4.9%, compared to minus 3% in April. For the next year, growth is expected to be 5.4%. As a result, global GDP is expected to slightly exceed its level from 2019 to 2021. However, in the fourth quarter of...

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6d ago
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Fed: Fiscal aid to households and businesses is unlikely to be enough - Economo

Fed: Fiscal aid to households and businesses is unlikely to be enough - Economo

The US Federal Reserve released the minutes of its June 9-10 meeting on Wednesday, during which central bank officials agreed to keep interest rates stable, saying they expect a loose policy to prevail until the economy returns to normal.Officials also held an in-depth discussion on limiting bond yields and strengthening guidelines on how the policy will be defined in the future.Members of the Federal Open Market Committee then voted to keep their key short-term interest rate in the 0-0.25% range, which was cut in mid-March as the Fed sought to provide support for an economy that continues...

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Jul 2
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The EC plans to invest at least 22 billion EUR in support of youth employment - Economo

The EC plans to invest at least 22 billion EUR in support of youth employment - Economo

The European Commission (EC) will allocate at least 22 billion EUR to support youth employment under the new budget for the period 2021-2027.The Commission today proposed funding through the NexGenerationEU instrument and the future EU budget. The funds will support the “Youth Guarantee”, created 7 years ago in the midst of the debt crisis, when unemployment among young people under the age of 29 rose to significant levels.Since then, the unemployment rate in the 15-29 age group has decreased significantly but is still significantly higher than total unemployment – just under 16%.Against...

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Jul 2
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Eurozone economic activity grows despite the uncertainty of COVID-19 - Economo

Eurozone economic activity grows despite the uncertainty of COVID-19 - Economo

The Eurozone economy is expected to grow again in the third quarter, although weak demand and growing job cuts are likely to weigh on the recovery.The three-month rate of economic contraction slowed to 0.2% in June, with the measure measuring private sector activity rising to a four-month high. Although orders from the region and abroad continue to decline, companies are confident that the continued easing of restrictions on coronavirus control will break this trend next year.The Eurozone Purchasing Managers’ Index (PMI) rose from 31.9 points in May to 48.5 points in June. The measure of...

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7d ago
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US businesses cut more than 170,000 jobs in June - Economo

US businesses cut more than 170,000 jobs in June - Economo

The US employers announced an additional 170,219 job cuts in June as the recession caused by COVID-19 reduced demand and pushed companies into bankruptcy, shows a new report.Although the layoffs reported by the global retraining company Challenger, Gray & Christmas, decreased by 57% compared to May, they jumped by 306% compared to June last year. Job cuts explain why the number of new applications for unemployment benefits remains extremely high, even after businesses reopen.“The impact of the recession is spreading to companies that have not been directly affected by the virus”, said...

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Jul 2
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James Bullard: Without proper risk management, a wave of bankruptcies can be disastrous - Economo

James Bullard: Without proper risk management, a wave of bankruptcies can be disastrous - Economo

The president and CEO of the Federal Reserve Bank of St Louis, James Bullard, warned that the growing number of bankruptcies due to the coronavirus epidemic could lead to a financial crisis.“Without more detailed risk management by health policy, we could get a wave of significant bankruptcies and this could lead to a financial crisis”, said James Bullard. He warned of “reversals” in the health crisis and said that “it is probably prudent to keep our credit for now, although it is true that liquidity has improved dramatically in the financial markets”.New cases of COVID-19 in the United...

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Jul 2
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Retail sales in Germany reported record growth in May - Economo

Retail sales in Germany reported record growth in May - Economo

German retail sales rose sharply in May, showing a recovery in private consumption after Germany lifted restrictions on fighting the spread of the coronavirus.Retail sales rose by 13.9% on a monthly basis in May after falling 6.5% in April, according to data from the Federal Statistical Office released on Wednesday. This is the largest increase in the indicator since the beginning of statistics in February 1994.On an annual basis, retail sales increased by 3.8% after a decline of 6.4% in the previous month. Thus, the meter realized its largest growth since February.Fear of the coronavirus...

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Jul 1
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What can asset managers do to help society during the pandemic? - Economo

What can asset managers do to help society during the pandemic? - Economo

What can asset managers do to help society during the pandemic? The answer is – a lot. Our debt for proper care stems from managing 50 trillion USD in stocks and bonds in public and private companies around the world, which in turn employ, directly or through suppliers, millions of people. The ultimate owners are mothers and fathers, retirees, public institutions, and charities – the same people whose livelihood is under pressure.Therefore, asset managers have full power and moral legitimacy to help shape decisions made on company boards. How should this influence be used? A good start is...

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Jul 1
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Spain will approve 50 billion EUR in aid for SMEs - Economo

Spain will approve 50 billion EUR in aid for SMEs - Economo

Spain will approve 50 billion EUR (56.4 billion USD) as part of a new package of measures aimed at boosting companies’ investment capacity and solvency in a bid to revive the coronavirus-affected economy, said Spanish Prime Minister Pedro Sanchez.The announcement was part of other proposals, such as tax reform, aimed in part at raising taxes for larger companies instead of small ones.In an interview, Pedro Sanchez said that the new measures are “related to strengthening solvency and investment”.A government source told earlier that Spain would approve the package at an emergency government...

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Jul 3
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US unemployment fell to 11% in June - Economo

US unemployment fell to 11% in June - Economo

US employers added 4.8 million new jobs in June, and unemployment fell to 11.1% amid an accelerating economic jump last month from an initial shock over the coronavirus before the blockade returned.The fall in unemployment from 13.3% in May is better than expected but is based on data collected in the second week of last month before the rise in the number of infected in a number of major US states, which led some authorities to reintroduce restrictions on activity.According to the Bureau of Labor Statistics, job growth is widespread, with the entertainment, hospitality, and restaurant...

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Jul 2
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Viliyana Filipova

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