Archives of “Papua New Guinea” tag

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Japan PM Abe: Current situation does not call for state of emergency declaration

  
  Analysis
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Comments by Japanese prime minister, Shinzo Abe

  • Coronavirus cases are rising, government is watching closely
It is clear that the virus situation across the country is not getting any better as the curve is steepening as the days go by. Japan reported a single day record of 980 new virus cases yesterday, with infections also picking up outside of Tokyo.
Japan
Osaka is reported to find 149 new cases today and that would be the daily record for the prefecture, with Tokyo having found another 260 new cases as reported earlier.
As much as the government insists that things are “under control”, you have to wonder where will they draw the line and say that they have made a mess of the situation.
Eventually, the fear of the virus spread in itself will take a toll on the economy – as much as the government wants to keep business activity running for as long as they can afford to. Unfortunately, that comes at the costs of people’s health and well being, and at worst lives.

Texas coronavirus cases up >10k on Thursday, record deaths in one day

  
  Analysis
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COVID-19 numbers published from Texas for the preceding 24 hours

  • New cases +10,291 bring the total to 292,656. This is the fourth highest single day increase. If there is a positive to be gleaned maybe 4th biggest is it?
  • The death toll however has gained at a record pace, for a second consecutive day, up 129 to a total of 3,561
  • Hospitalisations down 14, down for a second consecutive day – again trying to gather some positive signs, this is one
COVID-19 Texas coronavirus

Bank of Canada holds rates at 0.25%, as expected

  
  Analysis
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Highlights of the Bank of Canada rate decision

  • Prior was 0.25% (this is the effective lower bound for Canada)
  • BOC pledges to keep rates at 0.25% until inflation target hit
  • BOC to continue $5B per week in QE; repeats buying will continue “until the recovery is well underway”
  • BOC stands ready to adjust its programs if market conditions warrant
  • Says economic decline “considerably less severe than the worst scenarios presented in the April MPR”
  • BOC sees 40% of activity recovered in Q3 but then “the Bank expects the economy’s recuperation to slow as the pandemic continues to affect confidence and consumer behaviour and as the economy works through structural challenges”
  • Central scenario in in MPR shows economy not likely to return to pre-COVID levels until 2022
  • Sees 2020 GDP down 7.8%, up 5.1% in 2021 and up 3.7% in 2022
  • Says Q2 activity estimated to have fallen about 15% below its level at the end of 2019, economy appears to have bottomed in April
  • Sees US GDP down 8.1% in 2020, up 3.4% in 2021 and up 4.3% in 2022
  • Global GDP forecast down 5.2% in 2020 and up 5.2% in 2021
  • The path for CPI in the next year largely reflects the influence of energy prices
The big news here is this line:
“The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”
That’s forward guidance indicating no hikes until 2% inflation is ‘substantially achieved’. That last phrase leaves them some wiggle room but this is conditional forward guidance.
Macklem will hold a briefing at 1500 GMT (11 am ET)
Forecasts in the MPR:
BOC forecasts for developed world

BOJ’s Kuroda: Economic activity has gradually resumed

  
Analysis, Economy
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BOJ governor, Haruhiko Kuroda, begins his press conference

Kuroda
  • But Japanese economy remains in an extremely severe siituation
  • Pace of recovery to only be moderate
  • Inflation is likely to be negative for the time being
  • Future economic developments remain extremely unclear
  • Risks are tilted to the downside for prices, economic growth
  • BOJ won’t hesitate to ease further if needed
  • Will continue to support corporate financing, markets
Kuroda is still maintaining a more subdued take on the economic situation but that is hardly a surprise. The recent economic data from Japan have been rather poor and a possible virus resurgence only adds to more risks surrounding the outlook.
But Kuroda stands firm in assuring that the BOJ policies since March are having an impact, though I’m sure they pretty much lucked out on this one with the Fed and ECB doing most of the heavy lifting to appease financial risks in the market for the most part.

Risk ahead for the EURO this week

  
Analysis, Forex
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ECB policy review and European summit

German bunds were trading at -0.46% yesterday on the 10 year chart which is 10bps lower than a Bloomberg modelled curve mentioned on the Bloomberg Live Blog yesterday. This is most likely due to positioning ahead of the European Council’s summit.

On Friday and Saturday of this week EU policy makers will meet to discuss the proposed €750 billion recovery plan.The big questions is whether nations like Austria, Denmark, Sweden, Netherland and Finland will block the plan. The  issue is that these countries are opposed to the idea of large handouts on principle.However, despite their reluctance, the present crisis means their reticence may be seen as mean spirited in a time of shared humanitarian crisis. The pressure is for the countries concerned about the ideas of grants rather than loans to approve this proposed fund.On July 10 we had a German official state that Netherlands is unlikely to block the EU recovery fund which is supportive of the fund being accepted.

On Thursday we have the ECB rate meeting with little change expected. With the PEPP program increasing by €600 billion euros last month  it is unlikely that we see any changes to the PEPP program on Thursday.

The risk

If the recovery fund is rejected by the frugal four expect immediate downside for the EUR. However, given that the second day of the meeting is taking place over the weekend this is going to be weekend risk for the EUR.

ECB policy review and European summit

UK PM Johnson: We do think masks have a great deal of value in confined spaces

  
  Analysis
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Comments by UK prime minister, Boris Johnson

Boris Johnson
  • We have got the virus under control across the country
  • It is very important to wear a face covering in shops
  • Will look at the guidance and say more in the next few days
Judging by recent remarks by the government, it is only a matter of time now before masks are surely going to be mandatory in shops across the UK.
In the US, Trump also wore a mask in public over the weekend but we’ll see if he will start doing so outside of the hospital. If so, that could mark a change of a stance and may help to create more health awareness in mitigating the spread of the virus.

Japan reaffirms that state of emergency declaration is not needed for now

  
  Analysis
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Tokyo finds another 119 new coronavirus cases today

Japan economy minister, Yasutoshi Nishimura, is out to reaffirm that there is no need to declare another state of emergency in Tokyo just yet despite the consistent jump in the number of coronvirus cases in the capital over the past two weeks.
The count today may be skewed due to the ‘weekend effect’, with Tokyo having previously reported over 200 new cases each day over the last four days before this:
Tokyo

Iran and China are working towards partnerships – would benefit by offsetting US pressures on each

  
  Analysis
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A weekend report from the Wall Street Journal on mooted wide ranging partnership discussion by the two countries:

  • China would benefit from Iranian oil
  • Iran would get Chinese investment
Iran and China partnering up would deflect US pressures and influence on both.
WSJ goes on:
  • An initial draft of the Iran-China deal still requires Iranian parliamentary approval
  • under a 25-year partnership, China would import “sustainable” levels of Iranian oil, but offered no further details
Here is the link for more (may be gated).

iran china

OPEC and its partners will consider increasing oil output at a meeting this week

  
Analysis, Crude
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Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week’s meeting.

  • Key members of the Organization of the Petroleum Exporting Countries and its Russia-led allies will hold a virtual meeting on Wednesday 15 July
There is no further detail on this, link here
The increased optimism comes as hopes are up that demand is beginning to recover and will continue to do so. Its not going to be smooth sailing though.
Saudi Arabia and most others in the OPEC+ alliance support increasing output by around 2 million barrels a day say reports ahead of this week's meeting.
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