Global Macro


The structural changes of COVID-19

Nice work here from Seth Klarman of Baupost: Peering into the Future: The Possible Longer-Term Ramifications of the COVID-19 Pandemic For most of the last century, a reasonable approach to assessing a company’s future prospects was to expect mean reversion. Fluctuations in business performance were largely cyclical phenomena. The stock market, as always, could be


MB Radio: A podcast of gloomy disposition

  With the sheer enormity of the COVID19 pandemic’s economic impact only starting to dawn, David Llewellyn Smith and Leith Van Onselen spoke with Gunnamatta on the major forms the shock has taken through the Australian economy.  Over the course of about 75 minutes (3 parts) they cover the ugly numbers and the dynamics across


Is working from home too much of a good thing?

The OECD has released a report which concludes that the overall impact of working from home (WFH) on productivity during the COVID-19 pandemic remains “ambiguous”. However, the IMF warns that long-term productivity growth and workers’ efficiency may be negatively affected if companies continue to rely too much on telecommuting when the health crisis abates. The


World heads into w-shaped depression

Via Capital Economics: Hard data for May generally revealed sharp improvements in activity, particularly retail spending, albeit not to pre-virus levels. This led us to revise our forecasts for several economies including the US, UK and euro-zone, where we now expect falls in Q2 GDP to be less steep than we initially envisaged. However, renewed


Fitch: 2020 a record for sovereign downgrades

From Fitch Ratings: There were more sovereign downgrades in 1H20 than any full year prior, and 40 sovereigns are on Negative Outlook, a record high in absolute terms and as a share of the rated portfolio, Fitch Ratings says. The coronavirus pandemic is exerting considerable pressure on sovereign creditworthiness across all regions and rating categories,


COVID-19 mutates into more infectious strain

Global cases of COVID-19 has surged past 11 million, which is more than double the annual number of severe flu illnesses, according to the World Health Organisation (WHO): Daily cases are also running at record highs: As are active cases: And total serious and critical cases: Meanwhile, COVID-19 has mutated into a new strain that


PMI producer admits PMIs are useless

Via FTAlphaville: It’s confession time for IHS Markit, the firm behind the purchasing managers’ indices. The firm asks thousands of purchasing managers whether activity over the current month has declined, improved, or stayed about the same compared with the previous month. IHS Markit then tallies responses up to produce a net figure where 50 signals no


IMF bears up big but not enough

The IMF has turned super-bearish: A Crisis Like No Other, An Uncertain Recovery Global growth is projected at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the


More PMI drivel

Via FTAlphaville: Here’s some reaction to this morning’s European flash purchasing managers’ indices (PMIs). From Capital Economics: The rise in the eurozone flash Composite PMI in June confirms that economic output in the region is recovering rapidly from April’s nadir as restrictions are progressively eased. And ING-DiBa: Today’s PMI numbers provide further evidence of what


Why China loves Trump

Via Bloomie: Donald Trump has argued frequently of late that China is rooting for Joe Biden come November’s U.S. presidential election. In Beijing, however, officials have come around to support four more years of Trump. Interviews with nine current and former Chinese officials point to a shift in sentiment in favor of the sitting president,


India disappears into virus

Via the excellent Damien Boey at Credit suisse: No reliable official Indian data for April or May. The Indian Ministry of Statistics & Programme Implementation (MSPI) has halted the official releases of industrial production (IP) and consumer price index (CPI) estimates, providing instead “quick” estimates of IP, and partial food CPI data. Specifically on the IP data, The MSPI has


OECD is not happy

Via the OECD: The lockdown measures brought in by most governments have succeeded in slowing the spread of the virus and in reducing the death toll but they have also frozen business activity in many sectors, widened inequality, disrupted education and undermined confidence in the future. As restrictions begin to be eased, the path to


Assessing the global recovery

Via Rabobank Coronavirus causes deepest economic crisis since the Great Depression Summary COVID-19 is expected to result in contraction of the global economy by 4.1% in 2020 This means that the corona crisis will be the deepest economic crisis since the Great Depression in the 1930s We expect a relatively limited recovery in 2021, as


UN: Smallest nations the world’s happiest

In another strong rebuke to the mass immigration ‘Big Australia’ cabal, the United Nations has released its World Happiness Report, which reveals that nations/cities with small populations are the world’s happiest: The 2020 report ranked 156 countries by how happy their citizens perceive themselves to be, based on their evaluations of their own lives… Since


Lies, damned lies, and PMIs

Via FTAlphaville comes a point I’ve been making repeatedly myself: The purchasing managers’ indices are among the world’s most closely watched economic indicators, moving markets and provoking policymakers to act. And with good reason. The polls — most of which are compiled by data firm IHS Markit — offer an early sign of how well,


AEP: No v-shaped recovery for the West

Via Ambrose Evans-Pritchard: The V-shaped recovery in East Asia is sadly no template for the blundering West. The near euphoric rally on global equity markets is based on a fundamental fallacy. Most of Europe and North America are not pursuing the policies that enabled China and the Pacific Rim – with big variations – to


Restaurants go extinct

Globally and for the foreseeable future. First it was China where eating out is still down one third nearly three months after reopening: Now the US looks, if anything, even worse, via The Economist: COVID-19 HAS infected every sector of the global economy. But perhaps none has been hit as hard as the restaurant industry.


Study: Employers use skilled visas to slash wages

The Economic Policy Institute has released research showing that the United States’ temporary skilled visa scheme (H1B) has been used by employers to undercut local workers’ wages. The analysis is based upon the Department of Labor’s Occupational Employment Statistics (OES) survey, which constructs a distribution of wages for each occupation in a specific geographic location. The


Gargantuan output gaps upon us

Via FTAlpahville: The output gap is a concept we got familiar with during the global financial crisis. But it’s time to revisit it, in some detail. One reason the measure often gets overlooked in mainstream headlines is because it doesn’t sound all that consequential. Yet it is. Arguably more so than ever. Encumbering its popularity,


Encouraging results for Remdesivir. Or not

From Gilead: Gilead Announces Results From Phase 3 Trial of Investigational Antiviral Remdesivir in Patients With Severe COVID-19 — Study Demonstrates Similar Efficacy with 5- and 10-Day Dosing Durations of Remdesivir — FOSTER CITY, Calif.–(BUSINESS WIRE)–Apr. 29, 2020– Gilead Sciences, Inc. (Nasdaq: GILD) today announced topline results from the open-label, Phase 3 SIMPLE trial evaluating 5-day and


Dr Doom: Global economy lost decade ahead

Via Nouriel Roubini: After the 2007-09 financial crisis, the imbalances and risks pervading the global economy were exacerbated by policy mistakes. So, rather than address the structural problems that the financial collapse and ensuing recession revealed, governments mostly kicked the can down the road, creating major downside risks that made another crisis inevitable. And now that it has