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11.02. UK economy showed zero growth in the IV quarter

The UK economy showed zero growth in the last quarter of 2019. According to preliminary data from the National Statistical Office (ONS), GDP in October-December did not change compared to the previous quarter. In December, economic growth accelerated by 0.3%.

In annual terms, UK GDP in the IV quarter grew by 1.1%, at the lowest rate since the beginning of 2018.

Consumer spending in the country grew by only 0.1%, at the lowest rate since the end of 2015. Investment in business fell by 1%, which was the maximum decline since the end of 2016.

Manufacturing output fell 1.1% from the previous three months. Service growth slowed to 0.1%.

At the end of 2019, the UK's GDP increased by 1.4% compared with a rise of 1.3% in 2018.

The Bank of England predicts that in 2020 the UK economy will grow by only 0.8%, at the lowest rate since the financial crisis. In 2021 growth will accelerate to 1.5%, according to the Central Bank.

 

12.02. China maintains its goal of GDP growth despite coronavirus exposure

Deputy head of the PRC Academy of Social Sciences Cai Fan said that China will be able to achieve its long-term goal of doubling GDP and income this year, despite the consequences of the outbreak of Coronavirus. The epidemic will have only a short-term effect on the country's economy, after which demand will recover quickly, Chinese officials think.

The economist also noted that the impact of a virus outbreak will slightly reduce growth and other development indicators, but these consequences will not be long-term. According to him, the growth rate of about 5.7% this year will be sufficient to achieve the goal of doubling GDP and income.

Cai also added that the Chinese authorities should use policy tools in a timely and flexible manner, as well as apply «non-traditional policy tools» to support the economy.

It was previously noted that the outbreak of coronavirus in 2020 could reduce China's economic growth by 1 percentage point.

 

13.02. US annual inflation accelerates to 2.5% in January

According to the US Labor Department, consumer prices in the US in January rose 2.5% year on year, and on a monthly basis inflation was 0.1%. Experts expected consumer price growth to accelerate by 2.4% and 0.2%, respectively.

In December, inflation amounted to 0.2% in monthly terms and 2.3% in annual terms.

Core inflation in the United States (excluding food and energy prices) in January year on year amounted to 2.3%. Analysts had expected the indicator to be fixed at 2.2%. On a monthly basis, prices rose by 0.2%, which coincided with experts' forecasts.

US food prices in January in monthly terms rose by 0.5%, while energy prices fell by 0.7%. In annual terms, food prices rose by 1.8%, and energy – by 12.1%.

 

14.02. US industrial production in January fell by 0.3%

According to the US Federal Reserve, the volume of industrial production in the United States in January decreased by 0.3% compared to the previous month. Analysts polled by Reuters expected a 0.2% drop.

The value for December was revised: the decrease in industrial production in the country in the reporting month is estimated at 0.4% in monthly terms against the previous estimate of 0.3%.

The US industrial production index is one of the key indicators of the economy, reflecting the physical volume of products manufactured by American companies.

 

17.02. Japan's GDP in the IV quarter fell at the fastest rate since 2014

In the fourth quarter of 2019, Japan's GDP fell by 6.3% year on year after increasing the consumption tax in the country. Such rates of decline became the highest over the past 5.5 years. The fall in GDP was noted for the first time since the third quarter of 2018.

Analysts had expected the Japanese economy to decline in the fourth quarter by only 3.7%. In the third quarter, according to revised data, Japan's GDP grew by 0.5%, and not by 1.8%, as previously reported.

Analysts also fear that the country's economy may contract in January-March 2020 against the backdrop of the spread of the Chinese coronavirus. A fall in GDP over two consecutive quarters will mean a technical recession.

 

18.02. Apple shares fell on Tuesday

Stock prices of the American company Apple Inc are reduced today by 3.6% during preliminary trading. Even earlier, the stock drop exceeded 4%. The Nasdaq stock index, which calculates the company's securities, fell 0.9%.

The fall was caused by a warning from Apple that the company's revenue in the second fiscal quarter (ending March 30) would not reach the previously announced values due to an outbreak of coronavirus in China. As you know, all Apple's manufacturing facilities are located outside of Hubei Province, which is the epicenter of the disease, and all of them have already resumed work.

However, the recovery is slower than planned, which has led to a temporary restriction in the supply of iPhone smartphones worldwide. At the end of January, the company gave a forecast in which it estimated revenue in the current quarter at $63-67 billion with the resumption of production by February 10.

 

19.02. UK annual inflation accelerates to 1.8% in January

According to the Office of National Statistics (ONS), inflation in Great Britain accelerated in January to 1.8% from 1.3% in December in annual terms, and in monthly terms, deflation was fixed at 0.3% against zero inflation a month earlier.

Analysts predicted that annual inflation would be 1.6%, and in monthly terms, experts expected a deflation of 0.4%.

The CPIH index (inflation, taking into account the costs of homeowners on housing maintenance) for the reporting month was 1.8% in annual terms against 1.4% a month earlier. In monthly terms, a deflation of 0.2% was recorded against zero dynamics in December.

 

02.20. Gold has risen to a high in 7 years

Gold prices rose to a maximum in 7 years due to fears that an outbreak of coronavirus will slow down global growth, as well as amid rumors that the US Federal Reserve will cut the interest rate by the end of the year.

At the auction on February 20, the price per troy ounce of gold amounted to $1,621.45 – a similar price of gold was fixed at the beginning of 2013.

Although the number of new cases of coronavirus infection is declining, signs of deepening economic damage from the epidemic continue to put pressure on markets. Moreover, two deaths were recorded in Iran, which indicates the active spread of the disease outside of China.

The minutes of the last meeting of the US Federal Reserve showed that the regulator can leave rates unchanged for several months of 2020, but traders predict at least one decrease in 2020.

 

02.21. The ECB expects the completion of the coronavirus epidemic will lead to a significant revival of the eurozone economy

Philip Lane, chief economist at the European Central Bank (ECB), said that the spread of the coronavirus Covid-19 is the central agenda for the Central Bank and carries downward risks for its economic outlook until the epidemic is brought under control.

At the same time, the ECB expects that the end of the epidemic will lead to a significant revival of the eurozone economy, and in the foreseeable future we should not expect «dramatic» consequences.

The regulator also noted that the ECB has room to maneuver in terms of increasing monetary stimulus and is ready to lower key interest rates if necessary.

 

25.02. Italy has become the epicenter of the spread of Chinese coronavirus

Italy warned the EU that it could require substantial assistance if the unexpected spread of coronavirus in the country's industrial regions would have serious negative consequences for the economy.

On Monday, it became known about 8 cases of death from a coronavirus in Italy, the number of people infected in the country rose to 231. Most cases of infection were recorded in the northern regions of the country, which together account for about a third of Italy's GDP and about half of Italian exports.

Schools and universities have already been closed in these regions, and mass events, including the Venice Carnival, have been suspended.

Italian Deputy Economy Minister Laura Castelli said that the EU needs to be prepared to come to Italy’s rescue if the country faces an economic shock as a result of the effects of coronavirus. Analysts suggest that the economic consequences of the spread of coronavirus can be significant. According to estimates of the Bank of Italy, the epidemic factor will subtract 0.2 percentage points from the country's GDP growth rate in 2020.

 

26.02. German economy nears stagnation in first quarter with coronavirus outbreak

The German Institute for Economic Research DIW reported that Germany’s economy is close to stagnation in the first quarter of 2020 due to the coronavirus outbreak. According to the organization, the country's GDP will increase by only 0.1% compared with the previous quarter, and the industrial sector of the economy will be mainly hit.

The head of the economic department of the institute, Klaus Michelsen, also noted that the impact of the coronavirus epidemic remains unclear, and the damage cannot be calculated. However, experts are confident that German industry will suffer the most, since an outbreak of the virus will inevitably lead to interruptions in the supply of wholesale products from China.

According to the Federal Statistical Agency of Germany (Destatis), German GDP in the IV quarter of 2019 remained unchanged compared with the previous three months. Over the past year, Europe’s largest economy has grown by only 0.6%, at the lowest rate since the 2013 eurozone debt crisis.

 

02.27. European stock exchanges fall by more than 3% on concerns over coronavirus

Major European stock indexes on Thursday evening accelerated the pace of decline and are already falling by more than 3%. Experts note that the pressure on the exchanges is caused by concerns for the global economy, which is under pressure from the situation with the coronavirus.

In particular, the British FTSE 100 index falls by 3.02%, to 6824.55 points, the French CAC 40 – by 3.28%, to 5502.16 points, and the German DAX – by 3.1%, to 12357.11 points.

Investors continue to assess the risks of a slowdown in the global economy amid the continued spread of the coronavirus, which is becoming a pandemic. Coronavirus and related quarantine measures pose risks to many areas of the economy, including trade, transportation and tourism.

 

28.02. Eurozone inflation expectations drop to record low

A key market indicator of long-term inflation expectations in the eurozone fell to a record low amid growing concerns about the spread of coronavirus in Europe.

The five-year indicator of inflation expectations fell to 1.1182%, which was the lowest level in history. The indicator measures the level of expected inflation in the eurozone over a five-year period.

The previous record low was recorded in October 2019 at around 1.12%.

 

02.03. Italy's GDP growth slowed in 2019 to 0.3%, a minimum for 5 years

According to official figures, Italy's economic growth in 2019 has slowed to its lowest level since 2014 of 0.3% compared with 0.8% in 2018. Italian authorities predicted a recovery rate of 0.1%, a consensus forecast by experts provided for an increase of 0.2%.

Consumer spending in Italy last year increased by 0.4%, government spending decreased by 0.4%. Business investment grew by 1.4%, including investment in construction jumped 2.6%. The volume of exports from Italy in 2019 increased by 1.2%, the volume of imports decreased by 0.4%.

Italy's budget deficit last year amounted to 1.6% of GDP, which is the lowest since 2007. In the previous year, the budget deficit was 2.2% of GDP. The public debt indicator remained at the level of 2018 – 134.8% of GDP.

The official forecast for 2020 assumes a country's GDP growth of 0.6%, but many experts note the possibility of a recession in the economy due to the spread of coronavirus. The Italian government intends to revise the budget parameters for 2020 to take into account the urgent costs of supporting the economy in the context of the spread of coronavirus.

The authorities plan to spend at least 3.6 billion euro to support the economy, including the provision of tax benefits to businesses, as well as measures to support exporters to mitigate the negative effects that the spread of coronavirus could have on the economy.

 

03.03. Central Bank of Australia lowered rate to record low

The Central Bank of Australia has lowered its key interest rate from 0.75% to 0.5% per annum. The regulator reduces the rate for the fourth time in less than a year, bringing it to a record low. Prior to this, the rate was reduced in June, July and October 2019. This decision was unexpected for market participants, and only two economists surveyed by Reuters predicted a rate cut.

The head of the Reserve Bank of Australia, Philip Law, said that the spread of coronavirus could have a significant impact on the country's economy, and it is difficult to predict how harmful the consequences would be. The politician also noted that the Board of Governors of the Central Bank is ready to further soften monetary policy in order to support the Australian economy.

 

04.03. US Federal Reserve cut the rate unscheduled for the first time since 2008

The Federal Reserve Board unexpectedly lowered its base interest rate from 1.5-1.75% to 1-1.25%, dropping it by 50 basis points at once. Market participants expected that the regulator would make a decision on a rate change only at the meeting on March 18.

The Fed has taken emergency measures in connection with the spread of the coronavirus, which creates additional risks for economic activity, and the fall of markets. The last time a rate cut occurred outside of a scheduled meeting of the regulator was during the 2008 crisis.

It is noted that the Central Bank came to such decision amid pressure from the US Presidential Administration Donald Trump.

 

10.03. Saudi Arabia will increase oil supplies to 12.3 million barrels per day in April

Saudi Arabian State Oil Company Saudi Aramco intends to increase oil supplies to 12.3 million barrels per day in April. The company expects this to have a positive long-term financial effect.

According to the OPEC monthly report, in January, Saudi Arabia produced 9.7 million barrels of oil per day. The authorities said that the country's production capacity is 12 million barrels per day. Moreover, the Kingdom has tens of millions of barrels of oil in strategic reserves, which can be used if necessary.

Riyadh has already announced that it has been lowering oil prices for buyers from all regions since April, after OPEC and its allies, including Russia, could not agree on Friday to further reduce production.

 

11.03. Bank of England urgently cut rate to deal with coronavirus effects

The Bank of England unexpectedly lowered its base interest rate in an attempt to support the British economy amid the spread of coronavirus in the country. Yesterday, the Monetary Policy Committee voted unanimously to lower the rate by 50 basis points to 0.25%.

The regulator did not change the volume of the government bond purchase program (435 billion pounds) and kept the purchase volume of corporate bonds at 10 billion pounds. At the same time, the central bank lowered its countercyclical capital buffer for banks from 1% to 0% and launched a new small business lending support scheme.

The regulator noted that although the extent of the economic shock from COVID-19 is very uncertain, business and production activity in the country may significantly weaken in the coming months.

This emergency cut in the Bank of England rate was the first since the global financial crisis of 2008. As a result of this step, the rate returned to a record low level achieved after the Brexit referendum in 2016.

 

12.03. The ECB has kept rates unchanged, but introduced a stimulus package against coronavirus

According to the results of the European Central Bank (ECB) meeting, the regulator left key interest rates at the same levels, but presented a package of incentives to combat the effects of coronavirus. The Central Bank has announced measures to support bank lending and has expanded its program of quantitative easing (QE) by 120 billion euros.

The ECB kept the interest rate on loans at zero, the deposit rate was kept at -0.5% per annum, the margin lending rate remained at 0.25% per annum. The Governing Council noted that the ECB's key interest rates will remain at their current or lower levels until inflation approaches the target level of the regulator.

ECB Htad Christine Lagarde said earlier this week that Europe could face a serious economic shock comparable to the 2008 global financial crisis if the authorities in the region do not take the necessary measures to combat coronavirus.

 

13.03. The EU will allocate 37 billion investment to combat the effects of coronavirus

The European Union decided to create an investment initiative of €37 billion as part of a package of measures to protect the region’s economy from the effects of a coronavirus outbreak. This was stated today by the President of the European Commission Ursula von der Leyen.

Additional measures that the executive branch of the European Union will take include the provision of flexibility to member states regarding budget deficit rules and government aid.

The EU will also use 1 billion euros of EU money to guarantee up to 8 billion euros in loans to 100,000 companies affected by the coronavirus epidemic to support the corporate sector.

The Head of the European Commission at the same time noted her conviction that the EU will be able to withstand economic shock only if each member state lives up to its full responsibility.