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US oil inventories unexpectedly rose 1.5% over the week

According to the US Energy Information Administration (IEA), commercial oil reserves in the country for the week ending May 22 grew by 7.9 million barrels, or 1.5%, to 534.4 million barrels. Analysts had forecast a decline in stocks of 1.9 million barrels.

At the same time, gasoline inventories decreased by 0.7 million barrels, or 0.3%, to 255 million barrels. Forecasts suggested growth of 0.1 million barrels.

Distillate stocks over the same week increased by 5.5 million barrels, or 3.5%, to 164.3 million barrels. An increase of 1.8 million barrels was predicted.

The strategic oil reserve in the country increased compared to the previous week by 2.1 million barrels, or 0.3%, to 643.8 million barrels.

 

May 29. Italian economy experienced the strongest GDP decline in history in Q1

According to the final data of the statistical agency Istat, the Italian economy in the first quarter of 2020 decreased by 5.3% in quarterly terms and by 5.4% in annual terms. This was the largest drop in GDP since the start of statistics in 1996.

Preliminary data indicated an economic contraction of 4.7% in quarterly terms and 4.8% in annual terms.

In the fourth quarter of 2019, Italian GDP fell by 0.2% compared to the previous quarter, and not by 0.3%, as previously reported.

Consumer spending in Italy in January-March fell by 6.6% in quarterly terms, business investment fell by 8.1%, government spending fell by 0.3%. The volume of imports and exports decreased by 6.2% and 8% respectively compared to the previous quarter.

In recent weeks, the spread of Covid-19 disease and the number of people dying from it have been rapidly falling in Italy. The country is gradually loosening quarantine restrictions.

 

June 01. Eurozone PMI index in May turned out to be worse than forecast

According to the final assessment of the research organization Markit Economics, the index of business activity (PMI) in industrial production of 19 countries in the eurozone in May rose to 39.4 points from 33.4 points in April.

Analysts assumed that the indicator remained at the preliminary assessment level of 39.5 points.

The largest growth of the PMI index in May 2020 was recorded in Italy (45.4 points), Greece (41.1 points), France (40.6 points) and Austria (40.4 points). Germany, Europe's largest economy, had the lowest PMI growth (36.6 points).

 

June 02. NBK requires additional monetary policy measures

The Central Bank of China said that the economic damage from the coronavirus pandemic was stronger than expected, and that additional monetary policy measures were needed.

Pan Hongsheng, deputy head of the People’s Bank of China (NBK), said at a press conference in Beijing that new instruments to stimulate bank lending to small businesses are a short-term political agreement, not a form of quantitative easing.

Earlier, the regulator announced that it would begin to redeem bank loans provided by local lenders to small firms in order to try to encourage banks to issue loans to small enterprises in the amount of up to 1 trillion yuan ($140.44 billion).

The plan provides for the use of 400 billion yuan ($56 billion) from a separate program for the purchase of 40% of unsecured loans to small and medium-sized enterprises with a maturity of at least six months. Commercial lenders will need to repay the loans back in a year. Lenders will continue to receive interest payments from the borrower, while the Central Bank will not take credit risks. The plan could increase unsecured bank loans to small businesses by 1 trillion yuan.

 

June 03. Egypt launched an oil well at 123 thousand barrels per month

Egypt has commissioned a new well in the Western Desert, capable of producing more than 0.5 million cubic meters of natural gas and more than 4 thousand barrels of oil per day. The production capacity of the new well will be approximately 123 thousand barrels of oil per month.

A 4.4-kilometer well is located in the Abu Sinan area in western Egypt.

Earlier in December, Egyptian authorities already announced the commissioning of another well, located in the same area and capable of producing up to 7 thousand barrels of oil per day and about 280 thousand cubic meters of gas. The Egyptian Oil Ministry notes that oil production in the Western Desert fields is about 60% of the country's total production.

 

June 04. The ECB has added another 600 billion euros to combat the crisis

Today, a meeting of the European Central Bank (ECB) and a speech by regulator Christine Lagarde took place. The Central Bank kept the base rate at the current level of 0.0% and the deposit rate at -0.5%. Lagarde said the regulator will expand its anti-crisis program for the purchase of Eurobonds by €600 billion to combat the coronavirus pandemic.

The Central Bank also announced that it would leave interest rates unchanged, but at the same time increase the procurement period for debt securities of the Euroblock countries within the framework of this program for a year – until June 2021.

As a result, the amount issued by the bank under the Emergency Pandemic Bonds Purchase Financing Program (PEPP) will increase to 1.35 trillion euros, which means the bank will be able to buy up most of the debt of the eurozone countries this year.

In addition to the PEPP program, another ECB program for the purchase of assets worth about 20 billion euros is now operating.

 

June 05. OPEC+ meeting scheduled for June 6

Today it became known that the ministerial meetings of OPEC and OPEC + will be held on the same day, June 6. The decision to hold these events suggests that countries that are not fully implementing the deal (Iraq, Nigeria and Kazakhstan) in the past months have promised to compensate for this later by increasing production cuts. Approximately 1.5 million bpd in the following months.

In May, OPEC countries were to reduce production by 6.085 million bpd from 26.7 million bpd. According to preliminary data, OPEC countries completed the deal in May by about 75%, in particular because of Iraq and Nigeria. Nigeria reported that it completed the deal by 52%.

This news provided strong support for Brent quotes: on Friday, oil rose to $41.60 per barrel.

 

June 08. Italy's economy will decline in 2020 by 8.3%

According to the forecast of the Italian statistical office ISTAT, the country's GDP will fall by 8.3% this year and recover at 4.6% next year. The agency noted that the spread of the COVID-19 epidemic and the subsequent containment measures taken by the government caused an unprecedented shock for the Italian economy.

ISTAT also said that this year, household spending on households will be reduced by 8.7%, and investment – by 12.5%. Unemployment will drop to 9.6% due to an increase in the number of unemployed people.

It was noted that about 500 thousand people returned to the country's labor market.

 

June 09. German exports collapsed by a record 31.1% in April

According to the Federal Statistical Office of German (Destatis), exports in the country, which is the largest economy in Europe, fell in April by 31.1% in annual terms and amounted to 75.7 billion euros. Imports for the reporting period decreased by 21.6%, to 72.2 billion euros.

Such a decline in exports was a record since the start of statistics on foreign trade in Germany in 1950. And such a strong drop in imports was recorded in July 2009, during the financial crisis (-23.6%).

In monthly terms, the decline in exports amounted to 24%, analysts expected a decrease of only 15.6%. Import compared to March decreased by 16.5%, which also turned out to be worse than analysts' forecasts of 16%.

The surplus of Germany's foreign trade balance in April amounted to 3.2 billion euros. Analysts predicted 10 billion euros.

 

June 10. US annual inflation slows to 0.1% in May

According to the US Department of Labor, consumer prices in May rose 0.1% on an annualized basis, and a monthly deflation of 0.1% was recorded. Analysts had forecast inflation at an annualized rate of 0.2%, and monthly inflation – at 0.1%.

In April, consumer prices in the country fell by 0.8% in monthly terms and rose by 0.3% in annual terms.

Core inflation in the United States (excluding food and energy prices) in May year on year amounted to 1.2%, which was lower than analysts' forecasts of 1.3%. In monthly terms, a deflation of 0.1% was recorded, which coincided with analysts' forecasts.

Food prices in the USA in May in monthly terms increased by 0.7%, while energy prices decreased by 1.8%. On an annualized basis, foodstuffs rose in price in the reporting month by 4%, while energy prices fell by 33.2%.

 

June 11. The number of applications for unemployment benefits in the US fell more than forecast

According to the US Department of Labor, the number of applications for unemployment benefits continued to decline last week, although it may take a lot of time to fully recover the labor market after a pandemic.

The number of Americans applying for unemployment benefits for the first time in the week of June 6 was 1.542 million. Analysts surveyed by Bloomberg, on average, predicted a decrease in the number of applications to 1.55 million.

The number of applications is gradually decreasing after reaching a historical maximum of 6.867 million in the week ended March 28. The number of people continuing to receive unemployment benefits fell less than expected to 20.929, compared with 21.268 million a week earlier.

In May, the number of jobs in the US economy increased by 2.509 million. Unemployment fell to 13.3% from 14.7% in April.

 

June 15. UK Central Bank may extend £150 billion QE program on Thursday

On Thursday, a meeting of the Bank of England board will take place, during which the regulator can expand the program of «quantitative easing» (QE) by 150 billion pounds. This decision aims to continue the repurchase of financial assets from the market amid possible economic problems due to the negative impact of the coronavirus pandemic and the country's exit from the European Union (Brexit).

On March 19, the British Central Bank has already increased the amount of assets bought back from the market to 645 billion pounds from the previous 435 billion, and also lowered its key rate by 15 basis points to 0.1%. The next expansion of the QE program will continue the ransom until the beginning of October.

Economists speculate that the UK economy will continue to be much lower in the third quarter, even despite the expected start of economic recovery by easing restrictions imposed by the coronavirus pandemic.

 

June 18. Bank of England maintains interest rates and expands QE program

Today, a meeting of the Board of the Bank of England took place, at which the regulator kept the key rate at 0.1%, as expected. In addition, the British Central Bank increased its bond purchase program by £100 billion ($125 billion) to 745 billion. The authorities hope that such actions will help the country's economy recover from a record downturn in March and April caused by quarantine.

Representatives of the regulator noted that the Bank of England will spend an additional 100 billion on state bonds, but will slow down the pace of purchases. A new program target of £745 billion is expected to be reached by the end of the year.

The interest rate has been at 0.1% since March 19. In March, the regulator cut the rate twice during extraordinary meetings – first by 50 basis points, to 0.25%, and then by 15 basis points, to 0.1%.

 

June 22. Home sales in the US secondary market in May decreased by 9.7%, worse than forecast

Today in the United States published a report of the National Association of Realtors (NAR), traditionally important for the dynamics of the US dollar in the context of the crisis caused by the coronavirus pandemic. According to recent data, home sales in the secondary market in May fell by 9.7% compared with April, to 3.91 million.

Analysts polled by Reuters expected a 3% drop in the number of such deals, to 4.12 million.

In addition, the share of distressed real estate in this market in May amounted to 3%, which generally corresponds to the level of April, but above 2% in May 2019. Sales of single family homes amounted to 3.57 million, in monthly terms there was a decrease of 9.4%, in annual terms – by 24.8%.

 

June 23. Economists significantly worsen German GDP drop forecast this year

The Council of Economic Experts under the German government has adjusted the forecast for German GDP for the current year downward. Now economists expect the country's economy to collapse by 6.5% in 2020.

Council Chairman Lars Feld said the coronavirus pandemic will lead to the worst collapse of the German economy in the entire existence of the Federal Republic. At the same time, Feld suggests that the German economic recovery will presumably begin in the summer, and a return to growth – in early 2021. The return of economic indicators to the levels before the pandemic begins is expected only in 2022.

Recall that earlier economists considered a five-week lockdown and a 2.8% reduction in GDP the most likely scenario. In the worst case scenario, experts predicted a collapse of the economy in 2020 by 5.4%.

 

June 25. The final estimate of US GDP in the I quarter: a fall of 5%

According to the final estimate of the US Department of Commerce, the country's GDP in the first quarter fell by 5% in annual terms. The indicator coincided with the forecasts of analysts and the second assessment of the department. The first estimate suggested a decrease of only 4.8%. At the same time, exports fell by almost 9% and imports by 15.7%.

In the first quarter of 2019, US GDP growth in annual terms was 3.1%, in the second – 2%, in the third – 2.1%, in the fourth – also 2.1%.

The decrease in US GDP was noted for the first time since the first quarter of 2014, when this decrease amounted to 1.1%. It also became the strongest since the fourth quarter of 2008, when the country's economy shrank by 8.4%. Experts point out that social isolation measures in response to the coronavirus pandemic had a negative impact on the American economy in the spring of 2020.

 

June 26. US consumer income down 4.2% in May, better than forecast

According to the Bureau of Economic Analysis of the US Department of Commerce, consumer income in May fell 4.2% compared with April. Consumer spending rose 8.2% on a monthly basis. Analysts had forecast a 6% decline in revenue and a 9% increase in spending.

Growth in consumer spending was a record, but experts are confident that this trend will not last long: millions of Americans will soon cease to receive increased unemployment benefits. In April, consumer spending fell by a record 12.6%.

An estimate of the income and expenses of Americans in May was influenced by the quarantine response to the spread of COVID-19. The ministry noted that government payments aimed at restoring the economy were still made, but in smaller volumes than in April.

 

June 29. More than 40% of S&P 500 companies abandoned forecasts due to coronavirus

More than 40% of the S&P 500 companies withdrew quarterly or annual forecasts due to the uncertainty surrounding the outbreak of coronavirus. As the reasons, some of them noted the likelihood of new outbreaks of the disease, changes in consumer behavior and additional costs.

According to The Wall Street Journal, the stocks of the companies that made this decision have fallen in price by 18.2% since the beginning of the year, while the S&P 500 value fell by 6.9%. Many companies that have withdrawn forecasts are most affected by the industry pandemic – the telecommunications, entertainment, automotive, and industrial goods sectors.

However, among these companies there are those who have benefited from the effects of the pandemic. For example, this is the Kroger Co. supermarket chain, whose sales have jumped, and capitalization has increased by almost 13% since the beginning of the year. Payment system PayPal Holdings Inc. over the period of the pandemic, it added 58% against the backdrop of an increase in online trading.

Uncertainty is also associated with the lifting of quarantine measures in the United States. Texas and Florida reinstated some restrictions last week due to a spike in new cases. Many S&P 500 companies updated their forecasts due to a coronavirus outbreak: 154 companies worsened expectations in at least some indicators, while 28 improved forecasts.

 

30.06. US consumer confidence in June turns better than forecast

According to analysts at Conference Board, the US Consumer Confidence Index in June rose to 98.1 points from a revised May figure of 85.9 points. Analysts had forecast an increase to 91.8 points from an initial May value of 86.6 points.

The US economic expectations index in June rose to 106 points from a revised May figure of 97.6 points. The initial indicator of the previous month was 96.9 points.

The economic conditions index in the reporting month rose to 86.2 points from the revised May value of 68.4 points. The initial figure last month was 71.1 points.

 

July 02. The number of jobs in the US in June jumped to a record 4.8 million

According to the US Department of Labor, in June the number of jobs in the economy increased by 4.8 million. This growth was a record since the beginning of statistics in 1939. Experts on average predicted job growth of 3 million.

Experts note the gradual recovery of economic activity in the country, following the partial lifting of quarantine measures. In March and April, the American economy lost about 22.2 million jobs.

However, few people expect a quick recovery: many believe that the official data does not reflect the real scale of the losses, since a large number of people are considered to be employed, but they are not able to work due to continuing restrictions. In addition, there remains a high risk of a second wave of the epidemic not only in the United States, but throughout the world.

The number of jobs in the private sector grew by 4.767 million in June, while in the public sector by 33 thousand. Industrial enterprises increased the number of employees by 356 thousand.