· Dollar rises after strong US retail sales, Fed chief’s remarks
The dollar posted gains on Tuesday after a record increase in U.S. retail sales in May following two straight months of declines, reinforcing a growing belief that the worst may be over for the world’s largest economy.
The retail sales data followed a report early this month showing that the U.S. economy created an unexpected 2.5 million jobs in May.
Federal Reserve Chair Jerome Powell, however, doused some of the rosy expectations on Tuesday, as he painted a rather bleak picture of the U.S. economy in the wake of the coronavirus pandemic. That did not stop the dollar from rallying, as his comments bolstered the currency’s safe-haven appeal.
In the first of two days of hearings with U.S. lawmakers, Powell said there is significant uncertainty about the timing and strength of the U.S. recovery.
In afternoon trading, the dollar index was up 0.5% at 97.019, with the euro dropping 0.5% to $1.1262. The greenback, meanwhile, was little changed against the yen at 107.29 yen, paring early gains.
“The lockdowns ended and the 33% starting point for the personal savings rate did provide some decent dry powder for new spending,” said David Rosenberg, chief economist and strategist at Rosenberg Research in a research note.
He added that with the recent spate of solid U.S. data, the U.S. economy’s real gross domestic product would see a contraction that is “something less negative.”
· Coronavirus: Dexamethasone proves first life-saving drug
A cheap and widely available drug can help save the lives of patients seriously ill with coronavirus.
The low-dose steroid treatment dexamethasone is a major breakthrough in the fight against the deadly virus, UK experts say.
The drug is part of the world's biggest trial testing existing treatments to see if they also work for coronavirus.
It cut the risk of death by a third for patients on ventilators. For those on oxygen, it cut deaths by a fifth.
Had the drug had been used to treat patients in the UK from the start of the pandemic, up to 5,000 lives could have been saved, researchers say.
And it could be of huge benefit in poorer countries with high numbers of Covid-19 patients.
· U.S. narrowing support to seven COVID-19 vaccine candidates, expects them to be free for many
The Trump administration aims to narrow its financial support to about seven experimental coronavirus vaccines from the 14 it has been working with so far, the U.S. Department of Health and Human Services (HHS) said on Tuesday.
U.S. government officials also said that they expect many Americans to get an approved vaccine to prevent COVID-19 at no charge once it begins distribution, potentially in January.
“For any American who is vulnerable, who cannot afford the vaccines, and desires the vaccine, we will provide it for free,” a U.S. government official said during a call with reporters, requesting anonymity.
The official also said that based on conversations with commercial health insurers, it expects a vaccine to be covered with no out-of-pocket costs, similar to coverage policies insurers have put in place for COVID-19 related medical services.
· Powell warns of ‘significant uncertainty’ about the recovery and says small businesses are at risk
Federal Reserve Chairman Jerome Powell warned Tuesday about “significant uncertainty” regarding the pace of the U.S. economic recovery and said small businesses and lower-income and minority Americans are particularly at risk.
During the first day of his semiannual testimony before Congress, Powell told the Senate Banking Committee that while some indicators have shown improvement, there’s still a long way to go as the economy regains its footing from the coronavirus pandemic.
“The levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery,” he said in prepared remarks. “Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely.”
The warning was essentially a repeat of cautionary remarks he made last Wednesday following the Federal Open Market Committee meeting that may have contributed to a steep sell-off on Wall Street the following day.
The U.S. entered a recession in February, a month before the World Health Organization declared the coronavirus a pandemic, according to the National Bureau of Economic Research. Unprecedented job losses occurred in March and April, followed by a sharp increase in May that accompanied big gains in retail sales and real estate.
While noting the strong policy response, Powell said several areas are raising concerns. The Fed’s monetary policy report took note of challenges for small business.
“The pandemic is presenting acute risks to small businesses,” Powell said. “If a small or medium-sized business becomes insolvent because the economy recovers too slowly, we lose more than just that business. These businesses are the heart of our economy and often embody the work of generations.”
· Record spike in new coronavirus cases reported in six U.S. states as reopening accelerates
New coronavirus infections hit record highs in six U.S. states on Tuesday, marking a rising tide of cases for a second consecutive week as most states moved forward with reopening their economies.
Arizona, Florida, Oklahoma, Oregon and Texas all reported record increases in new cases on Tuesday after recording all-time highs last week. Nevada also reported its highest single-day tally of new cases on Tuesday, up from a previous high on May 23. Hospitalizations are also rising or at record highs.
· IMF set to slash economic forecasts and warns of a crisis ‘unlike anything the world has seen’
The global economy is on track for a more significant contraction than the International Monetary Fund estimated in April, the institution’s chief economist said Tuesday.
When European countries were in their first weeks of lockdown, the IMF said the global economy would suffer the worst financial crisis since the Great Depression of the 1930s. At the time, it forecast a contraction by 3% in 2020.
Now, despite some economies beginning to reopen, the fund has warned that the decline could be even worse.
“For the first time since the Great Depression, both advanced and emerging market economies will be in recession in 2020. The forthcoming June World Economic Outlook Update is likely to show negative growth rates even worse than previously estimated,” Gita Gopinath, the IMF’s chief economist, said in a blog post.
The fund also said the current crisis, which it dubbed the Great Lockdown, is “unlike anything the world has seen before.”
The pandemic started as a health emergency but soon sparked an economic crisis, due to the required social distancing measures and travel restriction measures.
Many countries have begun to lift lockdowns, but this has proven challenging and in some cases, the process has been slow. It comes as some nations continue to grapple with rising cases of Covid-19.
There have been more than 8 million confirmed infections of the virus worldwide. The United States, Brazil, Russia, India and the U.K. are currently the five nations with the highest number of cases, according to data from Johns Hopkins University.
· Oil jumps 3% on supply cuts, improving demand
Oil prices rose on Tuesday, with Brent crude rising above $40 a barrel, as the IEA increased its oil demand forecast for 2020 and as record supply cuts supported.
Brent crude rose $1.20, or 3%, to trade at $40.92 per barrel. West Texas Intermediate crude settled $1.26, or 3.39%, higher at $38.38 per barrel.
In its monthly report on Tuesday, the International Energy Agency (IEA) forecast oil demand at 91.7 million barrels per day in 2020, 500,000 bpd higher than its estimate in May’s report, citing higher than expected consumption during the lockdowns.
But the agency warned that a fall in flying due to the coronavirus means the world will not return to pre-pandemic demand levels before 2022.
Oil supplies in May, the IEA said, plunged by nearly 12 million bpd, with the Organization of the Petroleum Exporting Countries and its allies including Russia - a grouping known as OPEC+ - reducing their output by 9.4 million bpd.
This means OPEC+ hit 89% compliance with their agreed cuts in May, the IEA said.
· North Korea rejects South's offer of envoys, vows to send back troops to border
North Korea said on Wednesday it has rejected South Korea’s offer to send special envoys, and vowed to send back troops to demilitarised border units in the latest step towards nullifying inter-Korean peace accords.
The warning was made by state media KCNA one day after North Korea blew up a joint liaison office set up in a border town as part of a 2018 agreement by the two countries’ leaders, amid flaring tension over propaganda leaflets sent by defectors into the reclusive state.
Reference: CNBC, Reuters, BBC, Worldometers
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