Transactions. Restructuring. Transformation. Financial Engineering - Eight International
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Daily COVID19 Global Economy Newsletter June 5, 2020
Transactions. Restructuring.
Transformation. Financial Engineering.
GLOBAL INSIGHT
IHS Markit’s Unemployment in the eurozone rose by 211,000 in April, the
Economic Preview: biggest monthly increase in over seven years. Still, the magnitude
Low eurozone of the increase was roughly a third of the peak m/m rise of 636,000
unemployment rate back in March 2009 (see first chart) in the aftermath
of the Global Financial Crisis (GFC). While the eurozone
a temporary
unemployment rate increased in April, the modest increase from
reprieve 7.1% to 7.3% came in way below the market consensus expectation
of a rate just north of 8%. By way of comparison, the
unemployment rate in the US surged by 10.3 percentage points to
14.7% in April, the largest monthly increase in the history of the
data series stretching back to 1948. / IHS Markit
Eurozone unemployment rate rising relatively slowly so far
Eurozone employment is likely to decline markedly, with business surveys
including IHS Markit’s PMI data signalling a plunge across key sectors
over the coming quarters (see third and fourth charts). There may have
been an overreaction in some of the survey data at the height of the
COVID-19 shock, with partial rebounds now becoming evident. Still, the
employment intentions indices within them are going to remain
indicative of large-scale job losses.
Large eurozone employment losses signalled for services
Recent sharp decline in Italy’s unemployment rate (%)
ECB’s 600 billion- Barely had the European Central Bank unveiled its latest stimulus
Euro stimulus hasn’t boost to help the euro-area economy through its worst crisis in
stopped calls for decades, than economists and strategists were already clamoring
for more. The 600-billion euro ($680 billion) increase in the ECB’s
more
emergency bond-buying program -- taking it to 1.35 trillion euros
in addition to a swathe of other measures -- won’t be enough to
mop up government funding needs this year and next, according
to ABN Amro economist Nick Kounis. Bloomberg
EU sets up financial The European Union on Friday set up a unit of investigators to
crime unit as tackle an expected surge in finanial crime in the economic
pandemic poses downturn triggered by the COVID-19 pandemic and crack down
new risks on defrauding of state subsidies. / Reuters
Why stock markets Global financial markets have brushed off a devastating pandemic,
are so calm amid US civil unrest and fresh China tensions. How can Wall Street be so
detached from the economic reality of our times?
global economic
turmoil The S&P 500, the index of the largest US-listed firms, is currently
just 8% off its February high of 3,386, despite a coronavirus
pandemic that shut down a large chunk of the global economy for
the best part of three months. / DW
Executives in China Executives in China are the most positive about their country’s
are the most economy over the next six months. But, that's not the case among
positive about their executives across N. America, Europe, Latin America, the Middle
country’s economy East and other regions. / McKinsey
FRANCE
France will beef up incentives for apprenticeships and support
businesses that keep staff on payroll during a prolonged economic
downturn to prevent losing a generation to long-term
unemployment triggered by the coronavirus.
The move to support apprenticeships and make them available
to more companies will cost around 1 billion euros ($1.1 billion). The
government will also expand the financing of a system that allows
struggling companies to furlough workers if they strike
an agreement with unions to adjust working hours and conditions
over the long-term. / Bloomberg
French Finance Minister Bruno Le Maire says Germany’s stimulus
plan is “good news” for all European countries, but urged the bloc
to move ahead fast with its own plans and the shared recovery
fund that some are opposing. France, which has already unveiled
support packages for its auto and tourism industries, will present a
broader stimulus package in coming weeks that would be
effective from September, Le Maire said in a press conference with
German Economy Minister Peter Altmaier. / Bloomberg
UK
What Britain can learn from Germany's economic response to the
crisis? Chancellor Angela Merkel wants to fire up Europe's biggest
economy while the UK remains largely locked down. / The
Telegraph
There is no doubt that leaving the EU’s single market at the end
of this year will bring costs. But camouflaged by the pandemic’s
effects, and mitigated by the huge upswing of debt-fueled
government spending, Brexiters may argue there is no better time
to bite the bullet. The coronavirus pandemic is forecast to hit GDP
over 13% this year, while the economic impact of Brexit has been
estimated to result in foregone growth of 8% of GDP
over a 15-year period. / Bloomberg
U.K. consumer confidence dropped toward the end of the May,
even as the country began to loosen coronavirus restrictions and
open up some parts of the economy. Sentiment was the weakest
since the financial crisis, according to a flash measure from GfK. /
Bloomberg
GERMANY
Orders for German industrial goods fell 25.8% in April, suffering
their biggest drop since records began in 1991, as the coronavirus
slashed domestic and foreign demand for goods from Europe’s
biggest economy. Figures from the Federal Statistics Office
showed that domestic orders dropped 22.3% while orders from
abroad were down 28.1%. Analysts polled by Reuters had expected
a 19.7% fall in orders overall. / Reuters
GERMANY
Yet the recovery is still muted as some restrictions to rein in the
spread of the pandemic remain in place, the institution cautioned
in its twice-annual economic projections. Output
this year is forecast to shrink 7.1%, even with recovery
underway. / Bloomberg
ITALY
Amid warnings that Italy will lose a million jobs this year as it
staggers out of its Covid-19 crisis, experts believe the country can
either bounce back using well-invested emergency funds
or slide into economic collapse. / The Times
SPAIN
Spain’s calendar-adjusted industrial output registered its worst
contraction ever in April because of a government-imposed
lockdown to contain the coronavirus, data from the National
Statistics Institute showed on Friday. Production contracted
33.6% in April year-on-year, INE said on Friday, while it also revised
the March contraction to 13.7% year-on-year, from a previous
12.2%. / Reuters
RUSSIA
A combination of a collapse in oil prices and the global pandemic
has sent shockwaves through the oil industry. Compared to other
oil-producing countries, Russia is better prepared to weather this
oil price shock. Since 2014, Russia’s economy has developed
certain resilience, thanks to conservative monetary and fiscal
policies. / Foreign Policy Research Institute
TURKEY
Turkish inflation accelerated to 11.4% in May, in part fueled by
sharp lira losses in March and April. Inflation deviated from central
bank expectations, potentially causing the current rate reduction
cycle to be reconsidered. Should the lira remain relatively steady,
however, IHS Markit continues to expect another rate cut in late
June. / IHS Markit
JAPAN
Japan’s first quarter economic contraction was likely smaller than
initially estimated, a Reuters poll showed, thanks to stronger
business spending although the country is still expected to slide
deeper into recession this year. / Reuters
Japan’s household spending fell at the fastest pace on record in
April as the coronavirus shut down travel and dining-out in the
world’s third-largest economy, while fears of higher job losses
chilled consumer confidence. / Reuters
INDIA
India has the resources it needs to become a global electronics
manufacturing hub and a competitive partner to the world
economy, the country’s technology minister said. The government
on Tuesday introduced a $6.6 billion incentive scheme for
international companies to ramp up their electronics
manufacturing production in India. / CNBC
CHINA
The Chinese economy could return to “near-trend growth” as soon
as late 2020, economic strategists at BlackRock said in a research
note this week. They pointed to economic policy actions taken by
the Chinese government, such as fiscal stimulus measures, as
underpinning the asset management giant’s “overweight” outlook
for Asian equities and credit markets outside Japan. / Fortune
AUSTRALIA
While we still have to officially wait for this quarter’s data, there’s no
doubt almost 29-year recession-free run is over as the full effects of
the coronavirus shutdown take hold. /Bloomberg
Australia’s success in delivering timely economic stimulus in
response to the virus-induced crisis won’t stave off recession,
but the cash has landed in bank accounts, ready to accelerate the
recovery. Household bank balances surged through the peak of the
Covid-19 lockdown in April from the transfer of government
payments and a pullback in spending. Data on jobless Australians
seeking welfare benefits suggest recipients received benefits with
little delay. Less than 3% of unemployment benefit claims were
outstanding as of the third week of May. / Bloomberg
US
The U.S. economy’s steep slide appears to be leveling off amid signs
that layoffs are easing, travel is modestly picking up, and Americans
are beginning to eat out again, but a recovery from the coronavirus
pandemic is still a long way off, with economic activity at deeply
depressed levels. / Washingtonpost
SECTOR NEWS
Global market data (as of June 5, 2020)./ Reuters
Retail
American retailers have laid off or furloughed one-fifth of their workers.
/ Economist
Agriculture
Nearly half of the Mediterranean region’s agricultural production
value comes from four crops: grapes, wheat, tomatoes, and olives. How
would a harsher climate affect agriculture in the
region? / McKinsey
IT & Technology
Zoom Video Communications has to be considered one of the
biggest beneficiaries of the COVID-19 pandemic. As the following
chart shows, Zoom saw its revenue skyrocket in the past three
months, accelerating an already impressive upward trend. In the
quarter ended April 30, total revenue for the video conferencing
company amounted to $328 million, up 169 percent from the same
period of last year./ Statista
Construction
Since the beginning of March 2020, the construction industry has
been experiencing higher levels of project delays and cancellations
due to the COVID-19 pandemic, with widespread restrictions
on the movement of people and enforcement of complete
or partial lockdowns from mid-March 2020. For China and some
Asian countries, minor disruption had begun in February, but
globally, the impact of these restrictions peaked during the month
of April. / GlobalData
Projects delayed as a share of project updates each weekn by
region
Construction
Share of projects delayed by country
Transport & Travel
European airlines are set to resume flying this month, just in time to
haul plucky travelers willing to don a face mask to escape for the
sunshine of Spain or Greece. The normally busy summer season has
the potential to bring relief to the worst-hit region in an industry
that’s been slammed by the global coronavirus pandemic. Yet
pulling the fleet out of mothballs as country lockdowns loosen also
has its risks. / BloombergAFTER HOURS
It’s the end of the world as we know it. Also in fashion. Give the socks
and sandals trend a try this summer/ VogueA lovely weekend far from the city, brought to you by The New
Yorker Cartoons
About Eight International
Eight International is a global advisory organization founded in 2016 by six consultancies sharing the same values. A globally integrated team
of over 70 leaders and over 600 professionals seamlessly advises corporate clients, businesses, private equity funds and leading investment
banks to help navigate challenges across transactions, restructuring and operational transformation. Eight International brings innovative
solutions in a broad array of industries through its three key pillars: Reactivity via its nimble business model, Quality of its experienced
practitioners and Independence, given no conflicts of interest.
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