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Asia stocks retreat as virus threatens economic reopening – TheChronicleHerald.ca

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By Thyagaraju Adinarayan

LONDON (Reuters) – World shares hit two-week lows and oil fell nearly 2% on Monday as the relentless spread of the coronavirus curbed optimism on the global economy, prompting investors to take shelter in safe-haven bonds and gold.

European stocks opened slightly lower, after Asian shares ended deep in the red playing catch up with Wall Street’s ugly close on Friday as some U.S. states reconsidered their reopening plans.

The global death toll from COVID-19 reached half a million people on Sunday, with one quarter of those in the United States, where cases have surged in a handful of southern and western states.

MSCI’s world shares index was off 0.2%, hitting its lowest level since June 15 dragged down by Japan’s Nikkei shedding 2.2% and Chinese blue chips off 0.9%. E-Mini futures for the S&P 500 were up 0.1%.

“The market is caught in a real battle between recovery optimism and news of increasing cases in certain geographical areas such as the U.S,” said John Woolfitt, director of trading at Atlantic Capital Markets.

“I think this battle will remain until the U.S. get a handle on it.”

Sovereign bonds benefited from the shift to safety with yields on U.S. 10-year notes near 0.64%, having briefly been as high as 0.96% early in June. German government bond yields clung to one-month lows on Monday.

The U.S. dollar has generally gone in the opposite direction, rising to 97.334 against a basket of currencies from a trough of 95.714 earlier in the month.

It had less luck on Monday, easing back to 107.18 yen, though it remained well within the recent range of 106.06 to 107.63. The euro stood at $1.1245 having found solid support around $1.1167. [USD/]

“Financial markets remain extremely fragile, having to weigh worsening virus news against improving economic data,” said Marija Veitmane, senior strategist at State Street Global Markets.

It is an important week for U.S. data with the ISM manufacturing index on Wednesday and payrolls on Thursday, ahead of the Independence Day holiday. Federal Reserve Chair Jerome Powell is also testifying on Tuesday.

“U.S. economic data will reinforce that the economy is through the worst of the recession in our view,” said CBA currency analyst Joseph Capurso.

“But a double‑dip recession is possible if widespread restrictions are reimposed, leading to a surge in the dollar.”

In commodity markets, gold held near its highest since early 2012 at $1,773 an ounce. [GOL/]

Oil prices slipped amid concerns the pandemic would slow the reopening of some economies and thus hurt demand for fuel. [O/R]

Brent crude futures fell 69 cents to $40.33 a barrel, while U.S. crude lost 62 cents to $37.87.

Graphic: Asia stock markets https://product.datastream.com/dscharting/gateway.aspx?guid=516bc8cb-b44e-4346-bce3-06590d8e396b&action=REFRESH

Graphic: Asia-Pacific valuations https://product.datastream.com/dscharting/gateway.aspx?guid=80e5bbdc-eae6-4b37-bc49-a2d8056b75de&action=REFRESH

(Reporting by Thyagaraju Adinarayan in London, additional reporting by Wayne Cole in Sydney)

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P.E.I. economy in 'better spot' than anticipated, says finance minister – CBC.ca

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A fiscal update for P.E.I. delivered Wednesday shows the Island coping relatively well with the economic consequences of the pandemic, says Finance Minister Darlene Compton.

Compton spoke to Island Morning host Mitch Cormier about the update Thursday.

“We are actually in a better spot than we thought we would be,” Compton said.

“There’s some good news stories through this. Construction is up 7.3 per cent year to date. Housing starts are up 13 per cent through the second quarter of 2020. Farm cash receipts are at a record high.”

The government is forecasting the economy will shrink 3.9 per cent in 2020, an improvement over the spring projection of 5.1 per cent. But the government’s projected deficit is climbing, up $5.4 million to $178.1 million.

The sector suffering the most is tourism.

“Accommodation, food and beverage services, are definitely down and that’s the biggest pocket that is struggling through this pandemic,” said Compton.

The summer season is looking like it could be down as much as 60 per cent. Growth in other sectors, however, is balancing that out for the economy overall, said Compton.

Chaotic labour economy

The labour economy has been volatile.

Thousands left the labour market in April, and returned in large numbers in June only to leave again in the summer months. The unemployment rate has followed a similar path up and down, rising as high as 15.2 per cent in June and remaining in double digits since April.

Compton said she expects job numbers on the Island to return to something like a pre-pandemic norm this fall, even as the tourism sector continues to struggle.

As for the rising deficit, there are two main factors, she said.

One, the province has seen fewer federal dollars than expected, because some Build Canada projects are delayed. That has decreased projected revenue.

On the expenses side, pandemic costs have been higher than anticipated. That includes the cost of reopening schools.

Reopening schools has been costly. (CBC)

The province has set aside a $65 million contingency fund in the event of a second wave of COVID-19, said Compton.

Another factor working in the province’s favour, said Compton, is that bond raters have given P.E.I. stable ratings, which means interest rates on the debt won’t change. That will help keep finances under control.

More from CBC P.E.I.

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31.4% spring slide for a US economy likely to shrink in 2020 – Yahoo Canada Finance

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31.4% spring slide for a US economy likely to shrink in 2020

WASHINGTON — The U.S. economy plunged at an unprecedented rate this spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year, the first time that has happened since the Great Recession.

The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4% in the April-June quarter, only slightly changed from the 31.7% drop estimated one month ago, the Commerce Department reported Wednesday.

The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10% in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.

Economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses have re-opened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7% surge in the first quarter of 1950 when Harry Truman was president.

The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.

While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a longshot.

Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4% and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID-19. There are upticks in infections occurring right now in some regions of the country, including New York.

“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”

In 2020, economists expect GDP to fall by around 4% , which would mark the first annual decline in GDP since a drop of 2.5% in 2009 during the recession triggered by the 2008 financial crisis.

“With economic momentum cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, the main question is how strong the labour market will be going into the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics.

“With the prospect of additinal fiscal aid dwindling, consumers, businesses and local governments will have to fend for themselves in the coming months,” Daco said.

The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored and they don’t rule out a return to shrinking GDP if no further government support is forthcoming.

So far this year, the economy fell at a 5% rate in the first quarter, signalling an end to a nearly 11-year-long economic expansion, the longest in U.S. history. That drop was followed by the second quarter decline of 31.4%, which was initially estimated two months ago as a drop of 32.9%, and then revised to a decline of 31.7% last month.

The slight upward revision in this report reflected less of a plunge in consumer spending than had been estimated. It was still a record fall at a rate of 33.2%, but last month projections were for a decline of 34.1%. This improvement was offset somewhat by downward revisions to exports and to business investment.

Martin Crutsinger, The Associated Press

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Covid-19 Relief for Undocumented Would Boost the Economy for All – BNN

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(Bloomberg Opinion) — Among the many policy failures of our national Covid-19 response, the exclusion of 18.1 million people, including 4.9 million U.S. citizens, from federal stimulus packages will go down as one of the most economically devastating self-inflicted wounds.

These are neighbors who shop at local stores, pay rent and fuel the economy through their workforce participation to the tune of a $1.6 trillion contribution to the nation’s gross domestic product. According to research conducted by the University of California, Los Angeles, leaving undocumented immigrants out of the $1,200 tax rebate approved by Congress in March resulted in a $10 billion loss in economic activity — which is almost $3.4 billion more than what it would have cost to include them. (One of us, Raul Hinojosa-Ojeda, is a co-author of the study.)

The important role that documented and undocumented immigrants play in the national economy has been shown repeatedly in studies by the National Immigration Forum, the Center on Budget and Policy Priorities, the Brookings Institution and others.

With Congress negotiating a new coronavirus stimulus package, relief for undocumented workers must be a priority.

In California, undocumented immigrants make up more than 9% of the workforce and fuel the world’s fifth-largest economy. It is both a moral and an economic imperative to be sure they survive the pandemic. In April, Governor Gavin Newsom announced an emergency $125 million financial assistance program that would extend benefits to undocumented Californians. Cities including Los Angeles and San Francisco also have public and private programs to provide a safety net for immigrants who otherwise have nowhere to turn. But without an infusion of federal support, many undocumented families will fall off a financial cliff and take their local economies with them.

There are many communities outside of California that have not stepped in to fill the federal void even when undocumented immigrants and their families are hurting. The national unemployment rate for undocumented workers reached 29% in May, much higher than the rate for any other demographic group. The overconcentration of undocumented residents in construction and service jobs that have seen drastic cuts amid Covid-19 has resulted in a 25% reduction in wages for those workers.

The UCLA report found that undocumented workers and families are key contributors to the U.S. economy: About 78% of undocumented workers are employed in essential sectors. Undocumented workers and their families earn lower wages compared with their U.S.-born counterparts. Even before Covid-19, immigrant families struggled to make ends meet, yet their contributions keep local economies running. The failure to address their needs will only deepen the pandemic’s economic recession.

The shortsightedness of the federal policy also hurts U.S. citizens of all races and backgrounds. The UCLA report found undocumented immigrants contribute more than $190 billion in taxes. The American-born children of undocumented immigrants are facing hunger, potential homelessness and financial stress. The Donald Trump administration even made a decision to deny the $1,200 stimulus check to families in which one parent was undocumented, even if the other was a U.S. citizen.

The pandemic has exposed not only health and social inequalities, but also how our local and federal responses can lead to greater economic decline and deeper racial inequality. This vicious cycle of systemic discriminatory policies can be reversed with new policy ideas in a future federal stimulus package. Despite facing high unemployment rates, undocumented workers and their families are critical to meeting consumer demand for the national, state and local economic recovery.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lorena Gonzalez is an assembly member in the California Legislature for the 80th District.

Raul Hinojosa-Ojeda is a professor with the UCLA César E. Chávez Department of Chicana/o and Central American Studies and the UCLA Latino Policy and Politics Initiative.

©2020 Bloomberg L.P.

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