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Consumers start to wake up to COVID-19 threat to the economy, new survey shows – MarketWatch



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Women wear facemasks to protect against the COVID-19 coronavirus as they walk on a sidewalk on a polluted day in Beijing. The spreading illness has tanked stock markets in the U.S. and all around the world and raise the specter of a global recession.

The numbers: Americans expressed a great deal of confidence in the economy in February, but the growing threat of the COVID-19 coronavirus and resulting stock-market nosedive is starting to grab their attention, a new survey shows.

The final reading of the consumer sentiment index in February rose to 101.0 from a preliminary reading of 100.9, according to the University of Michigan. That’s just a few hairs below the postrecession high.

The latest survey results includes responses given in the last two weeks of February, but the threat the virus poses to the economy only exploded into public view in the final days of the month, especially after the stock market tanked.

Only 7% of respondents mentioned COVID-19 in the preliminary questionnaire that covered just the first two weeks of February. Yet 20% mentioned the virus and stock declines on Monday and Tuesday, the last two days of the February survey.

Read: Consumer spending is still rising steadily, but coronavirus looms as potential brake

What happened: Consumer sentiment is still near a postrecession high, but it won’t stay that way if the coronavirus spreads to the U.S. or shuts down large swaths of the global economy. Only time will tell how bad the situation will get.

Consumers are paying a lot closer attention, however, and the huge decline in the stock market has woken up Wall Street if not Washington to the potential threat.

“If the virus spreads into U.S. communities, consumers are likely to limit their exposure to stores, theaters, restaurants, sporting events, air travel, and the like,’ said Jim Curtin, chief economist of the survey.

Read: U.S. retailers get off to a sluggish start in 2020 — clothing stores the biggest losers

Big picture: Consumers had been fairly bullish on the economy and their own financial well-being before the coronavirus appeared. If the outbreak is contained, the economy probably won’t suffer much.

Yet if the situation gets worse, it could dampen business and consumer confidence, disrupt the economy and in a worst-case scenario trigger a recession. For now most forecasters predict a short-term hit to the economy that will eventually fade as the virus is brought under control.

What they are saying? ”It is certain that the early-month responses in March will be more heavily impacted by coronavirus and thus the confidence index will be sharply lower,” economists at Jefferies LLC said.

Market reaction: The Dow Jones Industrial Average

DJIA, -1.60%

and S&P 500

SPX, -1.01%

sank again in Friday trades.

The Dow has lost more than 3,500 points in the past week. It’s the biggest selloff since a major financial panic more than a decade ago swept through Wall Street.

The 10-year Treasury yield

TMUBMUSD10Y, -6.99%

fell to another record low of 1.19%, as investors sought the perceived safety of government bonds. Extremely low interest rates could spur some consumers to buy or refinance homes or purchase new cars.

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China's Economy Likely Remained Weak as Factories Slump – Bloomberg



China’s manufacturing activity likely remained subdued in November, with weak domestic demand in the economy outweighing any relief that came from an easing in energy shortages.

The official manufacturing purchasing managers’ index is forecast to improve slightly to 49.7 from 49.2 in October when it’s released Tuesday, according to the median estimate in a Bloomberg survey of economists. That would be the third month it stays below the key 50-mark, indicating a contraction in production. 

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China's Economy Likely Remained Weak as Factories Slump – BNN



(Bloomberg) — China’s manufacturing activity likely remained subdued in November, with weak domestic demand in the economy outweighing any relief that came from an easing in energy shortages.

The official manufacturing purchasing managers’ index is forecast to improve slightly to 49.7 from 49.2 in October when it’s released Tuesday, according to the median estimate in a Bloomberg survey of economists. That would be the third month it stays below the key 50-mark, indicating a contraction in production. 

The non-manufacturing gauge, which measures activity in the construction and services sectors, is forecast to fall to 51.5 from 52.4 in the previous month. 

China’s energy shortages, which ravaged factory production in September and October, likely eased this month as coal producers boosted output and inventories rose. However, the housing market crisis shows no signs of ending, and frequent Covid-19 outbreaks continue to curb consumption.

“Supply-side restrictions have improved marginally, so production likely rebounded somewhat,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd. But there’s “not much positive signal on domestic demand,” which continued to weigh on activities, he said.

Economic growth is forecast to slow to 5.3% next year, according to a Bloomberg survey median, with some economists seeing expansion as low as 4%. Bloomberg Economics forecast growth will come in at 5.7%, as the government will likely target a 5-6% range.

What Bloomberg Economics Says…

“In 2021, policy played a secondary role in setting the growth trajectory. In 2022, it will be pivotal. The extent of the slowdown will hinge largely on what balance China strikes between supporting short-term growth and advancing long-term reforms.

…We see the People’s Bank of China cutting the interest rate on its one-year medium-term lending facility by 20 basis points and the reserve requirement ratio by 100-150 bps by end-2022.”

— Chang Shu and David Qu

For the rull report, click here

Authorities are trying to moderate the sharp downturn in the property market, while providing targeted support to areas such as small businesses and green technology. Officials will reveal more clues on how much policy easing they plan to provide during two key political meetings in December by the Politburo and the Central Economic Work Conference.

China will adopt a more proactive macroeconomic policy next year to respond to the challenges from an uneven recovery of the global economy and instability in containing the pandemic, the Securities Times, run by the People’s Daily, said in a front-page commentary Monday. 

Authorities have exercised restraint in using monetary and fiscal tools amid an economic slowdown this year, thus creating sufficient space for policy maneuvering next year, according to the commentary.

The slowdown is being cushioned by strong export demand, which likely remained solid in November, judging by latest shipment figures from South Korea.

Consumption and travel continues to be affected by a resurgence in virus cases and the country’s growing determination to stick to its strict Covid Zero strategy. Subway passenger traffic in six major cities of China declined less than 10% in November from October, though the plunge is smaller than that over the August outbreak, according to Xing. 

(Updates with latest estimate in second paragraph.)

©2021 Bloomberg L.P.

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Stocks, oil tumble as omicron brings new risk to global economy | Daily Sabah – Daily Sabah



Confirmed cases of the new omicron coronavirus variant continued popping up around the world on Sunday as Australia joined the growing list of countries reporting cases. The recent discovery of the new strain has seen countries try to seal themselves off by imposing travel restrictions and is also sending stocks tumbling and causing oil prices to fall.

The Australian cases were the latest indication that the variant may prove hard to contain and will be a fresh hit to the global economy. First discovered in South Africa, it has since been detected in Britain, Germany, Italy, Belgium, Botswana, Israel and Hong Kong. Austria was investigating a suspected case on Sunday.

The discovery of omicron, dubbed a “variant of concern” last week by the World Health Organization (WHO), has sparked worries around the world that it could resist vaccinations and prolong the nearly two-year COVID-19 pandemic.

Omicron is potentially more contagious than previous variants, although experts do not know yet if it will cause more or less severe COVID-19 compared to other strains.

Countries have imposed a wave of travel bans or curbs on southern Africa. Financial markets, especially stocks of airlines and others in the travel sector, plummeted on Friday as investors worried that the variant could stall a global recovery. Oil prices tumbled by about $10 a barrel.

On Sunday, most Gulf stock markets fell sharply in early trade, with the Saudi index suffering its biggest single-day fall in nearly two years.

In the most far-reaching effort to keep the variant at bay, Israel announced late on Saturday it would ban the entry of all foreigners and reintroduce counter-terrorism phone-tracking technology to contain the spread of the variant.

Prime Minister Naftali Bennett said the ban, pending government approval, would last 14 days. Officials hope that within that period there will be more information on how effective vaccines are against omicron.

Many countries have imposed or are planning restrictions on travel from southern Africa. The South African government denounced this on Saturday as unfair and potentially harmful to its economy – saying it is being punished for its scientific ability to identify coronavirus variants early.

In Britain, where two linked cases of Omicron identified on Saturday were connected to travel to southern Africa, the government announced measures to try to contain the spread, including stricter testing rules for people arriving in the country and requiring mask wearing in some settings.

The German state of Bavaria also announced two confirmed cases of the variant on Saturday. In Italy, the National Health Institute said a case of the new variant had been detected in Milan in a person coming from Mozambique.

As for the economic impact side, “Investors are likely to shoot first and ask questions later until more is known,” Jeffrey Halley of Oanda said Friday in a report.

Ray Attrill, head of FX strategy at National Australia Bank in Sydney, is of the same opinion. “You shoot first and ask questions later when this sort of news erupts,” Attrill said.

“Markets have been quite complacent about the pandemic for a while, partly because economies have been able to withstand the impact of selective lockdown measures. But we can see from the new emergency brakes on air travel that there will be ramifications for the price of oil,” said Chris Scicluna, head of economic research at Daiwa.

Vaccine disparities

Although epidemiologists say travel curbs may be too late to stop omicron from circulating, many countries – including the United States, Brazil, Canada, European Union nations, Australia, Japan, South Korea and Thailand – have announced travel bans or restrictions on southern Africa.

More countries imposed such curbs on Sunday, including Indonesia and Saudi Arabia.

Mexico’s deputy health secretary, Hugo Lopez Gatell, said travel restrictions are of little use in response to the new variant, calling measures taken by some countries “disproportionate.”

“It has not been shown to be more virulent or to evade the immune response induced by vaccines. They affect the economy and well-being of people,” he said in a Twitter post on Saturday.

Omicron has emerged as many countries in Europe are already battling a surge in COVID-19 infections, with some reintroducing restrictions on social activity to try to stop the spread.

The new variant has also thrown a spotlight on huge disparities in vaccination rates around the globe. Even as many developed countries are giving third-dose boosters, less than 7% of people in low-income countries have received their first COVID-19 shot, according to medical and human rights groups.

Seth Berkley, CEO of the GAVI Vaccine Alliance that with the WHO co-leads the COVAX initiative to push for equitable distribution of vaccines, said this was essential to ward off the emergence of more coronavirus variants.

“While we still need to know more about omicron, we do know that as long as large portions of the world’s population are unvaccinated, variants will continue to appear, and the pandemic will continue to be prolonged,” he said in a statement to Reuters on Saturday.

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