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Fate of Global Economy Rests More Than Ever on Finding Vaccine – BNNBloomberg.ca

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As sections of the global economy tip-toe toward reopening, it’s becoming clearer that a full recovery from the worst slump since the 1930s will be impossible until a vaccine or treatment is found for the deadly coronavirus.

Consumers will stay on edge and companies will be held back as temperature checks and distancing rules are set to remain in workplaces, restaurants, schools, airports, sports stadiums and more.

China — the first major economy consumed by the virus and the first to emerge on the other side — has been able to revive production but not demand. The lesson for other economies: it’ll be a stop-start path back toward normal.

There’s also the risk of new flare ups. Some 108 million people in China’s northeast region have been put back under varying degrees of lockdown amid a new cluster of infections. Doctors there are also seeing the coronavirus manifest differently, suggesting that it may be changing in unknown ways.

In South Korea – where the virus was controlled without a hard lockdown — consumer spending remains weak as infections continue to pop up.

Sweden’s highly contested response left much of the economy open, yet the country is still headed for its worst recession since World War II.

That means global policy makers — who have already announced trillions of dollars of fiscal and monetary support — will need to keep the stimulus flowing to avoid yet more company failures and job losses. Federal Reserve Chairman Jerome Powell has warned that a full recovery will need to wait until the scientists deliver, a warning echoed by his Australian counterpart.

“If we don’t get breakthroughs on the medical front, then I think it’s going to be quite a slow recovery,” Australia’s central bank chief, Philip Lowe, said this week. “We’ve got a lot resting on the shoulders of the scientists here.”

Harvard University professor Carmen Reinhart, who is the incoming chief economist of the World Bank, had a similar message. “We’re not going to have something akin to full normalization unless we (a) have a vaccine and (b) — and this is a big if — that vaccine is accessible to the global population at large,” she told the Harvard Gazette.

With global infections topping five million and a death toll of over 330,000, there’s an air of desperation for good news on either a vaccine or effective anti-viral.

Shares in Cambridge, Massachusetts-based Moderna Inc. hit a record on Monday on early data from a small trial of the company’s coronavirus vaccine. It gave up some of those gains in later days as investors weighed the early nature of the vaccine data.

A survey of money managers by Bank of America Corp. found the biggest tail risk is a second wave of the virus that means restrictions will have to be imposed again. Only 10% expect a rapid rebound, the bank said in a note titled “V is for Vaccine”.

The race for a cure has a geopolitical edge too. U.S. President Donald Trump has vowed a Manhattan Project-style effort dubbed “Operation Warp Speed” to develop a cure, while China’s President Xi Jinping has pledged to make one universally available once it’s developed.

The fusion of when successful drugs can be found and when economies can get back to normal is dominating sentiment in financial markets.

“There is a global bounty on the virus,” said Stephen Jen, who runs hedge fund and advisory firm Eurizon SLJ Capital in London. “I don’t see how it is wiser for investors to bet on the virus than to bet on science, technology, and unlimited political and financial capital in the world to contain and defeat the virus.”

Health experts caution that the process for developing an effective immunity will take time – possibly years. And even then it will need distribution on an unprecedented scale, according to Anita Zaidi, Director of Vaccine Development and Surveillance at the Bill & Melinda Gates Foundation.

“I am optimistic we can develop a vaccine by the end of 2020,” she said during a discussion hosted by Bloomberg New Economy. “I am not very hopeful that we can deploy a vaccine for mass use by the end of 2020 because of the unprecedented scale needed to immunize the whole world.”

Deutsche Bank AG economists are working on the basis that a vaccine or a cure won’t be widely available for the next year and a half.

In the meantime, the cogs of global commerce are in limbo. The International Monetary Fund has warned the “Great Lockdown” recession would be the steepest in almost a century. More than 1 billion workers are at high risk of a pay cut or losing their job, the International Labour Organization warned in April. World merchandise trade volume is likely to fall “precipitously” in the first half of 2020, according to the World Trade Organization.

Critically, consumer confidence is shattered. One example: U.K. retail sales dropped by almost a fifth in April.

Bloomberg Economics estimates the lockdowns triggered a drop in activity of around 30% and their research found that the first steps to relax controls will have a more positive impact on activity than later ones.

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Central bank chiefs, who have had to resort to considering scenarios instead of hard forecasts, are staying in crisis mode.

Powell has pledged to keep using the Fed’s tools. The Bank of Japan, in an emergency meeting on Friday, launched a new lending program worth 30 trillion yen ($279 billion) to support small businesses as a key inflation gauge slid below zero in April for the first time in more than three years. India’s central bank cut interest rates in an unscheduled announcement on Friday to their lowest since 2000.

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While the world waits for a vaccine, workers employed in areas like tourism will need to be reskilled and shifted to where there’s demand, a process that will take time, said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings.

“Without a medical solution, either a vaccine or effective therapy, persistent behavior change would lead to large structural shifts in the economy,” he said.

Big employers are already adapting to the new, new normal. Facebook Inc. plans to hire more remote workers in areas where the company doesn’t have an office, and let some current employees work from home permanently. JPMorgan Chase & Co. expects to keep its offices half full at the most for the “foreseeable future.”

The circuit breaker to all of this would be a scientific breakthrough, said Torsten Slok, Deutsche Bank Securities Chief Economist.

“A vaccine would change everything,” he said.

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Mayor Watson asks province to consider local reopening of economy – Ottawa Citizen

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Mayor Jim Watson has asked Premier Doug Ford to consider reopening the City of Ottawa’s economy as part of a regional approach to relaxing COVID-19 restrictions.

“Mayor Watson spoke to Premier Ford last night and expressed his support for a more regional approach given our city is doing better than many other parts of the province,” Watson’s press secretary Patrick Champagne said Wednesday morning.

“As you know, we also have the added challenge of being a border city, creating an unlevel playing field, as businesses like hair salons and barber shops have reopened in Gatineau but not in Ottawa. Premier Ford fully understood our dilemma and committed to keeping the Mayor’s perspective in mind as they consider a regional approach to reopening the Ontario economy.”

Ford last week expressed interest in a regional approach to reopening Ontario’s economy based on COVID-19 testing and results, rather than tweak provincial emergency orders and have the rules apply to the entire province.

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US services index shows biggest part of economy is stirring – BNNBloomberg.ca

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U.S. service providers started to emerge in May from a pandemic-induced tailspin as nationwide lockdowns on business and social interaction began to lift.

The Institute for Supply Management said Wednesday that its non-manufacturing index rose 3.6 points to 45.4.

While the monthly increase was the largest in more than two years, the gauge remained below the 50 mark that shows most service-related industries continued to contract.

The purchasing managers group’s gauge of business activity, which parallels the ISM’s factory production index, jumped 15 points, the most in records dating back to 1997, to a still-tepid 41. Along with an improvement in new orders, the figures are a welcome sign that the economy is stabilizing and will gradually recover from a deep recession.

The median forecast in a Bloomberg survey of economists called for an improvement to 44.4 in the overall non-manufacturing index.

The report, however, also showed the labor market remains severely disrupted by the pandemic. The ISM measure of employment at services, which represent almost 90 per cent of the economy, only rose 1.8 points from the worst reading on record in April.

A Labor Department report on Friday is projected to show another 8 million decline in May payrolls after an unprecedented 20.5 million slump in April. The unemployment rate is forecast to soar to nearly 20 per cent.

A pickup in demand as states lift lockdowns and businesses begin to reopen is needed to help stabilize the job market. The ISM’s report showed an index orders at service providers climbed 9 points to a still-weak 41.9.

Meanwhile, the index of supplier deliveries in non-manufacturing industries fell for the first time in four months, indicating an easing in supply-chain bottlenecks and transportation delays.

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Posthaste: Here are three promising data points that show the Canadian economy is ready to rebound – Financial Post

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Good morning!

Rays (plural) of good news are piercing through the gloom surrounding the Canadian economy.

And not surprisingly, the country’s resilient housing sector is among the first to report a rebound.

Home sales jumped 53.2 per cent in May month-over-month, suggesting that April’s dramatic plunge in sales may have been the market’s low point.

Another crucial statistic was new listings that rose 47.5 per cent during May, compared to April, according to the Toronto Regional Real Estate Board.

The Real Estate Board of Greater Vancouver had also reported on Tuesday that homes sales jumped an unadjusted 34 per cent in May from April, while prices remained flat month-on-month. Benchmark prices rose 2.9 per cent to $1.03 million from a year ago.

Of course, these averages look good as the economy was wallowing in complete uncertainty in April, decimating homes sales and upending market trends.

While home sales in Toronto remain 53.7 per cent lower than May 2019, the decline was less than the 67.1 per cent year-over-year decline reported for April 2020.

“The MLS Home Price Index Composite Benchmark price was virtually unchanged in May 2020 compared to April 2020,” TRREB noted. “On a year-over-year basis, the composite benchmark was up by 9.4 per cent. The average selling price for all home types combined was up by three per cent compared to May 2019 to $863,599. On a seasonally adjusted basis, the average selling price was up by 4.6 per cent month-over-month compared to April 2020.”

A May poll by TRREB showed 27 per cent of the Greater Toronto Area households were looking to purchase a home over the next year, suggesting that sales may improve further in the coming months provided the economy is not adversely hit by new waves of the pandemic.

“As we move toward recovery, the housing sector will be a key driver of growth as consumer confidence increases and more households look to take advantage of very low borrowing costs,” said TRREB CEO John DiMichele.

Investors will also be watching a key metric that indicate where prices are headed next, especially in the pricey Vancouver real estate market.

Sales-to-active listings ratio for May 2020 was 15 per cent in the Vancouver region, detached homes at 13.5 per cent, 18.9 per cent for townhomes, and 14.8 per cent for apartments.

“Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months,” noted the Real Estate Board of Greater Vancouver.

TRREB is expecting prices to remain stable over time, with some possible uptick.

“With home sales and new listings continuing to trend in unison in May, market conditions remained balanced. This balance was evidenced by year-over-year average price growth slightly above the Bank of Canada’s long-term target for inflation,” said Jason Mercer, TRREB’s chief market analyst. “If current market conditions are sustained during the gradual re-opening of the GTA economy, a moderate pace of year-over-year price growth could continue as we move through the spring and summer months.”

***
Another glimmer of hope that the economy is returning to some form of normalcy has come from the transportation sector.

The Canadian National Railway Co. said it saw a 4 per cent increase in volumes of good shipped in May compared to April.

While the recovery is expected to be slow, it’s a positive sign after shipments hit bottom last month, the company’s chief financial officer Ghislain Houle said Tuesday at the UBS Global Industrials & Transportation virtual conference, according to Bloomberg.

“I think we’re seeing the light at the end of the tunnel,” Houle said. “Hopefully, it will hold.”

Canadian Pacific Railway Ltd. also said it set a new record for shipping Canadian grain and grain products in May, moving 2.80 million metric tonnes in the month.

**
Finally, yet another sign consumers are ready to put COVID-19 behind them is the 113,224 new light vehicles sold in Canada in May, a 147 per cent jump over April’s sales, according to a report by DesRosiers Automotive Consultants Inc. Still, May 2020 car sales were down considerably compared to the same period last year.

“It’s a measure of the strange times in which we find ourselves in that a market decline of only 44 per cent can seem like a positive sign. However, following the estimated 74.6 per cent decline in April — which sent Canadian new light vehicle sales levels back in time to roughly the early 1950’s — May’s year over year decline can evoke a touch of cautious optimism as the first tentative shoots of recovery spring up from a badly damaged marketplace,” the consultants said in a statement.

“Of course, the ongoing situation remains in flux and an already trying year could prove to have a few tricks left up its sleeves yet,” the consultants warned.

They are wispy green shoots of recovery — but we will take it.

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PROTESTS GO GLOBAL: Protesters hold placards next to the statue of 19th century British Prime Minister Benjamin Disraeli outside St George’s Hall in Liverpool, northwest England, on June 2, 2020, during demonstration after George Floyd, an unarmed black man who died after a police officer knelt on his neck during an arrest in Minneapolis, USA. – The city of Liverpool lit up their civic buildings in memory of George Floyd on June 2 the death of whom in Minneapolis while in police custody has sparked days of unrest in the US city and beyond. Paul Ellis/AFP via Getty Images

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  • Bank of Canada to make an interest rate announcement at 10 a.m. ET
  • Teck Resources Ltd. hosts a conference call to discuss its 2019 Sustainability Report and strategy
  • Quebec’s Treasury Board President Christian Dube and Finance Minister Eric Girard to discuss a bill to mitigate the effects of the pandemic and quickly revive the Quebec economy
  • A Papua New Guinea court is set to rule on whether Barrick Gold Corp. can proceed with a legal challenge over the government’s refusal to extend its lease on the Porgera gold mine
  • Case management conference for Huawei CFO Meng Wanzhou in Vancouver
  • Transport Minister Marc Garneau, CEO of Vancouver Fraser Port Authority Robin Silvester, Robyn McVicker, a vice-president at YVR and Tim Strauss, vice-president of Air Canada cargo take part in Transportation Forum 2020
  • Notable Earnings: Stingray Group Inc., Canada Goose Holdings Inc., AutoCanada Inc.
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Some of the biggest cannabis players when legalization took effect 20 months ago have successfully held on to their dominant positions, despite a year of bankruptcies, downsizings, revoked licences, executive firings, mass layoffs and a long market selloff, writes Vanmala Subramaniam.

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It is hard enough to make money in the stock market, even without the world shut down due to a global pandemic. In fact, studies have proven that the average stock actually goes down. So how does one make money? Well, it’s all in the math. A stock can “only” decline by 100 per cent. But if you have a big winner, you can make 1,000 per cent returns, or more. A winner or two can more than make up for many losers, writes Peter Hodson.

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Today’s Posthaste was written by  Yadullah Hussain (@Yad_Fpenergy), with files from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.

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