(Kitco News) – The global economic outlook looks slightly better than expected as the International Monetary Fund (IMF) raises its growth forecasts for this year and next.
Tuesday, in its World Economic Outlook, the IMF said that it sees the global economy contracting 4.4% this year, up slightly higher from its June forecast for a contraction of 5.2%.
Although the IMF is more optimistic about global growth, it also warned that recovery would be “long, uneven and uncertain.”
Although the IMF has upgraded its outlook for this year, it sees slightly less growth in 2021. The IMF sees the global economy expanding 5.2% next year, down slightly from its June forecast for 5.4% growth.
“We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” the IMF’s Chief Economist Gita Gopinath said in the report.
Gopinath said some $12 trillion in fiscal support and unprecedented monetary easing from governments and central banks helped to limit the damage caused by the COVID-19 pandemic.
Looking at the impact of the ongoing coronavirus, the IMF said that social distancing due to the coronavirus pandemic will continue into 2021. The report added that local transmissions will fall everywhere by the end of 2022.
The United States economy is set to fall by 4.3% this year, much better than the 8% contraction predicted in June; meanwhile, the euro zone’s economy is expected to contract by 8.3% in 2020, an improvement from a 10.2% contraction forecasted in June.
Commodity analysts appear to be mixed on what impact the economic revisions will have on gold prices.
Some analysts have noted the upward economic revisions will lower gold’s appeal as a safe-haven asset. However, other analysts have said that gold will continue to do well as the Federal Reserve is not expected to raise interest rates anytime soon even as the U.S. and global economies improve.
The analysts note that this scenario would see inflation pressures rise and reduce real interest rates, a positive environment for gold.
The gold market is seeing some renewed selling pressure in reaction to the latest IMF data. December gold futures last traded at $1,914.70 an ounce down 0.74% on the day.
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Cenovus Energy shares plummet on news of its $3.8B deal to buy Husky Energy
The all-share deal by Cenovus Energy Inc. to buy Husky Energy Inc. for about $3.8 billion will likely spark more mega-mergers among Canadian oil and gas majors, according to a veteran oilsands analyst.
“This is likely just the start of big deals in Canadian energy land and thus it begs the question of who is next?” said analyst Phil Skolnick of Eight Capital in a report on Monday.
“As seen in the U.S. with the accelerated M&A activity, when there’s one meaningful transaction, there’s likely more to come.”
Several industry observers point to Calgary-based oilsands producer MEG Energy Inc. as the leading potential target, noting Husky’s failed $3.3-billion hostile takeover attempt of its smaller rival two years ago.
In his report, Skolnick presents scenarios where Canadian Natural Resources Ltd. (sometimes referred to by its stock ticker, CNQ) or Imperial Oil Ltd. buy MEG, while also outlining the numbers involved if Canadian Natural combined with Imperial or Suncor Energy Inc., and if Suncor were to merge with Imperial.
“Some (scenarios) have been asked about before and I was just bringing up some new ones _ like a CNQ and Suncor merger is not something I’ve heard out there, but nor was Cenovus-Husky,” he said in an interview.
“I’m not going to give zero chance to anything anymore.”
Analysts generally applauded the surprise Cenovus-Husky hookup announced Sunday for its operational advantages but criticized the plus-20-per-cent premium in the price for Husky.
“The deal does makes strategic sense,” said Manav Gupta of Credit Suisse in a note to investors.
“Like U.S. E&P (exploration and production companies), Canadian energy companies also need to come together, cut costs and become leaner to better adapt to lower energy demand in post pandemic world.”
He said Cenovus’s reputation as an efficient operator in its steam-driven oilsands projects will help Husky overcome its struggles with operational issues, including higher operating and administrative costs.
The companies have identified $1.2 billion in potential annual cost savings which will include workforce reductions.
But Gupta added the premium is “excessive” and joined other observers in predicting Cenovus shares would trade lower, as they did, falling by as much as 15 per cent to $4.15 in Monday trading in Toronto before closing down 8.4 per cent at $4.47.
Husky, meanwhile, gained as much as 14.2 per cent to $3.62 before closing up 12 per cent at $3.55 .
Husky shareholders are to receive 0.7845 of a Cenovus share plus 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share if the deal is concluded.
Cenovus shareholders would own about 61 per cent of the combined company and Husky shareholders about 39 per cent.
The transaction must be approved by at least two-thirds of Husky’s shareholders but Hong Kong billionaire Li Ka-Shing controls 70 per cent of Husky’s shares and has agreed to vote them in favour of the deal.
The announcement Sunday came just as Calgary’s oilsands companies are about to start rolling out third-quarter financial results, with Suncor Energy Inc. set to report Wednesday and both Cenovus and Husky scheduled to report on Thursday.
© 2020 The Canadian Press
Ant Group raises $34.4 billion in the biggest IPO of all time – CNBC Television
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