15 PERCENT OF CANADA’S INDEPENDENT BUSINESSES POISED TO FAIL. Canada’s holiday shoppers plan to spend 66 percent of their gift dollars online and at big-box stores, according to a new survey by the Canadian Federation of Independent Business (CFIB).
Many independent retailers are counting on strong holiday sales to lift them beyond the months of lost sales during the economic shutdown. However, a spike in virus cases across Canada is likely to keep a significant number of shoppers out of stores in the weeks ahead.
Only 38 percent of independent retailers report their sales have returned to pre-pandemic levels, the survey found.
As many as 15 percent of Canada’s independent retailers responding to the CFIB survey said they were in danger of going out of business because of the shutdown and consumers’ reluctance to venture out in public while the virus is rampant.
“The holiday season is make or break for a lot of businesses,” said CFIB executive VP Laura Jones in an interview on Canada’s CTV television network. “We need to support local businesses or they just won’t be here tomorrow.”
EUROPEAN SHUTDOWNS SHUTTING DOWN ECONOMIES. As thoroughly reported in the Trends Journal, in response to rising cases (not deaths) of the coronavirus politicians’ economic shutdowns in much of Europe will drive the continent into prolonged depression.
Britain, France, Germany, Italy, the Netherlands, and Spain all mandated renewed closures of various kinds during the week of 12 October. Belgium ordered all bars and restaurants shut for at least four weeks. Ireland is in lockdown.
By itself, the rising number of cases seems to be persuading consumers to stay off the streets. Google data shows that, after rising for months, foot traffic in the business and commercial districts of Amsterdam, Berlin, London, Madrid, and Paris declined in October.
Last month, the European Central Bank predicted fourth-quarter growth in the Eurozone of more than 3 percent.
However, “We now see growth turning negative in several countries in the fourth quarter,” Katharina Utermohl, Senior Economist at Allianze, told the Financial Times. “Another recession is absolutely possible.”
Observers expect the central bank to expand its existing aid program, perhaps by adding another €500 billion to its bond-buying initiative in or before December. Analysts also expect individual countries’ governments to come to the rescue.
TRENDPOST: The slow, uneven, and now stalling recovery will continue to buoy the price of gold, silver, and Bitcoin as central banks inject monetary stimulus to artificially pump up failing economies.
MORE THAN HALF EUROPE’S SMALL BUSINESSES FEAR FAILURE. Fifty-five percent of small and medium-size firms – those employing 250 people or fewer – in France, Germany, Italy, Spain, and the U.K. will close by next September if their revenues remain at current levels, according to an August survey of 2,000 businesses by management consulting firm McKinsey & Co.
The survey was conducted before the COVID virus’s resurgence sparked renewed shutdowns across Europe.
At the current pace, one in ten such companies on the continent is expected to file bankruptcy within six months.
Small and mid-size businesses employ 90 million European workers but most have few cash reserves and so are vulnerable to cash-flow crises. In Spain, 83 percent of the 85,000 businesses that have failed since February had payrolls of no more than five people.
“Policymakers need to do whatever it takes to contain the pandemic and its economic damage, and not withdraw support prematurely, to avoid repeating the mistake of the global financial crisis,” the IMF wrote in its blog last week.
“For companies, policies now need to go beyond liquidity support and ensure that insolvent but viable firms can remain in business,” it added.
Europe’s economy will grow 5.5 percent next year after contracting by 8 percent in 2020, according to Reuters’ September poll of economists.
PUBLISHER’S NOTE: Government recovery packages are structured in ways that ensures the Bigs are cared for and small businesses are left to fend for themselves. Many will not survive, giving Bigs even greater market shares.
COPPER’S PRICE SURGES. On 21 October, copper’s price passed $7,000 a ton for the first time since June 2018.
The price has gained more than 50 percent since the economic shutdown disrupted mining and manufacturing last March.
The rising price is due to surging demand from Chinese factories and the ongoing global shift to “green” technologies, analysts said, as well as supply disruptions wrought by the global economic shutdown.
Demand for copper among automakers and the electric power industry is predicted to grow by 2.3 million tons over the next five years.
An electric car uses about three times as much copper as a gasoline-powered car, and copper is used throughout wind turbines and their connections to the electric grid.
China is driving much of the demand increase under president Xi Jinping’s pledge that China will be carbon neutral by 2060. The mandate is expected to significantly expand the country’s production of solar panels, wind turbines, and other clean power hardware.
In the U.S., Joe Biden has pledged a $2-trillion investment in green energy and infrastructure if he wins the presidency.
With green the color of the future, investors see copper as a way to ride the rising tide, analysts say.
“We believe investors’ interest in gaining exposure to the ‘decarbonization’ theme is… reaching fever pitch,” Citi analyst Max Layton told the Financial Times.
China, which buys more than half the world’s copper, may already have stockpiled as much as 800,000 tons, based on Macquarie Bank’s analysis of differences between imports and production.
CHINA’S STOCK MARKETS BOAST RECORD LISTINGS. Together, the stock markets in Shanghai and Shenzhen have listed 27 percent of the world’s new stock offerings this year, a record 27 percent of the global total.
The value of the IPOs and issues for companies already on exchanges elsewhere total a value of more than $47.5 billion, market listings show.
Adding listings by Chinese companies in Hong Kong’s market, the tally rises to 43 percent.
The Shanghai Composite Index has gained about 9 percent this year, making it an attractive place for Chinese companies to be listed.
The STAR Market – nurtured by president Xi Jinping as China’s version of NASDAQ – offers an additional venue. The year-old exchange is tech-oriented and more freewheeling than other markets, with share prices averaging 93 times the companies’ valuations.
STAR has booked $22 billion so far this year in IPOs and secondary issues.
Several businesses listed on Hong Kong’s exchange are mulling listing on the STAR in hopes of seeing share prices rise on the tide of enthusiasm and speculation.
Also, STAR welcomes listings by Chinese companies that are incorporated in other countries or listed on foreign exchanges.
In addition, U.S. threats to de-list some Chinese businesses now on American exchanges and to revise listing criteria are persuading some Chinese corporations to transfer their shares to their homeland exchanges.
“Homecoming listings allow Chinese companies access to new investors who find it difficult to invest in U.S, markets,” Craig Coben, market strategist at Bank of America, told the Wall Street Journal.
CHINA MAY REIN IN RISING RENMINBI. China’s renminbi currency rose 0.5 percent against the dollar to 6.64, its highest level since July 2018. The internal exchange rate has gained 4.7 percent this year and the offshore rate is up 4.9 percent.
If the renminbi breaks through 6.65, the country’s policymakers might take steps to drive the value back down, analysts have predicted.
A strong renminbi makes China’s exports more expensive abroad and could slow the country’s economic recovery and the growth of its export industries.
China’s central bank “may want to send some signals in the next few trading sessions” that it may intervene, Frances Cheung, Westpac’s head of Asian microstrategies, told the Financial Times.
The bank could slow the gains by using something called the “daily fix,” which sets a range in which the renminbi can trade against the dollar.
“China likes stability,” Kit Juckes, Chief Currency Strategist at Société Générale, said in a Financial Times interview. “There is history of not wanting the renminbi to be out of control and go too fast.”
The renminbi has been energized by China’s robust economic recovery, driving up stock prices, and the central bank’s generous interest rates that surpass those in effect in Europe and the U.S.
The dollar has been weakened by low interest rates, the flood of bucks the U.S. Federal Reserve has unleashed on the world to stabilize markets, an unsteady U.S. economic recovery, and anxieties around the November election.
China’s economy grew 4.9 percent in the third quarter, year on year, according to government data, strengthening forecasts that China’s will be one of the world’s few economies to grow this year compared to last.
TREND FORECAST: We do not believe China will take strong action to cool its currency.
China’s government sees the “Greatest Depression” under way and knows that exports will remain uncertain for some time to come. To guard against a softening economy, it will keep the renminbi strong enough to ensure its imported finished goods and raw materials are cheap, to grow the domestic economy, and to continue to draw foreign investors away from Europe and the U.S.
CHINA: RICH GET RICH, POOR GET POOR. China’s higher-income workers kept their jobs and saw their investments grow during the economic shutdown and nascent recovery, while hundreds of millions of lower-paid workers lost hours, lost their jobs, and depleted their meager savings, analysts say.
“Like the U.S., the recovery in China follows a K-shaped trajectory,” Tommy Wu, a Senior Economist at Oxford Economics, said to the Wall Street Journal. “It’s almost certain that” the shutdown “has worsened economic inequality in China.”
Low-income workers still make up a significant share of China’s $6-trillion consumer economy, which has lagged other sectors in recovering from the shutdown. The plight of low-income individuals could hobble the larger recovery, analysts caution.
Already, retail sales are down 30 percent for the year and are expected to contract in 2020 while the overall economy expands, driven in large measure by government investment.
Sales of luxury goods are on the rise, while sales of routine consumer goods are more modest, highlighting the disparity between economic classes.
Chinese officials also worry that the sight of many doing well while many more struggle could spark social unrest, although government officials told the Wall Street Journal that Beijing has said it sees no signs of that yet.
TREND FORECAST: Beijing will continue to pump more fiscal stimulus to generate growth with its “duel circulation” economic strategy, i.e., a self-sustaining economy.
Again, it will heavily invest in building its infrastructure to create jobs. With 1.4 billion people, the government will do what it can to prevent social uprising by millions of unemployed who have taken to the streets in the past when the economy declined.
SHUTDOWN BOOSTS GREEN ENERGY INVESTMENTS. Global energy consumption will fall 5 percent this year due to the worldwide economic shutdown, driving down capital investments in energy projects by 18 percent, according to the International Energy Agency’s (IEA) annual report on the future of the world’s energy markets.
Spending on oil and gas projects is falling further than that for any other fuel source, while spending for wind and solar projects sagged the least.
Renewable power sources benefited from the technologies’ falling prices and improving efficiencies as well as an array of government subsidies, the IEA said.
The agency expects renewable energy to meet 80 percent of the world’s new power demand through 2030.
“Solar is the new king of electricity markets,” said Faith Birol, the IEA’s executive director. “This is important for clean energy technologies, as they require relatively high up-front costs.”
“We definitely see further growth in renewable energy investment and certain institutional investors who want to push harder,” said Mark Florian, Director of Energy Investments at Blackrock.
In September, British energy giant BP laid out a future strategy that will lead it away from fossil fuels and emphasize renewables.
“The pandemic only adds to the challenge of oil in the future,” said BP CEO Bernard Looney, adding that world oil demand may have permanently peaked just before the pandemic arrived.
Total, the French global oil company, announced plans last month to raise spending on renewables from $2 billion a year now to $3 billion annually by 2030.
Although fossil fuel demand may have peaked in developed nations, demand for it will continue to grow in emerging economies such as China and India, the IEA predicted, leading oil and gas to still supply 40 percent of the world’s power by 2040, even if governments continue to subsidize renewable sources.
TRENDPOST: China’s carbon dioxide emissions levels fell during the shutdown but already have returned to pre-pandemic levels, the agency noted.
Coal will see a lesser fate, the agency said: demand permanently peaked in 2014 and will continue to fall until, by 2040, coal makes up less than 20 percent of the global energy mix for the first time in almost 250 years.
AUSTRALIAN BANKS SLASH INTEREST RATES. Australia’s “big four” banks – ANZ, Commonwealth Bank, NAB, and Westpac – have all cut their interest rates on savings accounts since September to as low as 0.01 percent.
The online-only Xinja bank has announced it will no longer pay interest on savings accounts with balances above $150,000.
Most of the new interest rates are below the rate of inflation, meaning that savers are effectively losing money by keeping their savings in a bank.
The skimpy rates encourage savers to hop from bank to bank to take advantage of higher introductory rates of as much as 2 percent for short periods, typically four or five months.
The banks resisted cutting rates to zero “because zero is that kind of magical round number that says, ‘Oh, I’m getting nothing now’,” Steve Mickenbecker, an executive with the Canstar financial comparison website, told Australia’s New Daily newspaper.
GOLDMAN SACHS PAYS TO SETTLE CRIMINAL CHARGES. Goldman Sachs has agreed to pay $2.9 billion to regulators in Britain, Singapore, the U.S. and other nations as part of admitting its role in a conspiracy to bribe foreign officials so the bank could land lucrative business deals.
On 22 October, the bank’s Malaysian subsidiary pled guilty to one count of conspiracy to violate the U.S. Foreign Corrupt Practices Act. The bank’s parent company entered into an agreement with the U.S. justice department that will allow the bank to avoid closing down certain business operations.
The misdeeds are related to Malaysia’s ongoing “1MDB” scandal, in which Goldman Sachs allegedly helped a Malaysian financier steal billions from the country’s 1Malaysia Development Berhad, a government-run development corporation formed to foster economic development.
The Malaysian swindler used the money to buy a $250-million yacht and real estate around the world, as well as to bribe officials in Malaysia and Abu Dhabi, according to the U.S. justice department.
Goldman Sachs collected about $600 million in fees for shepherding bond sales that financed the bank. Financial professionals found the fees to be unusually high, the justice department noted.
The bank admitted failure to take “reasonable steps” to ensure that the corrupt financier was not involved in the bond deals.
In July, Goldman reached a separate $3.9-billion settlement with the Malaysian government in the case.
TRENDPOST: We note this article to again emphasize how the Bigs get a slap on their financial wrist for committing high crimes and misdemeanors while we, the little people of Slavelandia are punished to the full extent of the law for minor infractions.
