The recession of galaxies
Investing.com – Global economy continues to recover, if not, then at least discuss the types to recover. At the same time, while the growing number of cases continues in seven of the ten largest population countries in the world, except for China – where now introduced new quarantines, Russia – in which, however, has yet to mostly is determined by the data in Moscow, and the leader of the list – the United States. The three leaders in the number of cases has rapidly invaded Brazil, the exponential growth of the epidemic continues in India and some other countries, significantly influencing the overall situation.
Life “beyond pandemics” also continues. The Chinese government on may 21 announced the intention to introduce in Hong Kong the national security act, allowing you to officially act in the city’s mainland intelligence agencies.
This provoked a strong reaction not only USA but also the UK and other countries. However, even without this economic conflict between the United States and China will not go away, so there is not always a good idea to separate cause and effect: in particular, the U.S. Senate on Wednesday approved the bill toughening the requirements to the placement of securities of foreign companies on U.S. exchanges.
“This is not the only measure – for example, a couple of weeks ago, the US issued a circular on the transport of embargoed goods by sea, arrest of ships have already been conducted. All this really smacks of “Tiananmen square”: after the events of 1989 China 10 years have been under sanctions – but then was de-Sovietization, the opening of new markets and the world economy is easily survived. Now we can expect the same, but still without any mitigating factors. Especially from Hong Kong actively supports the UK – and they don’t write in Twitter, but actually act. Any concessions China is, for example, the President of China, XI Jinping himself has admitted that he will have to allow the who to investigate the development. But the conflict remains. And at least, this means that economic growth will slow,” says the Director of analytical Department IK “Region” Valery Weisberg.
Today the main news promised to be another press conference of the President of the United States Donald trump, but he spoke less than a minute, is not affected neither the topic of vaccines against coronavirus, nor the problems of Hong Kong and did not answer questions. So as the events of the day the market had to be content with the fact that China for the first time in 30 years refused the installation of the benchmark GDP growth this year.
Against this backdrop, the futures contract on the S&P 500 spent a week in the outset and finished it exactly on the level to which came out on Monday – 2956 p.
“There is a “recession of galaxies” of the country in the course of the pandemic are moving at different speeds and in different directions. In Germany industry restaurants for the week gained 3% to 75% of the tables – in the US, this and there. And in India the unemployment is 20% – more than the population of Russia, and everything is just beginning. The last few months, the S&P 500 index has pulled up the company’s bet on globalization and universal services, which can provide from anywhere in the world. What is happening shows that they will experience difficulties. Moreover, the OECD recently endorsed the concept of taxation on Internet companies – continues Valery Weisberg. – Separation of perceptions is clearly evident in everything: on the one hand we have the prospect of 30-40 million unemployed Americans, companies refuse Baibakov and dividends, asking for help. On the other hand, the index at the same level as a year ago. The reason is obvious. In April there was a big trouble – global consumer price index fell by 2.5%, we will have deflation. And almost all over the world real rates will be negative or slightly positive. At the optimum, we see Iran – the enormous growth of the stock market on the background of vacuum in the economy and the second wave of the pandemic. There are people fleeing from inflation, they have nowhere to invest money. In developed markets the ratio of market capitalization to profit is inversely proportional to rates. The main investors – insurers, pension funds and other institutionally, too, left without choices: if you want to have a yield above 0.5% per annum to invest in the stock market.”
At the same time, these funds remain “virtual” and nothing to do with the recovery industry, demand and other useful things. “IPO market where money could get it companies, while lying. And I agree with the fed Chairman Jerome Powell, that the money they pour in, not come down to the economy. It is difficult for companies to obtain them and a loan, the average rate on bonds with rating BBB while 3,24% – is gradually decreasing, some tributaries appear, but the spread with the rate the fed is still large, and such rates in dollars difficult for business. That is, we have huge incentives, but the market is not stabiliziruemost is himself admits Powell,” notes the analyst.
Futures for a barrel of Brent, despite all the efforts of the bulls and the continued decline of inventories in the United States, also failed to break above $37. The situation is dramatic in many ways. First of all, because even without government help, according to the Federal reserve Bank of Dallas, the average price of $30 per barrel of WTI allows American companies from break-even to operate the existing wells. “We have the March gap. If a gap happened, and the situation was restored, the market sooner or later will close down. Oil you need to reach the level of $37-40 a barrel. The bad news is that America still, in the worst scenario, produces 10.5 million barrels per day – more than Russia or Saudi Arabia. And now the American kancevica in may-June reduced royalties, the company will save hundreds of millions of dollars, and promised loans to pay. Help came, production still fell by only 1.3 million barrels per day. And achieving a level of $40 per barrel of Brent will allow to reopen part of the closed wells, and even a new drill. Of course, the forecast demand is gradually growing up, and cry about the lack of storage yet subsided – however, the demand for tankers as floating storage are still very high,” – says Valery Weisberg.
Russia in global trends: today it became known that the index of producer prices of industrial goods in April compared to March fell by 7.2%. The difference, however, is that in this case the fault is not one coronavirus: the decline continues in the fall. Index Mosberg on Friday has decreased on 0,34%, RTS index – on 1,48%: try going above 2700 and 1200 p. p. respectively failed, however, both indices remain high enough: first at the level of June and the second in March 2019.
The ruble strengthened before falling on Monday the peak of tax payments: during the day, the dollar dropped to RUB 70,33 Taxes, of course, by the end of April will be released a bit – but the demand for currency is not what it the year before. However, according to the forecast of Ministry of economic development, the average rate of 72,6 rubles.dollar.
“Now, the company abandoned forecasts. The level of positive recommendations of analysts reached almost the February. Fundamentally it looks like the bottom is passed. The U.S. market stood at a very high multipliers – the ratio of market capitalization to net profit reaches 20, and, most likely, in this lethargic state, and will remain, unless new factors, such as the wave of bankruptcies or, at least, to the nasty messages at the end of II quarter, or earlier, – says Valery Weisberg. – In Russia, statistics are brilliant, there is no inflation, industrial production fell slightly, producer prices fall for eighth month. In this case we have a market concentrated in a few companies, who have a higher survival rate. Dividends will be paid rather than not – except that they will depreciate. Even on the news that the meeting of shareholders of Sberbank (MCX:SBER) is postponed, the stock rose. Plus babaki also remain. So the market will remain in the range 1100-1300 p. RTS, and a positive history may go up. Ruble we hit the target level of 70.7 rubles per dollar. It is seen that the government expects the stabilization parameters and is developing different scenarios and one speaks of a sharp increase in the emission of BFL, the other – on the contrary. In any case, large inflows of non-residents in this market I do not expect, but annual repo banks with the Central Bank will work, and they will provide the demand. Given the gradual recovery in consumer demand will we see a small recovery of imports though fell mainly investment, but essentially it does not change. In the end, with the release from quarantine should be guided by the rate of 72-73 RUB”.
(Text prepared by Daniel Zhelobanov)