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Best of the Web - April '21

Executive Summary

The month of April saw a shift in sentiment as the pandemic resurged at the fastest pace seen so far, driven by a massive outbreak in India. However ongoing vaccination programs are continuing to hit milestones, despite some countries facing shortages in vaccines, resulting in a more unequal prospect for global economic recovery.

How is the world coping with the new wave of Covid-19?

Covid-19 cases have picked up sharply around the world, with South Asia seeing a horrific rise in cases, with additional waves starting in Europe and the US as well. Globally, cases are now close to 150mn, with deaths mounting to above 3mn. On a more positive note, countries have also made strides in their vaccination programs with around 555mn people receiving at least 1 shot, that is approximately 7% of the world’s population.

Cases rise sharply in India: Over the past few weeks, Covid-19 cases have risen very sharply with daily cases hitting 350,000 a day, a drastic increase compared to January and February where daily cases were just below 20,000. India is also facing a major shortage of oxygen, and concerns over new variants are bringing ripples of worry across the world.

Europe gets hit by a third wave: Cases in Europe have spiked recently, as vaccinations have not yet hit their mark. The rise is attributed to the new and more dominant variant of the virus B.1.1.7 which was first observed in England last year. Concerns over how the EU will deal with this surge could impact global consumer sentiment.

US and UK see breakthroughs in vaccinations: England has reached a milestone in administering Covid-19 shots by vaccinating more than 90 per cent of the people most at risk. The NHS has confirmed that 19 out of 20 people aged 50 and over have been vaccinated. The US has also set records in the recent weeks, with more than 120m Americans having received one or more doses of a coronavirus vaccine and almost 74m Americans, or 28.6 per cent of the adult population, have been fully inoculated.

How has the global outlook changed?

While expectations of global recovery still remain, uncertainty as to the pace of recovery has increased due to a surge in Covid-19. Recovery is also far more likely to be divergent with new surges in some areas along with vaccine weakness.

US to grow at record breaking pace: The US could reach upto 7% growth this year as it rebounds from the pandemic - if achieved it would mark the fastest annual expansion since 1984. This new wave of optimism among economic forecasters is attributed to the $1.9 trillion pandemic relief package already passed and also President Joe Biden’s proposed $2 trillion-plus infrastructure plan.

India recovery prospects dented: A dark shadow has been casted on economic recovery in India after it was hit by the new wave of Covid-19. The catastrophic surge in cases and deaths across India, as well as subsequent lockdowns, are almost certain to severely weaken India’s recovery, and some are starting to worry about a full recession this year.

Markets expecting a Fed rate rise next year: Uncertainty looms as the US embraces strong economic recovery and with it a higher inflation expectation. This has resulted in many markets anticipating a sooner than expected hike in rates despite the Feds commitments to hold rates and to have an accommodative monetary policy stance, leading to continuous volatility in emerging market capital flows.

How have commodities been performing?

Oil prices rise despite upsurge in Covid-19 cases:

Oil prices rose from $62.90 per barrel at the start of the month to a monthly high of $68.08 per barrel on the 20th of April supported by disruption to Libyan exports and expectations of a drop in U.S. crude inventories. However, as many countries started getting hit by new waves of the pandemic, oil prices fell to $65.65 per barrel by the 26th of April.

Gold prices hit a 2-month high:

Gold prices rose across April starting from $1708.90 an ounce to a peak of $1793.46 an ounce by the 22nd of April due to a growing sense of unease over the surging COVID-19 cases, before falling back a little to $1780.15 by the 26th of April.


Top 5

IMF aims to distribute SDR reserves this summer, Okamoto says

The International Monetary Fund has a goal of distributing a $650 billion allocation of Special Drawing Rights monetary reserves to member countries this summer, IMF First Deputy Managing Director Geoffrey Okamoto said on Monday.

Covid-19 resurgence threatens vigorous global economic growth momentum

The renewed surge in Covid-19 infections is threatening to further divide the world economy between the rich and poor, potentially damaging overall global growth if the fresh outbreaks spread or if key sources of demand falter.

Fed doesn’t see inflation running out of control, Harker says

The Federal Reserve sees inflation moving up towards its 2% annual target but doesn’t see runaway price pressure. Many economists are worried that the massive fiscal stimulus passed by Congress earlier this year will cause the economy to overheat, sending consumer prices significantly higher.

Dollar threatens the emerging markets party

Nearly all EM currencies have weakened against the dollar since late February, with a slight recovery at the start of April. But the dollar is still 9% stronger against the Brazilian real and it’s up 5% against the Russian rouble since the start of the year. It’s also advanced against market darlings such as the Mexican peso and the Chinese renminbi.

China’s Economy Is Booming. Shoppers Are Skittish Anyway

Factories are whirring, new apartments are being snapped up and more jobs are up for grabs. When China releases its new economic figures on Friday, they are expected to show a remarkable post-pandemic surge.

Compiled by: Emaad Rizwan

Disclaimer: This information has been compiled from sources believed to be reliable but Frontier Research Private Limited does not warrant its completeness or accuracy. Opinions and estimates constitute our judgment as of the date of the material and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The recipient of this report must make their own independent decision regarding any securities or financial instruments mentioned herein. Securities or financial instruments mentioned herein may not be suitable to all investors.


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