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Best of the Web - June '21

Executive Summary

The month of June saw resurgences in Covid-19 in countries that otherwise showed successful mitigation in cases over the last few months. Inflation expectations are still high whilst the global economy is currently heading towards steep yet uneven recovery aided by ongoing mass inoculation programs seen in many regions around the world.

How has the global economy been battling growing inflation fears?

Inflations fears are high and are getting worst with parts of the global economy seeing staggering post pandemic recovery, in addition to the trickled down benefits of the fiscal stimulus plans in the US.

Inflation is said to be at its highest since the global financial crisis : Price are rising quickly across huge swaths of the developed world, with inflation in countries that belong to the OECD surging in April to the highest rate since 2008. There is no consensus on whether rising inflation is a temporary phenomenon that will fade as economies and consumers adjust to life after the pandemic, or if price rises signal the start of a sustained trend with major implications for workers and companies.

A rate rise by the US Federal Reserve to be sooner than initially expected: US central bank officials brought forward their projections of the first post-pandemic rate rise by a year to 2023. Headline US consumer price rises hit 5 per cent in the 12 months to May, but Jay Powell, Fed chair, told Congress recently that the Fed would wait for “actual evidence of actual inflation” before tightening monetary policy. Regardless moves by the Fed are on close watch by emerging markets and investors who fear another taper tantrum similar to 2013.

Global economy to grow at its fastest pace post-recession: The global economy is on track to grow at the fastest post-recession pace in 80 years, thanks to steady – but uneven – vaccine distribution, the World Bank said in a new report. Global growth will increase by 5.6% in 2021, an increase from its projection of 4.1% in January. The projected growth would make 2021 the fastest year for economic expansion since 1973 when it grew 6.6%.

How have countries been performing in managing the pandemic?

Global cases are currently at 181mn and deaths are at a whopping 3.92mn. Vaccine distribution is at its peak yet expectations of further economic inequality due to unequal distribution is on the rise.

Economic recovery uneven as vaccine roll out uneven: In some countries, vaccinations are being rolled out more aggressively than others. The lack of vaccines is a limiting factor, with many nations not getting shipments until late 2021. Less than 1% of people in sub-Saharan Africa right now are fully vaccinated, according to the World Health Organization.

Fears of variants are causing some stalwarts in management to falter: Daily positive cases have been rising in Britain for a month ranging between 15000 to 20000 cases a day while Israel recorded more than 100 new daily cases in successive days after registering zero earlier, the spread is attributed to the Delta variant, but a rapid vaccination program appears to have weakened the link between infections and deaths, with daily fatalities in Britain for example remaining around 20 or lower.

How have commodities been performing?

Oil prices climbed to their highest since October 2018:

Oil prices rose from $70.15 per barrel at the start of the month to a monthly high of $76.18 per barrel on the 26th due to an improving demand outlook and over expectations the market will remain tight as OPEC+ is likely to only deliver a small boost to output at the July 1st ministerial meeting.

A sharp fall seen in gold prices:

Gold prices fell across June starting from $1777.95 an ounce to a low of $1764.30 an ounce by the 19th of June, experts say that this is due to the US Fed's announcement to hike interest rates twice in 2023 and the US Dollar (USD) gaining strength against major global currencies.


Top 5

Delta variant on its way to becoming dominant variant globally because of significantly increased transmissibility: Top WHO official

The COVID-19 Delta variant, which was first identified in India, is becoming the dominant variant globally because of its significantly increased transmissibility, WHO chief scientist Soumya Swaminathan said on Friday. According to the COVID-19 Weekly Epidemiological Update issued by the WHO on June 15, the Delta variant is now being reported in about 80 countries around the world.

Oil May Hit $100 a Barrel Next Year on Demand Rebound, BofA Says

The Bank of America forecasts that oil may surge to USD 100 per barrel next year, for the first time since 2014. Global oil consumption will outstrip supply in 2022 as the global economy recovers from the pandemic. There would be extra travel demand as most will prefer to use personal cars as a healthy precaution.

IMF's SDR cash will still leave poorest nations short, S&P says

The world's poorest countries will still require nearly $200 bn to restock depleted reserves after an imminent injection of new money from the International Monetary Fund, according to the estimates of credit rating agency S&P Global. However, it would still be enough to restore the financial reserves of Zambia, Jordan, El Salvador, Benin and Togo to adequate levels

OECD's May report foresees 5.8% growth for 2021

According to a new report released by OECD, the world's economy is forecasted to grow by 5.8% in 2021, due to quick vaccination in developed economies as well as strong growth in the US as a result of huge stimulus. However the growth is expected to decrease in 2022

Fed will not raise rates on inflation fears alone: Jerome Powell

Fed chair, Jerome Powell reassured that it is more focused on the recovery of the job market and will not increase interest rates due to inflation. Even Though Powell acknowledged high inflation, he said price pressure will ease on its own. Recent job growth has been slower as most people retired early due to the pandemic.

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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