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Best of the Web - October '20

Executive Summary

The global economy continued to be mostly impacted by the Covid-19 pandemic, with a resurgence in the virus across most of the world.

What will the new waves mean?

Throughout October, the world started seeing significant surges of Covid-19, with Europe and the US seeing the worst numbers out of these. Total case counts have now exceeded 43 million, while over 1.15 million have been recorded as deaths.

Europe’s surge is starting to look like April: After managing to largely open up across the middle of the year, Europe is now seeing case counts that far exceed April’s – while deaths and hospitalizations are fast rising too. With some countries instating strong lockdowns again, the health of Europe’s economy is, once again, at risk.

Hospitalizations are rising in the US’ third wave: While ramped up testing has helped show the extent of the virus’ spread in the US, a third wave is now raging across most of the USA. Unlike in the 2nd wave, hospitalizations and deaths are also rising fast – and many are worrying whether the US will see its economic recovery shut down again.

Even previous success stories have started to see cracks: Success stories in Asia like Malaysia are now starting to see their own control of Covid unravel. While other successes were able to successfully manage their 2nd waves, the continued impact of the virus is reminding Asia of the need for continued vigilance.

What else is impacting the world’s economy?

A weakened US dollar is also shaping the world: Driven by record low interest rates as well as oscillating prospects of US fiscal stimulus, the US dollar has been broadly lower this year. With further global stimulus now looking likely, this could have significant impacts on global financing requirements down the line.

The US election remains a risk – although Biden holds a strong lead: Democratic contender for the US Presidency, former Vice President Joe Biden continues to hold a strong lead in polls, even outside the margins of error seen in 2016. However, a few key states remain much closer, and incumbent President Trump has continued to rule out a peaceful transition of power if he loses.

Emerging markets have seen inflows dry up again: With global uncertainty once again at a high, due to rising Covid-19 outbreaks as well as the US election, investors began to pull out of emerging markets by the end of September. Given that many emerging markets are starting to face high debt levels, worries are beginning to rise on how this would be handled.

How have commodities been performing?

Oil prices rose slightly, but fell back down:

Supply related restrictions from both OPEC+ as well as US production led oil prices to recover slightly in the middle of the month, but as global Covid-19 cases surged, uncertainty over global energy demand brought prices down again. After a low of US$ 39.27 per barrel on the 2nd of October, prices rose to highs of US$ 43.34 by the 8th of October, before falling down to US$ 40.46 per barrel by the 26th of October.

Gold prices were flat across October:

Not withstanding some small spikes and dips in response to US dollar movements, the price of gold was broadly stable across the month, hovering around US$ 1,900 per ounce. Prices reached a high of US$ 1,929.50 per ounce on the 21st of October and a low of US$ 1,890.80 on the 7th of October.


Top 5

The bond market is starting to wake up with interest rates headed higher

US bond markets are starting to tick up once again, with some interest rates at their second highest levels since March. Driven by hopes of further US fiscal stimulus, if US interest rates continue to trend upwards, there could be similar effects on global interest rates as well.

Tale of three economies: coronavirus pandemic spells end of synchronised global growth

Three main engines of global growth, The US, China, and Europe are expected to diverge in their recovery from the economic impacts of Covid-19. While a synchronized path had followed previous recessions, this divergent recovery could lead to significant restructuring of the global economic order.

Covid Crisis Strengthens U.S. Dollar’s Role in Global Economy

Despite questions over its value, the US dollar has once again become more important as a currency in the global economy. As dollar financing gets cheaper with Fed action, and a lack of credible alternatives, the dollar remains the world’s foremost source of reserve financing - a state that leaves many nations under the indirect influence of the US Federal Reserve.

Why China's GDP rebound is not all that great

Although China is seeing a positive recovery in its economy, two main risks still remain. One, is directly from Donald Trump who might ratchet up action against China if he loses the election. The other is from rising global Covid-19 cases, which can severely derail the prospect of China’s exports recovering.

Oman $2 billion bond sale hit by weak demand ahead of U.S. vote

Recently downgraded Oman has seen low demand for an attempted International Sovereign Bond issuance. While the bond was subscribed to, this was far below the value that was expected, causing the offered premium yields to move up even higher.

Compiled by: Chayu Damsinghe

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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