Overview of TOP weekly news 7.10.2020

07 / 10 / 2020
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Warning associated with the second wave

The second wave of coronavirus, which is slowly hitting more eurozone countries, could delay the economic recovery in the eurozone, Christine Lagarde, the president of the European Central Bank, said today. This is due to the growing number of new cases of coronavirus infection in many European countries, with the authorities responding by renewing restrictive measures.

“We fear that the restrictive measures that the authorities must put in place will have an impact on the recovery,” Lagarde told The Wall Street Journal CEO. She also added that she feared that instead of a V-shaped recovery, after which everyone we desire and in which we hope, the second half of this letter will be a little weaker.

The ECB’s outlook in mid-September predicted that euro-area gross domestic product would fall by eight per cent this year. Next year, growth of 5% was expected.

The outlook may not materialize in the future, as IHS Markit data this week showed that the recovery process in the euro area almost came to a halt in September due to the resumption of restrictive measures, even though the ECB had already taken a series of emergency measures to support inflation and the economy.

Confusion over Brexit

“We must be in a position to provide companies with certainty about the terms of our future trade relationship with the EU, and we believe we must be able to clarify whether or not there will be an agreement by 15 October,” the prime minister’s spokesman said.

Finance Minister Rishi Sunak said Britain would give priority to saving jobs over raising taxes as long as the COVID-19 pandemic stifled the economy even though record loans and a pile of debt could not be sustained forever.

Minister Sunak’s emergency spending measures, including subsidies to slow the shock of rising unemployment, will cost around ÂŁ200 billion this year, and public debt is expected to climb to more than ÂŁ2 trillion, representing 100% of gross domestic product.

The bankruptcy rate in the United States is rising

According to Epiq, the number of corporate bankruptcies in the United States in the first three quarters of this year rose by 33% to 5,529 cases. The reason is the ongoing COVID-19 pandemic, which plunged the country into an economic recession and hit many businesses hard. In September alone, according to the company, the number of corporate bankruptcies increased by as much as 78 per cent year-on-year to 747 cases.

The gross domestic product of the world’s largest economy fell by a record 31.7% in the second quarter in terms of a full year after declining in the first quarter.

“These are mainly small businesses that do not have access to capital or incentives. Unfortunately, the number of these bankruptcies will continue to increase in the current economic environment, “said Deirdre O’Connor of Epiq.

The number of personal bankruptcies in the US, thanks to government support measures, fell by 43% to 118,306 cases in the first nine months of this year.

Vigorous trimming of Daimler costs

Daimler has announced a plan to reduce fixed costs by more than 20% by 2025 compared to last year, which includes R&D costs and capital expenditures. The carmaker’s goal is to achieve a return on sales in the medium to the high single-digit range by 2025, even under unfavourable market conditions. Another goal is to achieve a double-digit margin in the current strong market environment.

Earlier this year, Mercedes-Benz slightly revised its market tactics when it stopped producing sedans in the US to focus on more profitable SUVs. On the other hand, it created a new Volvo Trucks alliance in fuel cell development and also stopped automated development cooperation with BMW.

Performance of the Daimler’s shares (Source of the graph: Tradingview)

Problems of the entertainment industry

The largest cinema network in the United States, AMC Entertainment, has announced that more than 80% of its cinemas in the country may remain open because several new films are ready for release in October and November.

The company’s biggest rival and the world’s second-largest cinema operator, Rival Cineworld, has stepped up its costs by saying it will close all its cinemas in the United States and Britain after studios release major releases, such as the latest James Bond film.


Performance of the AMC Entertainment’s and Rival Cineworld’s shares (Source of the graph: Tradingview)

Watch this week:

Thursday, October 08, 2020

The United States will publish initial unemployment claims. A slight decrease in the growth of initial applications is expected from 837 thousand to 820 thousand applications.

Friday, October 09, 2020

Canada will announce a change in unemployment in September. Unemployment is expected to fall from 10.2% to 9.7%.

United Kingdom production for September. Analysts expect a more modest 3% growth in August on a month-on-month basis.

Source of the text: Investing, Zerohedge, Financial Times, Reuters, Tradingview

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