Simply Economics

Reflecting the strains of Covid in Europe, splits may be showing at both the European Central Bank, where calls are appearing for greater QE, as well as the Bank of England where talk of negative rates has re-emerged. Jeremy Hawkins and Mark Pender also update the outlook for fiscal stimulus both in Europe and the US, and also discuss the possible market impact of US politics and the first presidential debate.

How to control the pandemic while not limiting the economic recovery is the question for policy makers in Europe where talk of a second wave is building. Jeremy Hawkins and Mark Pender discuss the general outlook for fiscal stimulus as well as September's run of PMIs and what to expect from the coming Swiss National Bank assessment.

Inflation is the first topic of discussion among many European central-bank policy makers, in distinct contrast to the US where the labor market is top on the agenda. The relative role that currency plays in policy making is also discussed, as are the latest developments over Brexit (specifically the UK’s Internal Market Bill).

New stimulus from the European Central Bank on Thursday isn't likely but, given economic slowing and rising Covid rates, is possible. Uncertainty over passage of July's European recovery package is another risk our panelists discuss as well as new uncertainty over Brexit as the UK toughens its stance.

Our panelists update economic activity in Asia, North America, and Europe with the general assessment that the recovery may, on net, be unfolding somewhat slower than expected. Also addressed is the Federal Reserve's move to embrace inflation averaging, what it means and whether other major central banks might go down the same route.

How is the sharp bounce back in economic data affecting politics, including the pending election in the US? Jeremy Hawkins and Mark Pender also tackle questions surrounding the general weakness in production versus strength in retail sales and home sales.

The great wave of central bank stimulus is finding a home in the equity markets as the great wave of fiscal stimulus is supporting consumers and driving up retail spending. Jeremy Hawkins and Mark Pender consider the outlook for stimulus, including the risk to financial markets of it winding down should Covid-19 cases begin to ebb.

Economic data in Asia, tied to infection levels, are diverging with China bouncing back but others still contracting. For the US, Friday's jobs report will update whether the US is also bouncing back, if not then pressure for fiscal stimulus would heat up even further. In Europe, rising infection levels are raising questions over the third-quarter outlook.

Heightened rates of infection, especially in the US, are pulling down consumer and business outlooks in results that do not support a 'V'-recovery. Jeremy Hawkins and Mark Pender also discuss upcoming indicators including US GDP, where massive contraction is expected, as well as Germany's CPI which is at risk of being skewed lower by a cut in value-added taxes.

The good news is that Europe's recovery agreement marks a positive step toward a harmonised fiscal policy and takes a little of the heat off the European Central Bank to further stimulate growth. However, securing the prospective transfer of wealth from the European Union’s northern members to its southern states has highlighted major differences over economic policy and done little to bolster the Eurozone’s political credibility.

No new stimulus is expected from the ECB on Thursday though the outlook for the EU leaders summit at week's end, and details on an expected €750 billion bailout fund, is less certain. Jeremy Hawkins and Mark Pender also discuss the latest global data along with US fiscal policy as well as the UK's move to ban Hauwei and what it might mean for post-Brexit trade.

How much of Hong Kong's distinctive character is permitted to survive will be key to how foreign businesses respond to China's security move. And what advantages Hong Kong loses as a financial center will likely pass to two rival financial centers, Singapore and Shanghai. Our panel also discusses high-flying stock prices in the US, economic resilience in Switzerland, and lack of progress in Eurozone recovery plans.

Economic damage from the coronavirus appears to have been comparatively less severe in Europe, reflected in retail sales data, including from Germany, that have been rebounding sharply higher. German employment has also been favorable, showing only minimal damage and underscoring the success of the government's crisis efforts. Unemployment benefits, value added taxes and US employment data are also discussed.

Flash PMIs for June are pointing not to increasing rates of growth but to stabilization near the deep lows when the virus first hit. Economic risks posed by rising infections in the US and clusters of infections in Europe are also discussed as are yield curve controls, Italian bonds, as well as social distancing rules for UK pubs.

Government stimulus together with pent-up demand drove US retail sales sharply higher in May, raising the question whether consumer spending in Europe may also rebound. Other topics include quantitative easing at the Bank of England, foreign exchange intervention at the Swiss National Bank, and Europe's stake in ongoing Brexit negotiations.

Outside of May's wildly strong US employment report, there is very little if any evidence of economic strength, whether in the US or Europe. Jeremy Hawkins and Mark Pender also discuss the outlook for Wednesday's Federal Reserve announcement and revisit last week's European Central Bank meeting that produced a burst of new QE.

Hong Kong, hit previously by US-China trade disputes then civil unrest then Covid-19, is now being hit by China's security move which is raising questions over the city's status as a global financial center. Our panel also discusses social strife and unemployment in the US, the European Central Bank's dynamic but also careful move to increase QE, and the latest on Brexit and whether a no-deal trade deal is a risk.

Now is the testing time for cultural traditions in the US labor market and political unity in Europe. Jeremy Hawkins and Mark Pender detail the latest in fiscal policy and also monetary policy including the pros and cons of negative interest rates.

Prices for food may be going up but prices for just about everything else are going down. Policy implications of lower prices are discussed as well as what the coronavirus may mean for future production and also the risk that the US-China blame game poses to future trade.

There are some signs of improvement in Asia, but not any yet in Europe and North America where virus impact is still severe. Our panel discusses emerging economic imbalances and what monetary and fiscal policy can and can't do to help.