USA

US banks shy away from risk

  US banks are becoming much more restrictive in their lending. This is shown by the latest results of the US Federal Reserve’s quarterly Senior Loan Officer Survey among banks. Should there be a wave of insolvencies, the economic recovery is likely to be very sluggish. For that reason, the US Federal Reserve is currently trying to secure the supply of credit almost single-handedly. The standards for commercial loans as well as for loans to private households have tightened dramatically in the wake of the COVID 19 crisis. In the business subcategory, respondents reported that, on balance, credit conditions have been tightened considerably for both large and medium-sized and small firms. In addition, margins for riskier loans have risen sharply and the requirements for collateral have increased considerably. The main reason cited by the credit institutions for the significant tightening of the granting of corporate loans was lower risk tolerance….

USA: The GDP decline in Q1 is only a slight foretaste of the slump in the current quarter

The restrictions imposed on economic and social life by the Corona pandemic have pushed the US economy into recession, as confirmed by the latest data. In the first quarter, gross domestic product (GDP) shrank by 4.8 percent, projected for the year as a whole. However, the negative Q1 data are probably only a slight foretaste of the sharp downturn expected in the current quarter. This is supported by the fact that consumer spending has been limited to the bare essentials as a result of the nationwide output restrictions. Moreover, both industrial companies and the service sector have suffered an unprecedented slump in sentiment. Consumers‘ assessment of their current situation is equally gloomy, with more than 26 million initial applications for unemployment benefits filed in recent weeks. Ultimately, economic output is expected to decline by around 30 percent in the second quarter. The financial aid measures from the government, which now…

Oil: Supply side is on the move and China is going bargain hunting!

The epic drop in oil prices is causing the three biggest oil producers Saudi Arabia, Russia and the USA to talk to each other again. Meanwhile, the US president is tweeting and announcing an imminent cut in Opec+ production of 10 million barrels per day. The oil price has risen sharply as a result. Since Wednesday the Brent crude oil price has risen by over 25 percent. However, neither Russia nor Saudi Arabia has confirmed any agreement. Only a virtual special meeting has been arranged for Monday – but nothing more so far. It will not be easy, however, and the US oil industry will have to play its part. If there is no signal here, the remaining OPEC+ countries will also hold back. The increase in American oil reserves could at least be a signal of this kind. However, it would be better if the US frackers could agree…

Forecast for the US economy significantly lowered

In the United States, too, there is now a quasi nationwide curfew, which the US President recently extended until the end of April. In the second quarter, the US economy is therefore likely to suffer a much deeper slump than initially assumed. We expect an unprecedented slump especially in private consumer spending in Q2. This will primarily affect the household-related services sector, but many other sectors of the economy are now at a standstill as well. As a result, unemployment has already skyrocketed and will continue to rise. If private households are not (yet) affected by this themselves, they will limit consumer spending to the bare minimum simply because of a great deal of uncertainty. Ultimately, we expect gross domestic product in Q2 to decline by around 30 percent projected for the year. The extensive support package passed by Congress a few days ago cannot prevent this slump. According to…

Corona virus: Concerted central bank action could be imminent

In the meantime, there are growing signs that the major central banks, the Fed, ECB, BoJ and BoE, could take measures in view of the spread of the corona virus. This could involve interest rate cuts as well as increases in purchasing programs. The risks for the global economy have undoubtedly increased. The quarantine measures and production interruptions should have a noticeable impact on the global economy. In particular, countries that are heavily dependent on exports, such as Germany, are likely to suffer more from the economic activity that has been paralyzed in some areas. The United States, on the other hand, will probably be only slightly affected by the negative consequences of the virus epidemic, although a complete economic decoupling will not be possible. Ultimately, however, interest rate cuts and/or concerted action by central banks are unlikely to have a positive impact on the real economic environment. Thus, supply…

Trump remains in office – will the corona virus remain in China?

The corona flu is increasingly spreading in China. The scale of SARS has already been far exceeded, with over 20,000 people infected to date. However, despite the high infection rate, the number of cases outside China remains very small and manageable. A global pandemic is still a long way off. The financial markets have reacted to the development, and the concerns that have visibly increased in the last week have evaporated again. This is of course only true as long as the spread of the flu remains largely confined to China. Nevertheless, the sharp rises in equity markets may have been somewhat premature. The longer the flu virus restricts economic activity in China, the greater the economic losses will be. Even now, slightly negative effects on global economic momentum should not be ruled out. US President Trump has been celebrated for the economic successes he has achieved and the extremely…

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