Focus: US GDP & Federal Reserve

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Updated 30 April 2020
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Focus: US GDP & Federal Reserve

What happened:

US GDP numbers for the first quarter came in at minus 4.8 percent, breaking over a decade of uninterrupted growth. The first quarter only reflects the beginning of the outbreak and the number will deteriorate significantly in the upcoming quarter.

The Federal Reserve’s (Fed) Open Market Committee met and decided to leave interest rates unchanged between 0 and 0.25 bps. The Fed did not announce new measures on top of its current nine programmes. Fed Chairman Jerome Powell made clear that the institution was committed to use its full range of tools.

Spanish and French GDP fell by 5.8 and 3.8 percent respectively.

Earning’s season continued:
In the US it was a tale of two universes: Companies heavily impacted by the pandemic and lockdown on one hand; enterprises in a good position to benefit from new models of work on the other.

Boeing posted a first quarter loss of $641 million down 70 percent compared to Q1 2019. The planemaker burned through around $4 billion of cash during Q1 and will reduce its workforce by 15,000 or 10 percent. GE’s net industrial profit tumbled by 46 percent to $1.1 billion, with the health care division showing gains and aviation a radical decline.

Boeing’s woes reflect the contraction in the wider aviation sector as air travel has drastically dropped since the outbreak of the pandemic. Boeing is also a major part of US exports and its supply chain is global. Its 17,000 contractors will be hit hard by the company’s downturn with ripple effects in the US and beyond — particularly in Japan.

Microsoft revenue increased by $4 billion or 14 percent. Net income stood at $11.6 billion. Owing the success in part to shared cloud storage, which addresses key aspects of a large part of the workforce operating from home. Facebook doubled its net income to $4.9 billion.

Stock markets seemingly shrugged off the bad news and rallied on tech sector results and early positive results in clinical trials of Gilead’s antiviral coronavirus drug remdesivir.

On the other side of the Atlantic, Shell posted a net loss of $24 million down 100 percent compared to Q1 2019. The picture will turn bleaker in Q2 due to the deterioration in oil prices. The company slashed dividends by 75 percent, which represents the first cut of dividends since the Second World War and is in stark contrast with BP’s decision to leave dividend payments in place.

Société Générale posted a surprise loss of €326 million ($354 million) and Swiss Re’s profits fell to $426 million.

US President Donald Trump announced Operation Warp Speed, a program pulling together private pharmaceutical companies, government agencies and the military. Its aim is to develop a vaccine by January of next year.

Background:

It was widely expected that the Fed would leave interest rates unchanged until the economy has recovered and is on track to achieve maximum employment, while achieving price stability goals.

In a press conference, Powell voiced concerns that the current downturn would leave permanent scars. He stressed that “the ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near-term, and poses considerable risks to the economic outlook over the medium-term.”

Powell made clear that the Fed’s mission was to ensure the flow of credit and liquidity in the system and that the institution would deploy its full range of tools to this end. He stressed that providing liquidity is about more than just lending, but also creating confidence in the functioning of markets.

He reiterated the limitations to what the Fed could do, emphasizing the need for fiscal stimulus. He urged Congress to use its “great fiscal power,” pointing out that he would have preferred for the US to be in a stronger fiscal position going into the crisis, but that this was not the time for discussion but action.

The Fed’s chairman was particularly concerned about the unemployment rate having surged from a record low of 3.5 percent in February to double digits within the span of two months. This is relevant because consumption contributes 70 percent to US GDP and unemployment of this scale could have a permanent psychological impact on the US workforce and economic confidence.

Powell painted a bleak picture for the world’s largest economy, particularly citing the unpredictability of the pandemic until a vaccine or effective medicine was found.

Where we go from here:

Early afternoon CET, the European Central Bank will announce the outcome of its governing and general councils’ meetings and first time US jobless claims for the week ending April 24 will be released.

 

— Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources.
Twitter: @MeyerResources


Saudi Arabia retains top spot in global cybersecurity rankings for 2025

Updated 52 sec ago
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Saudi Arabia retains top spot in global cybersecurity rankings for 2025

  • National digital transformation strategy helps propel Kingdom to forefront of international standards, officials say
  • Saudi Arabia cited as Tier 1 ‘role-modeling’ nation by UN specialist agency, further underlining its world standing

RIYADH: Saudi Arabia has maintained its position as the top-ranked country in global cybersecurity, according to this year’s edition of the International Institute for Management Development World Competitiveness Yearbook.

The cybersecurity indicator ranking reflects what officials describe as continued support from the country’s leadership, including King Salman and Crown Prince Mohammed bin Salman.

Officials added the leadership’s national digital transformation strategy has helped propel the Kingdom to the forefront of international benchmarks.

They also said the Kingdom’s achievements in cybersecurity stem from a comprehensive, long-term strategy that balances national security with economic and technological development.

Saudi Arabia was also designated a Tier 1 “role-modeling” nation in the Global Cybersecurity Index 2024 published by the UN’s International Telecommunication Union, further underlining its international standing.

Central to this model is the National Cybersecurity Authority, the country’s primary body for overseeing cybersecurity affairs, and the Saudi Information Technology Company, which serves as its technical and strategic partner.

Together, these institutions have helped strengthen national cyber defenses, localize key technologies, and expand collaboration both domestically and internationally.

The NCA, which acts as the national reference point for all matters relating to cybersecurity, is tasked with enhancing the Kingdom’s digital resilience by safeguarding critical infrastructure, key sectors, and government services.

It is also responsible for setting policies, frameworks, and standards while encouraging innovation, investment, and growth within the Kingdom’s cybersecurity sector.

These initiatives form part of Saudi Arabia’s wider efforts to build a secure and trusted digital environment that supports economic growth and global cooperation.


US envoy praises Lebanon’s ‘well-balanced’ response on Hezbollah disarmament

Updated 8 min 9 sec ago
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US envoy praises Lebanon’s ‘well-balanced’ response on Hezbollah disarmament

  • Ambassador Tom Barrack holds separate talks with President Aoun, PM, parliament speaker
  • ‘An opportunity is on the horizon,’ he says

BEIRUT: US envoy Tom Barrack said he was “very satisfied” with how Lebanon responded to a US proposal aimed at disarming Hezbollah.

The comments from the US ambassador to Turkiye and special envoy for Syria and Lebanon came after his meeting with President Joseph Aoun on Monday.

Barrack’s meetings with Lebanese officials took place while Israeli reconnaissance planes were hovering over Beirut and the Presidential Palace in Baabda.

A security source told Arab News that the US delegation “expressed its surprise at the overflight, using the term ‘weird’ to describe it, especially since the roar of the aircraft was audible inside the meeting hall.”

Barrack received the Lebanese leadership’s response to the US proposals aimed at establishing a road map for implementing the ceasefire agreement between Hezbollah and Israel, and focusing on confining weapons solely to the Lebanese state.

On the eve of Barrack’s visit, the Israeli army launched a series of airstrikes on several areas in the south and the Bekaa Valley. The attacks left 10 people injured, including a child, the Ministry of Health said.

Besides Aoun, Barrack held talks with Lebanon’s Parliament Speaker Nabih Berri — who is in charge of communicating with Hezbollah regarding the negotiations with the American side — and Prime Minister Nawaf Salam, with each meeting lasting over an hour.

In a statement issued by its media office, the presidency emphasized that Aoun provided Lebanese ideas for a comprehensive solution.

Berri’s media office said that the meeting was “very good and constructive and clearly took into account Lebanon’s interests and sovereignty, the concerns of the Lebanese people and Hezbollah’s demands.”

A political source told Arab News that Hezbollah “did not provide the response-drafting committee with answers but rather a set of questions reflecting its concerns.”

In a press conference at the presidential palace, Barrack described his meeting with Aoun as “very interesting and satisfying.”

US President Donald Trump and Secretary of State Marco Rubio were “deeply grateful for the promptness and the well-balanced, considerate tone of the response to our proposals,” he said.

“It is a highly critical period for Lebanon and the region. An opportunity is on the horizon as the region undergoes significant changes and everything is moving at a remarkable pace. The countries around us are undergoing constant transformation,” he said.

Barrack said Trump had expressed his commitment to and deep respect for Lebanon, as well as his support and desire to help it achieve peace and prosperity.

“I don’t believe there has been any statement like that since the time of Dwight Eisenhower,” he said.

On the Lebanese response, Barrack said: “It is thoughtful and considered. We are creating a go-forward plan and to make that we need dialogue. What the government gave us was something spectacular in a very short period. I’m unbelievably satisfied with the response.

“Now what it takes is delving deeper and taking the time to reflect on the details, which we are going to do. I’m very hopeful.

“Of course the complexity of all this is massive but at the end of it, it is simple: Is everybody tired of what has gone on for the past years? And I think the answer is: absolutely yes. Now that we have a new architecture, we must seize the opportunity. Now everybody is going to have to give up something.

“But when you give up something of a hope and expectation of an illusion, of the adversariness that we have had internally, you can get support from the world to do that.”

Regarding how to deal with Hezbollah’s refusal to hand over its weapons to the state, Barrack said: “The good news for the US is that we do not intend to deal with it. We intend for you to deal with it.

“If you want change, you change it, and we will be there to support you. But if you do not want change, it is no problem. This is a call to action.”

Lebanon risked being left behind as change swept through other countries in the region, he said.

Regarding guarantees for Lebanon, Barrack said that “what happened previously was that the specificity in the cessation of hostility agreement just was not sufficient. So neither side trusted the other.

“The mistrust between Israel, Hezbollah and the Lebanese army, all the pieces just never came together, because everybody was in such a hurry to get a transaction done. What your government is doing now is filling in those details.”

The envoy referred to the Taif Agreement, which he considered “almost identical to what is happening today. So let us take lessons from the past.”

“My belief is that Israel wants peace with Lebanon, how to get there is a challenge. Hezbollah is a political party but it also has a militant aspect to it.

“It needs to see that there is a future for it and that that road is not harnessed just solely against it and that there is an intersection of peace and prosperity for it also.”

Barrack said Israel “does not seek war with Lebanon. It is not an occupying force nor does it harbor ambitions to control the country.

“On the contrary, it respects the shared Levantine culture that unites the region. The conflict has been a nightmare for both sides and a growing fatigue is evident.

“Today, a genuine opportunity exists, made possible by the leadership of the US president, particularly through his decisive stance on Israel and Iran. Israel finds itself at a moment of introspection, seeking to show the world that it values patience and is committed to regional calm. I believe their intentions are sincere.

“Syria, once overwhelmed by chaos, is now entering a new phase, marked by hope that the international community will support its reconstruction efforts, which are beginning from the ground up,” Barrack said.

Addressing the prospect of a Syria-Israel agreement, he said: “Dialogue between the two sides has already begun, and we are no longer constrained by the events of 1967, 1974, 1982, 1993, or even by UN Resolution 1707.

“While these events hold historical significance, they are no longer the focal point. What matters now is that all parties are actively seeking to reach an understanding, an effort to de-escalate tensions and bring an end to hostilities through a meaningful agreement.”

According to sources, the Lebanese response “reaffirmed its commitment to Resolution 1701, including the extension of state authority south of the Litani River and the dismantling of unauthorized installations.”

However, it linked “the exclusivity of arms control to Israel’s full implementation of its obligations under the same resolution,” they said.

The Lebanese response stopped short of detailing how Hezbollah would withdraw its weapons north of the Litani and offered neither an implementation mechanism nor a defined timeline for action.

The Lebanese response urged “Arab sponsorship of Lebanese-Syrian relations, emphasizing the importance of facilitating the return of Syrian refugees and strengthening control over the shared border.

“It also underscored the need to address the issue of Palestinian faction arms, under the Taif Agreement and the provisions of Resolution 1701,” the sources said.


Lula says BRICS do not want ‘emperor’ after Trump threat

Updated 22 min 44 sec ago
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Lula says BRICS do not want ‘emperor’ after Trump threat

  • Luiz Inacio Lula da Silva: ‘We are sovereign nations. We don’t want an emperor’

RIO DE JANEIRO: Brazil’s president said Monday that emerging BRICS economies did not want to live under an “emperor,” after Donald Trump declared a 10 percent tariffs hike on members for their allegedly anti-American policies.
“We are sovereign nations,” Lula said as he ended a two day summit of 11 nations that include US allies and foes alike. “We don’t want an emperor.”


Bencic downs Alexandrova to break Wimbledon 4th-round barrier

Updated 37 min 17 sec ago
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Bencic downs Alexandrova to break Wimbledon 4th-round barrier

  • Bencic, who has been knocked out in the fourth round here three times before, said she turned the tide by being more courageous

LONDON: Switzerland’s Belinda Bencic reached her first Wimbledon quarterfinal in nine attempts on Monday, dismissing 18th-seeded Russian Ekaterina Alexandrova 7-6(4) 6-4 in just under two hours on a breezy Court One.

The Tokyo 2020 Olympic champion, 28, shed tears after she finally broke the fourth-round barrier 15 months after giving birth to her daughter Bella and said she felt very proud of herself.

But she needed six match points to down 30-year-old Alexandrova, who just last month beat Bencic with the loss of only three games at the Den Bosch grasscourt tournament in the Netherlands.

Bencic, who has been knocked out in the fourth round here three times before, said she turned the tide by being more courageous.

“I think I tried to be more brave. I had more matches under my belt and it turned out better than the last time I played her,” she said.

“I always got stuck in the fourth round. It was so important for me to break through to the quarterfinals,” she added.

Alexandrova, who has also never passed the fourth round at the All England Club, blew hot and cold in the first set, dropping two service games before turning on the aggression, improving her second serve and fighting back to force a tiebreak.

But Bencic, calm and businesslike, won four points in a row in the tiebreak and sealed the set after an hour and one minute when Alexandrova sent a backhand long.

Bencic broke Alexandrova’s serve in the eighth game of the second set but was unable to capitalize when serving for the match in a mammoth eight-deuce game that lasted some 15 minutes and during which the Russian saved five match points.

But Bencic came fighting back on the Russian’s serve with a forehand winner for a sixth match point, converting it when Alexandrova put a forehand long.

The Swiss, ranked 35 but a former world number four, was one of nine mothers in the draw, but the only one to reach the fourth round. She gave birth in April last year and was back playing competitively within six months even reaching the fourth round of the Australian Open in January 2025.

“I’m really proud of myself and the whole team. We did an amazing job coming back,” she said.

“It’s amazing to share the memories together as a family. I’m enjoying it more. I juggle it like every mum does.”


Riyadh’s coolest ride this summer is the metro

Updated 44 min 55 sec ago
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Riyadh’s coolest ride this summer is the metro

  • Designed for over 1m passengers a day, the system is impressing locals as temperatures soar

RIYADH: As Riyadh sizzles under peak summer heat, residents are turning to the city’s new metro system for a faster, cooler way to get around, proving that public transport can thrive, even when temperatures soar.

Arab News spoke to Riyadh residents about why the summer sun is no issue when it comes to commuting.

For the past couple of months, Rashid Alikhan has opted to use the metro to get to work, hopping on at SABIC Station and getting off at King Abdullah Financial District.

Commuters say the Riyadh Metro has significantly reduced travel times compared to navigating the city’s increasingly congested roads. (AN photo by Huda Bashatah)

“The most challenging aspect has been getting to the station and back home in a way that made sense. I’d say parking is an issue if you don’t go early,” he said.

“I go before it gets too hot to walk from the parking to the station … The stations are well AC’d … but it does get hot, so you just have to bear it.”

He recommends that passengers take a seat during the transit, whenever they are available, to minimize the burden of the trip.

HIGHLIGHTS

• Riyadh Metro features driverless trains and air-conditioned cabins with designated seating areas.

• The system is also integrated with the Riyadh Bus network, creating a unified public transport solution.

• Riders can pay via contactless cards, station kiosks, or the Darb app.

“Getting first class is worth it, and avoiding the rush and the sun. If you’re walking from the car to the station, I see a lot of people taking umbrellas, so that helps.”

Commuters say the Riyadh Metro has significantly reduced travel times compared to navigating the city’s increasingly congested roads. (AN photo by Huda Bashatah)

Commuters say the Riyadh Metro has significantly reduced travel times compared to navigating the city’s increasingly congested roads.

The system includes several sustainable features, such as energy-efficient trains and stations, and regenerative braking technology that helps cut energy use.

To boost accessibility, rideshare platforms such as Uber are offering free connections through the RPT Link service, which transports passengers to metro stations within a 3 km radius.

Commuters at Qasr Al Hokm Station in Riyadh. (AN Photo by Huda Bashatah) 

Nouf Al-Dossari, a content creator, said she relies on the metro for attending events and work-related outings. “It has been cost-friendly to me and saves me lots of time,” she said.

“Usually I’d leave my house an hour before to just reach in time because of the traffic, but now I leave 15 to 20 minutes before the scheduled time. It’s been wonderful.”

She encourages others to use the metro during the hot months, but also advises staying hydrated and in the shade as much as possible.

Commuters at Qasr Al Hokm Station in Riyadh. (AN Photo by Huda Bashatah) 

“I believe the most challenging part is trying to find an available seat when coming back home, and even in the morning because everyone is heading to work,” she said.

While she is used to the Riyadh heat, she still uses Uber to reach the stations for safety reasons.

“Some are located near highways or busy roads which makes it a bit difficult to safely walk to and from,” she explained.

People purchase tickets at the King Abdullah Finance District "KAFD" metro station in the Saudi capital Riyadh on December 1, 2024. (AFP)

Noura Al-Dakhil has been using the metro for her daily commute for over a month and says that the transition has been relatively smooth.

“The stations I use have a big sidewalk next to it, safety measures, and comfortable access. Although the parking situation isn’t ideal — or, let’s say, nonexistent,” she said.

While she used to walk to a nearby station in cooler months, the summer heat has forced her to adapt.

The metro is built to accommodate up to 1.2 million passengers daily. (Supplied)

“In the summer, I use my car and park next to the station,” she said. For those without that option, she recommends preparing for the weather, such as using an umbrella.

“It’s a game changer. And wear airy fabrics. I switched to cold caffeinated beverages, which helped too.”

The metro is built to accommodate up to 1.2 million passengers daily. It features driverless trains and air-conditioned cabins with designated seating areas.

The system is also integrated with the Riyadh Bus network, creating a unified public transport solution. Riders can pay via contactless cards, station kiosks, or the Darb app.