Focus: US unemployment and Eurozone woes

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Updated 01 May 2020
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Focus: US unemployment and Eurozone woes

What happened:

US first-time jobless claims jumped another 3.8 million, topping 30 million over the last six weeks.

Eurozone growth rates were dismal too, coming in at minus 3.8 percent for the eurozone as a whole, minus 5.8 percent for France, minus 5.2 percent for Spain, and minus 4.7 percent for Italy.

The corporate earnings season continued with Apple, Amazon and Twitter all either taking a hit or showing lackluster results.

Apple’s net income stood at $11.2 billion. Revenue was up by 1 percent, which was below guidance. Twitter reported a loss of $8 million, due to slagging advertising revenue, and Amazon reported a net income of $2.5 billion, down 30 percent compared to the first quarter (Q1) of 2019. Sales increased by 26 percent as orders jumped due to the coronavirus disease (COVID-19) lockdowns. Operating amidst lockdown and social distancing increased the cost base, which explains the discrepancy between revenues and profit.

US multinational energy corporation ConocoPhillips reported a loss of $1.7 billion due to the challenging environment in the oil and gas sector.

RBS was forecasting an operating profit of £519 million and beefed up its loan loss provisions to £802 million.

Budget airline Ryanair announced that it would cut 3,000 jobs, representing 15 percent of its workforce. The company’s CEO Michael O’Leary told Bloomberg that the $30 billion in state aid to some carriers but not others would lead to market distortions, penalizing some of the more profitable budget airlines.

BA (British Airways) is temporarily closing its base at Gatwick airport.

Background:

The European Central Bank (ECB) left rates unchanged despite the eurozone’s dismal GDP numbers. ECB president, Christine Lagarde, predicted the eurozone economy to contract between 5 and 12 percent for the full year of 2020. In its downside scenario for the second quarter it sees a contraction of 15 percent.

The bank did not increase its 750 billion-euro emergency asset purchase program, but Lagarde indicated willingness to do so down the line.

The ECB left interest rates prima facie unchanged. Its TLTRO-III program lets banks obtain three-year liquidity between minus 0.5 and minus 1 percent if they meet lending goals.

Under its PELTRO (pandemic emergency longer-term refinancing operations) they can get loans with maturities up to 16 months at an interest rate of minus 0.25 percent. The ECB has also allowed banks in some cases to lower the requirements on collateral to BB. These measures are tantamount to a stealth interest-rate cut and are designed to ease the stress on European lenders.

Decision making is less clear cut at the ECB than it is at the US Federal Reserve, because the eurozone consists of 19 countries with their own fiscal systems. However, both institutions showed a similar trajectory by announcing huge programs last month and only tweaking them at the margins this month, while indicating willingness to do more if necessary and emphasizing the importance of further fiscal stimulus.

The EU has so far spent 3.5 trillion euros in rescue funding. Going forward the institution will frontload its seven-year budget. It will also borrow money for a recovery program, which European Commission President Ursula von der Leyen likened to the Marshall Plan (a 1948 post-war foreign aid scheme for Western Europe) and which will be funneled through the multiannual budget to be frontloaded again.

While US first-time jobless claims for the week ending April 24 are high, new claims seem to be on a downward trajectory. More than 30 million Americans have filed for unemployment benefits over the last six weeks. US Secretary of Labor Eugene Scalia told CNBC that benefits had not trickled through to recipients at the desired speed, because many states had antiquated computer systems rendering processing the sheer number of transactions challenging.

The unemployment rate will be higher than after the financial crisis, which is bound to leave a big dent on consumer confidence and consumer spending in an economy which depends 70 percent on the consumer.

Under any scenario, employment is not going to increase as fast as people have lost jobs over the last two months.

Where we go from here:

The dismal economic news combined with lackluster earnings reports resulted in markets sliding across the board on Thursday and into Friday. This stands in stark contrast to the April performance of all major stock exchanges. The S&P 500 was up by 18 percent and the Nasdaq by 21 percent.

Again, this is a striking difference with the overall macroeconomic picture, giving rise to the question, if or rather when we shall see a downward adjustment?

 

 

— 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


A British F35 fighter jet stranded in India may finally fly back home after inspiring memes

Updated 26 sec ago
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A British F35 fighter jet stranded in India may finally fly back home after inspiring memes

  • Jet has been stranded at airport in southern Kerala state due to technical snag, is being repaired by UK engineers
  • One of the memes shows cartoon in which plane is enjoying snacks with group f locals against a scenic background

NEW DELHI: A British F-35B fighter jet stranded at an Indian airport for nearly a month, sparking memes and cartoons on social media, is expected to fly back home as early as next week, Indian officials said.

The stealth fighter, one of the world’s most advanced and costing around $115 million, is stranded at Thiruvananthapuram International Airport in the southern state of Kerala due to a technical snag and is being repaired by UK engineers, officials said. The officials spoke on condition of anonymity because they aren’t authorized to speak to the media.

The jet was on a regular sortie in the Arabian Sea last month when it ran into bad weather and couldn’t return to the Royal Navy’s flagship aircraft carrier, the HMS Prince of Wales, officials said.

The aircraft was then diverted to Thiruvananthapuram, where it landed safely on June 14. Officials said engineers hope to repair the plane in the next few days before it could fly back to UK sometime next week.

The stranded military aircraft, manufactured by Lockheed Martin, has triggered A.I.-generated memes in India. In a social media post, the tourism department of Kerala showed the aircraft on the tarmac surrounded by coconut trees and posting a fictitious five-star review.

“Kerala is such an amazing place, I don’t want to leave. Definitely recommend,” it said.

The state’s top official at the tourism department, K. Biju, said the post was put out in “good humor.”

“It was our way to appreciate and thank the Brits who are the biggest inbound visitors to Kerala for tourism,” said Biju.

Another cartoon posted on X showed the plane enjoying snacks with a group of locals against a scenic background.

The British High Commission confirmed to The Associated Press that a UK engineering team has been deployed to “assess and repair” the aircraft.

There has been speculation in India that if the engineers fail to rectify the aircraft, it could be partially dismantled and transported in a cargo plane. The UK’s Ministry of Defense dismissed the speculation in an emailed statement.


Report: Japan, UK, Italy open to Saudi joining fighter-jet program

Updated 28 min 5 sec ago
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Report: Japan, UK, Italy open to Saudi joining fighter-jet program

  • Tech sharing, and other issues need resolution, says report
  • Riyadh ‘encouraged’ to boost its nascent aerospace industry

DUBAI: Japan, the UK and Italy are open to having Saudi Arabia join their next-generation fighter-jet initiative, but only once the project has reached a more advanced stage and key issues have been resolved, according to The Japan Times.

The Global Combat Air Program is a joint effort to develop a sixth-generation fighter.

It will likely remain a trilateral initiative until after the GCAP International Government Organization, or GIGO, and the industry-led joint venture Edgewing sign their first international contract, likely by the end of 2025, the newspaper reported recently.

The GIGO, officially inaugurated on Monday in Reading, England, was established last year to oversee government-level coordination for the program.

Edgewing, launched last month, brings together the UK’s BAE Systems, Italy’s Leonardo, and the Japan Aircraft Industrial Enhancement Co., and is responsible for designing and developing the aircraft.

“There is no preclusion in having Saudi Arabia join the program, but we first have to define certain criteria and clarify all the points,” one source told The Japan Times, speaking after a virtual meeting between the GCAP nations’ defense ministers on Monday.

Riyadh has been “encouraged” to build up its aerospace expertise — including potentially acquiring and assembling Eurofighter Typhoons — before entering the GCAP, the newspaper reported.

In addition to Saudi Arabia, several other countries are said to have expressed interest in joining the program. These include two unnamed European countries, as well as one Middle Eastern and one Asian nation, according to a source cited by The Japan Times.

The terms of participation and contributions of any future member states remain undefined. Any expansion of the program would require unanimous approval from Japan, the UK and Italy.

The GCAP aircraft will be Japan’s first major defense development with partners other than the US.

It is intended to replace the aging F-2 fighter jets used by Japan’s Air Self-Defense Force, as well as the Eurofighters operated by the UK and Italy. The new jets are scheduled to enter service by 2035.

With the conceptual design phase complete, the program is moving into detailed design and development, and a demonstrator flight is expected within two to three years.

Despite overall satisfaction with the program’s progress, some tensions remain, particularly around access to sensitive intellectual property and full technology sharing.

In April, Italy’s Defense Minister Guido Crosetto publicly criticized the UK for not fully disclosing technology to its partners, in an interview with Reuters.

It is a concern that The Japan Times understands is still unresolved.


Gaza doctors cram babies into incubators as fuel shortage threatens hospitals

Updated 26 min 30 sec ago
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Gaza doctors cram babies into incubators as fuel shortage threatens hospitals

  • Overwhelmed medics say the dwindling fuel supplies threaten to plunge them into darkness and paralyze hospitals and clinics in the Palestinian territory, where health services have been pummelled during 21 months of war

GAZA: At Gaza’s largest hospital, doctors say crippling fuel shortages have led them to put several premature babies in a single incubator as they struggle to keep the newborns alive while Israel presses on with its military campaign.
Overwhelmed medics say the dwindling fuel supplies threaten to plunge them into darkness and paralyze hospitals and clinics in the Palestinian territory, where health services have been pummelled during 21 months of war.
While Prime Minister Benjamin Netanyahu discussed the fate of Israeli hostages in Gaza with US President Donald Trump in Washington this week, patients at Al Shifa medical center in Gaza City faced imminent danger, doctors there said.
“We are forced to place four, five, or sometimes three premature babies in one incubator,” said Dr. Mohammed Abu Selmia, Al Shifa’s director.
“Premature babies are now in a very critical condition.”
The threat comes from “neither an airstrike nor a missile — but a siege choking the entry of fuel,” Dr. Muneer Alboursh, director general of the Gaza Ministry of Health, told Reuters.
The shortage is “depriving these vulnerable people of their basic right to medical care, turning the hospital into a silent graveyard,” he said.
Gaza, a tiny strip of land with a population of more than 2 million, was under a long, Israeli-led blockade before the war between Israel and Palestinian militant group Hamas erupted.
Palestinians and medical workers have accused the Israeli military of attacking hospitals, allegations it rejects.
Israel accuses Hamas of operating from medical facilities and running command centers underneath them, which Hamas denies.
Patients in need of medical care, food and water are paying the price.
There have been more than 600 attacks on health facilities since the conflict began, the WHO says, without attributing blame. It has described the health sector in Gaza as being “on its knees,” with shortages of fuel, medical supplies and frequent arrivals of mass casualties.
Just half of Gaza’s 36 general hospitals are partially functioning, according to the UN agency.
Abu Selmia warned of a humanitarian catastrophe and accused Israel of “trickle-feeding” fuel to Gaza’s hospitals.
COGAT, the Israeli military aid coordination agency, did not immediately respond to a request for comment about fuel shortages at Gaza’s medical facilities and the risk to patients.

OXYGEN RISK
Abu Selmia said Al Shifa’s dialysis department had been shut down to protect the intensive care unit and operating rooms, which can’t be without electricity for even a few minutes.
There are around 100 premature babies in Gaza City hospitals whose lives are at serious risk, he said. Before the war, there were 110 incubators in northern Gaza compared to about 40 now, said Abu Selmia.
“Oxygen stations will stop working. A hospital without oxygen is no longer a hospital. The lab and blood banks will shut down, and the blood units in the refrigerators will spoil,” Abu Selmia said, adding that the hospital could become “a graveyard for those inside.”
Officials at Nasser Medical Complex in Khan Younis are also wondering how they will cope with the fuel crisis. The hospital needs 4,500 liters of fuel per day and it now has only 3,000 liters, said hospital spokesperson Mohammed Sakr.
Doctors are performing surgeries without electricity or air conditioning. The sweat from staff is dripping into patients’ wounds, he said.
Earlier this year, Israel imposed a total blockade on Gaza for nearly three months, before partly lifting it. Israel accuses Hamas of diverting aid, something Hamas denies.
“You can have the best hospital staff on the planet, but if they are denied the medicines and the pain killers and now the very means for a hospital to have light ... it becomes an impossibility,” said James Elder, a spokesperson for UN children’s agency UNICEF, recently returned from Gaza.
The latest bloodshed in the decades-old Israeli-Palestinian conflict was triggered in October 2023, when Hamas-led militants attacked southern Israel, killing around 1,200 people and taking 251 hostages, according to Israeli tallies.
Gaza’s health ministry says Israel’s response has killed over 57,000 Palestinians. It has also caused a hunger crisis, internally displaced almost all Gaza’s population and prompted accusations of genocide and war crimes, which Israel denies.


At least 87 killed, 149 injured in rain-related incidents in Pakistan since June 26

Updated 28 min 48 sec ago
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At least 87 killed, 149 injured in rain-related incidents in Pakistan since June 26

  • Those killed include 42 children, 29 men and 16 women, national disaster authority says in latest report
  • WHO, Pakistan government finalize contingency plan to maintain essential health services in high-risk districts

KARACHI: At least 87 people have been killed and 149 others injured in rain-related incidents across Pakistan since June 26, according to figures released Thursday by the country’s National Disaster Management Authority (NDMA).

Pakistan’s most populous province, Punjab, reported 29 deaths including 15 children, while the northwestern Khyber Pakhtunkhwa province recorded 30 deaths, 14 of them children. The southern province of Sindh reported 16 deaths, eight of them children, and the southwestern province of Balochistan saw 11 fatalities, five of them children. One man lost his life in Azad Jammu and Kashmir, the NDMA said.

“The total number of 87 deceased include 42 children, 29 men and 16 women,” the NDMA report said, adding that 149 people were injured, 61 children, 52 men and 36 women.

Heavy rains have also damaged at least 242 houses nationwide, including 71 that were completely destroyed and 171 that were partially damaged.

Flood relief operations have been underway since late June, with authorities distributing tents, ration bags, blankets, sandbags, quilts, gas cylinders, mattresses, kitchen sets, mosquito nets, plastic mats, hygiene kits and food packets to affected families.

A total of 24 relief camps have been set up in Punjab and two in Sindh, providing shelter to 176 people. According to the NDMA, around 245 people have been rescued in 21 operations carried out across the country.

Meanwhile, the World Health Organization (WHO), in partnership with the Pakistani government, has finalized its Monsoon Contingency Plan 2025 to ensure a coordinated emergency response and maintain essential health services in high-risk districts.

The plan will be implemented in 10 districts in Punjab and Sindh, nine in Balochistan and four in Khyber Pakhtunkhwa.

“WHO stands with Pakistan and partners to be ready to save lives by supporting rapid response, surveillance and the continuity of essential health services in the event of a natural disaster,” Pakistani state media quoted WHO Representative Dr. Dapeng Luo as saying.

“In a context marked by the impacts of climate change, which are exacerbating risks, it is crucial to be ready to protect the health of all, particularly the most vulnerable,” Luo added.

Pakistan has also rolled out a location-based SMS alert system to warn citizens living in flood-prone areas about imminent weather threats.


Pakistani PM orders urgent overhaul of tariff commission that sets trade duties

Updated 45 min 34 sec ago
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Pakistani PM orders urgent overhaul of tariff commission that sets trade duties

  • Third-party review planned to boost Commission’s performance
  • Automated research capacity seen as key to solving business challenges

ISLAMABAD: Pakistan’s Prime Minister Shehbaz Sharif on Thursday ordered an urgent overhaul of a top government body responsible for regulating customs duties on imports and exports, aiming to strengthen its legal, administrative and institutional powers amid growing calls to modernize the country’s trade policy.

Announcing its federal budget for 2025-26, Pakistan said it planned to cut the overall tariff regime by more than 4 percent over the next five years, as part of reforms aimed at shifting the country toward an export-led growth model. 

As per the National Tariff Policy 2025–30, the government plans to abolish additional customs duties, regulatory duties, and the fifth schedule of the Customs Act, 1969. The policy envisions a streamlined customs structure with just four duty slabs ranging from 0 to 15 percent, which would become the maximum rate. The move is part of Pakistan’s push not just to boost its exports and protect its local industry but also meet international obligations, including aligning with the government’s commitments under a $7 billion IMF program approved last year.

“Reorganization of the National Tariff Commission along modern lines is indispensable to fully meet the requirements of the new tariff regime,” a statement quoted Sharif as saying after he chaired a high-level review meeting on the NTC’s performance.

The PM’s proposed reforms aim to modernize the NTC so it can better support businesses, collect real-time market data and align with the country’s new tariff regime.

The premier directed that a third-party review be conducted to identify weaknesses in the Commission’s performance and make it “more effective.” He also stressed the importance of strengthening the NTC’s research and data-gathering abilities.

“The National Tariff Commission must have an effective capacity to gather all ground realities related to domestic business, imports, and exports market,” Sharif said. 

“The automated and effective research capacity of the National Tariff Commission can play a key role in resolving the problems faced by domestic business.”

He also ordered the immediate activation of the NTC’s Appellate Tribunal, which handles disputes on tariff decisions, a step aimed at improving transparency and efficiency.

The NTC plays a crucial role in Pakistan’s trade policy. In the 2025–26 federal budget, customs duties are projected to contribute around 6 percent of total tax revenue, according to the Pakistan Economic Survey 2024–25. While relatively small, these duties are politically sensitive and impact competitiveness for domestic industries that rely on protection from cheaper imports.

Pakistan’s economic managers are under pressure to balance protection of local industry with commitments under international trade agreements and IMF-backed fiscal targets. The government says the NTC must adapt to “modern requirements” and be given adequate training and resources to support economic stabilization and export-led growth.

“The government is committed to addressing the lack of training and resources for the National Tariff Commission and to aligning its work with modern requirements,” Sharif said at Thursday’s meeting.