- New coronavirus support package from England
- Crucial OPEC + meeting insight
- Manufacturing PMI in China at 9-month low
New Coronavirus Support Package from England
Chancellor Rishi Sunak will announce a new state-backed loan program to help British companies recover from the effects of the coronavirus outbreak.
It may be only Rishi Sunak’s second Budget as chancellor, but it comes after delivering almost a dozen major economic announcements last year. Sunak will face a very different task in 2021 as he will be forced to make tough long-term decisions on the country’s finances – beginning Wednesday, March 3, with his spring Budget. In his 3 March statement, the chancellor will outline the state of the UK economy and its outlook for the future – and give details of the government’s plans for raising or lowering taxes.
Chancellor Rishi Sunak’s budget on 3 March is set to deliver a budget focused on “employment and prosperity,” with an emphasis on generating jobs and getting the economy going in the short term, meaning that some of Prime Minister Boris Johnson’s expensive transportation and infrastructure projects would have to wait.
The final stages of lockdown are due to come to an end on June 21, according to the Government’s roadmap, but the economic damage caused by Covid-19 won’t be repaired overnight, unfortunately.
This Wednesday, after 12 months in which 122,000 people in the UK have lost their lives to Covid, the total cost of measures announced by Sunak on virus-related spending will – in all probability – exceed £300bn, fully 10 times the massive sum pledged a year ago. Mr Sunak told the BBC’s Andrew Marr the government had gone “big and early” when providing support to those hit by Covid at the beginning of the pandemic – and added “there’s more to come”.
Mr Sunak said he was focused on “preparing a budget that provides support for people and businesses and families through the remaining stages of this crisis” and in line with the easing of restrictions as set out by Prime Minister Boris Johnson.
However, he also said he wanted to “be honest” with the public about the pandemic’s impact on the economy and “clear about what our plan to address that is”. He warned high levels of borrowing had meant Britain was “more sensitive to interest rate changes” and that debt could “rise indefinitely” if borrowing continued after the recovery.
Rishi Sunak has hinted at tax rises in next week’s Budget, saying: “I would like to keep taxes low for people… but I want to deliver our promises to the British people that we will be responsible with their money.”
Crucial OPEC + Meeting Insight
Investors are expecting the pandemic will soon be under control — and that in turn will unleash pent-up demand for road trips, cruises, flights and other oil-consuming activities. Against this backdrop OPEC +, are scheduled to meet Thursday to deliberate whether to add more barrels into to the hungry market.
While oil markets are focused on the OPEC + meeting to be held on Thursday, oil prices have started the new week with a rise.
Futures surged towards $63 a barrel in the New York market after dropping 3.2 percent on Friday. The OPEC + coalition, which will meet on Thursday, is expected to slightly increase production.
Although the Saudi Arabian energy minister has warned producers to be cautious, it remains unclear what attitude the countries in the group will take.
In addition to OPEC + cuts, demand in the Asian markets also contributed to the recovery of crude oil. One step closer to US President Joe Biden’s $1.9 trillion stimulus package also supported oil prices.
OPEC + meeting is very important. The markets may still remain positive if OPEC + increases only slightly, but if there is a large increase, the outlook may deteriorate in the short term.
Saudi Arabia’s cuts, the improving demand outlook as vaccinations are introduced, and the increasing popularity of commodities as a hedge against inflation have all pushed oil higher this year. Plenty of bullish calls have surfaced in recent weeks, forecasting that the rally will continue as producer response lags demand and North Sea field maintenance reduces supply.
“The OPEC+ meeting is very important,” said Michael McCarthy, chief markets strategist at CMC Markets Asia Pacific. The “market could remain easily positive in the face of a modest increase in OPEC+ production. If there is a large increase, then it could dampen the outlook in the short term,” he said.
The meeting will decide how much and how rapidly OPEC+ production is restored, with existing reductions averaging just over 7 million barrels per day, or 7 percent of global supply. The 23-nation coalition will determine whether to restart a 500,000-barrel tranche in April, as well as whether Saudi Arabia confirms that an additional 1 million barrels that were taken offline will be restored on time.
West Texas Oil for April futures is up 2.3 percent in the Nymex market, hovering around $62.92 a barrel. Brent oil for May settlement rose 1.7 percent to $65.51 a barrel on the London ICE Futures Europe market.
Manufacturing PMI in China at 9-month Low
Manufacturing PMI in China dropped to a 9-month low in February, driven by a decline in demand and exports for new orders. In China, the official manufacturing PMI, which is mostly focused on large-scale and public-owned companies, decreased from 51.3 points in January to 50.6 points in February.
The official manufacturing Purchasing Manager’s Index (PMI) fell to 50.6 from 51.3 in January, data from the National Bureau of Statistics (NBS) showed on Sunday, remaining above the 50-point mark that separates growth from contraction. Analysts had expected it to decline to 51.1.
Reuters explained ”China’s factory activity expanded at the slowest pace in nine months in February as weak overseas demand and coronavirus flare-ups weighed on output, adding pressure on the country’s labor market, a business survey showed on Monday.”
”The slowdown in the manufacturing sector underscores the fragility of the ongoing economic recovery in China, although domestic Covid-19 cases have since been stamped out and analysts expect a strong rebound in full-year growth.”
However, February was the 10th month in a row when manufacturing PMI data remained above the breakeven point of 50 points, indicating growth.
“The 3-month decline in PMI data indicates that the impact of the recovery is further weakened,” said Wang Zhe, senior economist at Caixin Insight Grouh.
In addition, manufacturing activity is usually distorted by the week-long Lunar New Year holidays — which fell in February this year — when factories and businesses close and many people travel back to their hometowns for family gatherings.
This year, however, virus restrictions to contain outbreaks in some parts of the country prompted workers to cut back on travel and spend instead at shops, restaurants and cinemas close to their job locations.
Bloomberg Economics said that: ‘’The larger-than-expected declines in China’s February purchasing managers’ indexes should not cause alarm. They reflect seasonal weakness and effects of the virus surge before the Lunar New Year. What they don’t fully capture, though, is the stabilization that started to take hold late in the month.’’
Asian stocks are trading higher on Monday, as data releases showed China’s manufacturing activity growth slowing in February.