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The resurgence of the virus pandemic is at risk of derailing the global economic recovery. 

Goldman Sach’s latest Coronavirus Global Activity Tracker, published each Wednesday to track the impact of the virus outbreak on economic activity on a per-country basis, shows mobility, industrial activity, consumer activity, labor market, and travel trends are stalling in major economies. 

The note first points out mobility data in Croatia, Israel, Australia, Japan, and Hong Kong, has likely peaked after surging for a couple of months due to, in some of these countries, surging virus cases. On a weekly percentage change basis, all countries, except for Croatia, have seen mobility trends in late June turn lower. 

​Goldman’s industrial activity trackers were stable in China and the US, at 4% YoY and -11% YoY, respectively. China’s industrial revival post-pandemic lockdowns has been more robust than the US.  

​There is no V-shaped recovery here. Goldman’s industrial activity trackers also show activity levels around 90% of pre-corona levels in June across G4 countries. Rebounds in BRICs have been much softer than developed economies. 

​The note transitions from examining industrial activity to the consumer. To sum up, the consumer in the US and China are still fragile in the first week of July. 

​As we’ve covered in several recent pieces, global restaurant bookings on a YoY percentage change stalled in mid/late June. 

​Goldman’s trackers on global movie theaters is self-explanatory.

​Global retail and recreation activities stalled in June then edged lower through the first week of July. 

​Global workplace visits stalled as early May 30 and trended lower through July 11. 

​As for travel, we’ve noted countless times, the recovery is years away. 

​Goldman concludes the note by saying the virus-induced recession will have “scarring effects” on the global economy. We’ve noted these scarring effects are rising bankruptcies, permanent job loss, and social unrest that will result in a prolonged downturn, if not a double-dip recession for the US, and maybe other region regions in the world dealing with similar socio-economic chaos and rising virus cases. 

Authored by  Cyril Widdershoven via OilPrice.com,

One of the world’s forgotten conflicts is now making headlines again.

In the last week, the military conflict between Azerbaijan and Armenia has reignited, with the two nations having already been engaged in a military confrontation for decades. Nagorno Karabach, an Armenian enclave inside of Azerbaijan, is one of the main underlying factors for the conflict, but the growing rivalry between Russia and Turkey is also playing a part. More than 16 soldiers have been killed in the most recent round of fighting. Both sides are accusing each other of aggression and military action. The use of full scale armed forces and drones have been involved, killing several soldiers on both sides and reportedly an Azerbaijani general. The current outbreak of fighting has been the deadliest since the “April War” of 2016. While most clashes normally occur in and around the Armenian controlled Nagorno-Karabakh region, the current clashes are on the international border between Armenia and Azerbaijan. The international community is urging both sides to end the clashes.  

The United States, European Union, and the OSCE Minsk Group are trying to defuse the situation. While it remains unclear what reignited the conflict, it seems that Armenia played a large role in increasing tensions. Armenia recently constructed a new military outpost, which could have given Armenian armed forces a tactical advantage and tempted Azerbaijan to strike. At the same time, Azerbaijan is being buoyed by strong support from Ankara and may have wanted to test Russia’s support for Armenia. Remarkably, Armenia has called upon the Russia-led Collective Security Treaty Organization (CSTO), of which Armenia is a member, to intervene. The CSTO’s response, from Yerevan’s point of view, however, is lacking. As of July 14, the CSTO has only called for a normalization of the situation on the border, not implying that it would provide military support for Armenia. The lack of vocal support from Moscow for Armenia is improving Azerbaijan’s position in the conflict.  There is, however, a risk that the conflict will escalate to involve both Russia and Turkey. 

While the military conflict may be drawing the majority of media attention, there is also an energy aspect to this conflict. 

The military conflict gets full attention but another issue is a major threat to energy markets. The Caucasus is a major oil and gas transfer chokepoint, on which involves Russia, Turkey, Iran, Azerbaijan, Armenia and Central Asian countries.  Energy market observers should be concerned about the proximity of the current military clashes to the Baku-Turkey oil and gas pipeline systems. 

Threats to these important oil and gas pipelines, which not only connect the Central Asian producers to the global markets but also stabilize the region due to growth potential and revenues, are already significant. Gazprom Armenia, a subsidiary of Russia’s energy giant Gazprom, stated on July 14 that gas pipelines had been damaged near the border of Azerbaijan. Increased military action on both sides will only increase the danger to existing regional oil and gas infrastructure. Turkey will be hit hard if this conflict does escalate as it is largely dependent on oil and gas from the region.

Regional analysts are already assessing the possibility that the current flare up may have been instigated by Russia.

The Tovuz region where the fighting is taking place is particularly close to Azerbaijan’s crucial South Caucasia pipeline (SCP). The SCP channels natural gas to Turkey’s TANAP pipeline and is a key component of Ankara’s efforts to decrease its dependence on Russian energy. For years, Turkey has been trying to diversify its energy imports, but Ankara is still heavily dependent on Moscow. Russian gas is twice as expensive for Turkey than it is for most European customers, which is why Ankara is so desperate to move away from Russia gas. By getting Azerbaijani gas via TANAP, Turkey has been able to significantly reduce its costs. The Azeri-Turkish partnership could deepen further as a new opportunity arises in 2021, when a major gas deal between Turkey and Russia is up for renewal.  Those discussions stalled in April when the two counties failed to reach an agreement. All of this combined means that Russia could be looking at losing market share in a very important growth market.

The main pipeline, the Baku-Tbilisi-Erzurum pipeline, that supplies gas to Turkey from Azerbaijan, passes through the Tovuz region of Azerbaijan. This area borders the Armenian Tavush, where the clashes took place. Due to its geopolitically strategic location, a possible Turkish military intervention, especially considering its operations in Syria and Libya, is not unthinkable. Blowing up the current infrastructure in Azerbaijan would almost certainly ensure Turkish military involvement. “Turkey will never hesitate to stand against any attack on the rights and lands of Azerbaijan,” Turkish President Recep Tayyip Erdogan said Tuesday. Erdogan suggested a wider conspiracy lay behind the latest fighting. Turkish pro-government media have been quick to accuse Moscow of encouraging Armenia to attack Azerbaijan, albeit without substantiating evidence. Some analysts believe Turkey’s actions in Libya and Syria are related to this new conflict. Ankara could be forcing a new front, and the hand of Moscow, to get some bargaining power in North Africa. 

Whatever the cause of this latest conflict, the situation is on a knife’s edge. Azerbaijan, via its defense ministry, has warned Armenia that it could launch missile attacks on its Metsamor Nuclear Power Plant. These threats could be easily be countered by Armenian actions on Azerbaijan’s weak point, its oil and gas transit pipelines. The fallout would be felt not only in European markets, but globally as well.

Europe is facing a deeper recession in 2020 than previously thought, while the UK economy could shrink by 10% this year.

The shape of the UK recovery is turning out to be anything but a “V,” forcing more than half of the manufacturers in the country to reduce their respective labor forces in the back half of the year, according to Make UK’s latest Manufacturing Monitor survey.

The second round of job layoffs could be much deadlier for the economy than the first. Why is that? Well, it’s being called a “jobs bloodbath” by Make UK, because high-value skill jobs are the next to be axed. 

The survey, which covered 170 companies between 7 and 14 July, shows 53% of manufacturers across the automotive and aerospace sectors are expecting layoffs of highly skilled workers by the end of the year. Make UK said these high-value sectors have long supply chains that employ tens of thousands of people directly and indirectly. If these jobs are lost due to an extended downturn, it would be disastrous for the economy and suggest a recovery could take years. 

Take, for example, Airbus. The European planemaker, with production sites in the UK, said in late June it would cut 15,000 workers across its entire global workforce and doesn’t expect a recovery in air travel until 2023.

Make UK’s warning about high-value job loss comes as the UK economy is expected to shrink by nearly 10% this year, making it one of the worst-hit economies on the continent. 

The road to recovery is far from a smooth sail, as what it’s routinely pitched by government officials and central bankers. 

“At present, the prospect of a V shaped recovery for Industry seems remote.” said Stephen Phipson, CEO of Make UK. 

With no “V” shaped recovery expected, the government might have to support additional rounds of its furlough scheme that pays wages of more than 9 million people. The program is expected to be round down in August and halted in late October. 

Submitted by South Front

Early on July 20, positions of the Syrian Army came under shelling by militants in the villages of Furu, Bahsa and Beit Hassno in the southern part of the Idlib de-escalation zone. In response, government forces struck positions of Hayat Tahrir al-Sam near Kansafra and surrounding areas.

Local tensions increased just a few days after a key infrastructure object of Hayat Tahrir al-Sham in Idlib became the target of a drone attack. On July 18, three suicide drones hit facilities of the Watad Petroleum Company in the town of Saramada. This company is controlled by Hayat Tahrir al-Sham (formerly the Syrian branch of al-Qaeda) and has a monopoly on the fuel market in Greater Idlib. It is deeply involved in oil trafficking with nearby Turkish-occupied areas in northern Aleppo and responsible for the illegal import of fuel from Turkey. A notable part of Hayat Tahrir al-Sham’s revenue is generated by Watad.

The HTS news agency Iba’a confirmed that the drones struck the headquarters of the company as well as its fuel market. However, the agency claimed that the strikes didn’t result in any human or material losses.

A photo of one of the drones made before the attack shows an X-shaped wing design similar to that of the Hero family of loitering munitions produced by Israel’s UVision. Syrian sources speculate that this drone may be a Russian, Syrian or Iranian reverse-engineered copy of the Israeli munition. At the same time, it is likely that the strike was conducted by Turkey itself, which is silently working to undermine the dominance of Hayat Tahrir al-Sham in the region.

Earlier in July, Idlib militants attacked a joint Turkish-Russian patrol on the M4 highway with a detonated car driven by a suicide bomber. It is hard to believe that such an attack could be possible without the coordination with Hayat Tahrir al-Sham that controls the frontline in that area. So, Ankara may opt to employ some additional measures to demonstrate its dissatisfaction with such actions of its al-Qaeda partners, that Turkish state media like to call ‘moderate rebels’.

On July 19, an improvised explosive device (IED) exploded in the Turkish-occupied town of Afrin in northern Aleppo. The IED targeted a vehicle of the Sham Corps militant group wounding at least 3 of its members, including a field commander. On the same day, a car bomb attack in the town of Sajjo reportedly killed 5 people and injured dozens of others. Turkish sources often blamed Kurdish rebels for these attacks. However, ISIS cells are also quite active in the Turkish-controlled part of Syria.

On July 16, a quadcopter armed with an explosive charge targeted a group of Russian and Syrian service members in the vicinity of the town of al-Darbasiyah in northeastern Syria. Three service members of the Russian Military Police and three Syrian personnel were injured. According to reports, the attack took place during a meeting at a local coordination post, which was initiated due to the increase of ceasefire violations by Turkish-led forces on the contact line in northeastern Syria.

Even if this attack was not initiated by Turkish forces themselves, but was a local initiative of Turkish proxies, such incidents do not contribute to the stability in Syria’s northeast. The regular ceasefire violations and attacks create an explosive situation on the frontline, which runs the risk of turning into an open military confrontation between the Syrian Army and Turkish forces. The areas with a strong Turkish military presence and the US-controlled zone of al-Tanf remain the main sources of tensions and instability in Syria.

In November of 2018, an organized Antifa chapter known as “Smash Racism DC” showed up at the home of Fox News host Tucker Carlson – ringing his doorbell as their violent co-founder, Michael Isaacson – who loves dead cops and called for VP Mike Pence’s assassination – led them in chants such as “Tucker Carlson, we will fight! / We know where you sleep at night!“

Later that evening, the group posted “Every night you spread fear into our homes — fear of the other, fear of us, and fear of them. Tonight you’re reminded that we have a voice. Tonight, we remind you that you are not safe either.”

The angry mob would return weeks later to further hassle Carlson and his family.

The previous month, Carlson said that he’s “not a restaurant guy anymore” because of the constant harassment from the left – including a verbal altercation the Fox News host got into with a man who allegedly called his 19-year-old daughter a “whore” at at a Charlottesville, VA club.

Due to the ongoing threats, the Carlsons packed up and moved to a new house in order to keep his family out of harm’s way.

Except now, Carlson claims that the New York Times is about to dox his family by revealing their new address in an upcoming article.

This was his response Monday night:

“As a matter of journalism, there is no conceivable justification for a story like that. The paper is not alleging we’ve done anything wrong, and we haven’t. We pay our taxes. We like our neighbors. We’ve never had a dispute with anyone. So why is The New York Times doing a story on the location of my family’s house? Well, you know why. To hurt us, to injure my wife and kids so that I will shut up and stop disagreeing with them,” Carlson said, adding “Editors there know exactly what will happen to my family when it does run. I called them today, and I told them. But they didn’t care. They hate my politics. They want this show off the air. If one of my children gets hurt because of a story they wrote, they won’t consider it collateral damage. They know it’s the whole point of the exercise: To inflict pain on our family, to terrorize us, to control, we say. That’s the kind of people they are.”

Watch:

The Times has denied the allegation, saying in a Monday night statement: “While we do not confirm what may or may publish in future editions, The Times has not and does not plan to expose any residence of Tucker Carlson’s, which Carlson was aware of before tonight’s broadcast.”

Smash DC’s Isaacson, meanwhile, has an axe to grind after Carlson demolished him on live television in September, 2017:

In addition to airing his violent fantasies across the internet, a January, 2017 undercover video from Project Veritas captured the now-fired Isaacson encouraging his supporters to “throat punch” conservatives.

“Generally speaking, Nazis will only actually attack people if they strongly outnumber them because Nazis are essentially cowards. So if it’s three of them and a homeless guy, they’re going to beat him up. If it’s one of them and like six other people, they’re gonna run the f*ck away,” he told the Veritas journalist.

Throat punching is just a joke, huh? @lacymacauley seems to think so, but our footage seems to say differently. What do you think? pic.twitter.com/jNPUq1rlQQ

— Project Veritas (@Project_Veritas) January 19, 2017

And now, if the New York Times does indeed dox Carlson – an unemployed Antifa leader with violent fantasies will know right where to send his angry mob.

Authored by Bloomberg macro commentator Ye Xie

Monday’s trading saw a continuation of recent themes.

1. Winners among the sectors least affected by the virus: the Nasdaq Composite Index rose to another record
2. More government and central bank stimulus is coming: 10-year real Treasury yields are inching toward an all-time low, and the two-year Italian BTP yield turned negative again
3. The stimulus suppresses asset volatility
4. The dollar has peaked. The DXY Index is testing the post-Covid lows
5. Buying the dip in risky assets makes sense because they have an imbedded call option on a vaccine. As time passes by, the chance of a medical breakthrough increases

Back in China, the biggest news overnight was that Jack Ma’s Ant Group is seeking a valuation of more than $200 billion as it goes public in Hong Kong and Shanghai. It could seek to raise more in its IPO than Saudi Aramco’s record $29 billion haul, according to a person familiar with the matter.

The significance of this deal is multifold:

• It would be the biggest IPO ever on mainland exchanges, smashing the record $10 billion debut by Agriculture Bank of China in 2010.
• It signifies the rise of New China in the form of private high-tech companies, as opposed to the Old China dominated by state-owned banks and energy giants.
• And it lends much needed credibility to the Shanghai stock exchange’s STAR board, which is designed to harbor tech startups.

More importantly, the choice of Shanghai and Hong Kong for listing signals China’s deliberate efforts to reduce its reliance on the U.S. capital market for fund-raising amid the tension between the two countries. Already, Chinese and Hong Kong exchanges accommodated the world’s biggest four public listings this year, including Semiconductor Manufacturing International Corp. and JD.com.

In the debt market, China’s borrowing in foreign currencies seems to have also peaked. The external debt was little changed at $1.3 trillion last year, after rising 16% in 2018 and 22% in 2017. Dollar-denominated debt accounted for 83% of the total foreing debt outstanding, according to the State Administration of Foreign Exchange.

Considering everything from the U.S.’s threat to delist Chinese companies, to moves to strip Hong Kong of its special status, it’s more than clear that China is starting its process of de-dollarization and furthering the internationalization of its own currency.

Delinquency rates across commercial properties have shot up faster than at any other time.

As thousands of restaurants, hotels, and local businesses in the U.S. struggle to stay open, delinquency rates across commercial mortgage-backed securities (CMBS) – fixed income investments backed by a pool of commercial mortgages – have tripled in three months to 10.32%.

As Visual Capitalist’s Dorothy Neufeld notes, in just a few months, delinquency rates have already effectively reached their 2012 peaks. To put this in perspective, consider that it took well over two years for mortgage delinquency rates to reach the same historic levels in the aftermath of the housing crisis of 2009.

The above chart draws data from Trepp and illustrates the recent shocks to the CMBS market, broken down by property type.

Storm Rumblings

While there is optimism in some areas of the market, accommodation mortgages have witnessed delinquency rates soar over 24%.

Amid strict containment efforts in April, average revenues per room plummeted all the way to $16 per night—an 84% drop.

Similarly, retail properties have been rattled. Almost one-fifth are in delinquencies. From January-June 2020, at least 15 major retailers have filed for bankruptcy and over $20 billion in CMBS loans have exposure to flailing chains such as JCPenney, Neiman Marcus, and Macy’s.

On the other hand, industrial property types have remained stable, hovering close to their January levels. This is likely attributable in part to the fact that the rise in e-commerce sales have helped support warehouse operations.

For multifamily and office buildings, Washington’s stimulus packages have helped renters to continue making payments thus far. Still, as the government considers ending stimulus packages in the near future, a lack of relief funding could spell trouble.

Weighing the Impact on U.S. Cities

How do delinquency rates vary across the top metropolitan areas in America?

Below, we can see that the delinquent balance and delinquency rates vary widely by city. Note that this data is for private-labeled CMBS, which are issued by investment banks and private entities rather than government agencies.

Despite the New York city metropolitan area having a delinquent balance of $7 billion, its delinquency rates fall on the lower end of the spectrum, at 7%. New York alone accounts for 18% of the total balance of private-label CMBS.

By comparison, the Syracuse metropolitan area has an eye-opening delinquency rate of 69%. Syracuse is home to the shopping complex, Destiny USA, which is facing tenant uncertainties due to COVID-19. The six-story mall attracts 26 million visitors annually.

Like the overall market, delinquencies are being driven by accommodation and retail properties across many of these U.S. metropolitan areas.

What Comes Next

What happens when delinquency rates get too high?

Often, when borrowers do not make payment after a reasonable amount of time, they enter into default. While time ranges can vary, defaults typically take place after at least 60 days of nonpayment. Between May and June, defaults in the CMBS market surged 792% to $5.5 billion.

As effects reverberate, properties could eventually fall into foreclosure. At the same time, institutional investors who own these types of securities, which include pensions, could begin seeing steep losses.

That said, the Federal Reserve has set up mechanisms to purchase CMBS loans with the highest credit quality. This is designed to inject liquidity into the mortgage market, while also financing small and mid-sized properties that house small businesses. In turn, this can enable the employment of millions of Americans.

Of course, it remains to be seen whether the mortgage market will face a sustained downturn akin to the financial crisis, or if the temporary decline will soon subside.

Authored by Paul Joseph Watson via Summit News,

A video clip posted to TikTok shows a woman holding a tape measure screeching hysterically as she appears to be upset with beachgoers for not adhering to proper social distancing.

The woman screams something unintelligible before shouting “Fuck you! Get out of here!” at other people who appear to have gathered near a lake or a beach.

The protagonist is wildly flailing around a tape measure she is holding as a man tries to restrain her.

“It’s people like you that are ruining it for all of us!” she yells.

What’s happening here? pic.twitter.com/D46qJxAVT5

— Ian Miles Cheong (@stillgray) July 20, 2020

According to respondents on Twitter who translated comments made by the woman filming the video, the screeching lady is upset at the others for being too close and not properly social distancing.

Others suggested that the woman was upset because she was trying to “measure something” and loud music was preventing her from concentrating.

Either way, the woman filming the video says that she just wanted to have a “tranquil” day with her family.

This looks like another case of a social distancing Karens gone wild.

*  *  *

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Briggs & Stratton Corporation, the world’s largest manufacturer of small gasoline engines with headquarters in Wauwatosa, Wisconsin, filed petitions on Monday morning for a court-supervised voluntary reorganization under Chapter 11, along with plans to sell “all the company’s assets” to KPS Capital Partners. 

The Fortune 1000 manufacturer of gasoline engines was able to secure a $677.5 million in Debtor-In-Possession (DIP) financing to support operations through reorganization efforts. The Company also said it “entered into a definitive stock and asset purchase agreement with KPS.”

To facilitate the sale process and address its debt obligations, the Company has filed petitions for a court-supervised voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company has also obtained $677.5 million in DIP financing, with $265 million committed by KPS and the remaining $412.5 from the Company’s existing group of ABL lenders. Following court approval, the DIP facility will ensure that the Company has sufficient liquidity to continue normal operations and to meet its financial obligations during the Chapter 11 process, including the timely payment of employee wages and health benefits, continued servicing of customer orders and shipments, and other obligations.

This process will allow the Company to ensure the viability of its business while providing sufficient liquidity to fully support operations through the closing of the transaction. Briggs & Stratton believes this process will benefit its employees, customers, channel partners, and suppliers, and best positions the Company for long-term success. This filing does not include any of Briggs & Stratton’s international subsidiaries. – Briggs & Stratton’s press release states

Todd Teske, Briggs & Stratton’s CEO, stated the Company faced “challenges” during the virus pandemic that made reorganization “necessary and appropriate” for the survivability of the Company.  

“Over the past several months, we have explored multiple options with our advisors to strengthen our financial position and flexibility. The challenges we have faced during the COVID-19 pandemic have made reorganization the difficult but necessary and appropriate path forward to secure our business. It also gives us support to execute on our strategic plans to bring greater value to our customers and channel partners. Throughout this process, Briggs & Stratton products will continue to be produced, distributed, sold and fully backed by our dedicated team,” said Teske. 

Briggs & Stratton is the world’s top engine designer and manufacturer for outdoor power equipment, with 85% of the small engines produced in the U.S. The pandemic and resulting virus-induced recession have been brutal for the Company, with declining engine sales, resulting in a reduction in the US workforce. 

Financial Times noted, in June, the Company had difficulty refinancing a $175 million bond that matured in September. Sources told FT the Company’s deteriorating position made it impossible to obtain refinancing funds in the bond market. 

Add Briggs & Stratton to the list of bankrupted companies as an avalanche of bankruptcies is expected in the second half of the year. 

Not surprising whatsoever, Robinhood daytraders have panic bought collapsing Briggs & Stratton shares. 

The bankruptcy wave is not over, it’s only getting started as the virus-induced recession will be more prolonged than previously thought.