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In the latest revision to the IMF’s economic outlook published this morning, the fund warns that the world is facing “a crisis like no other”, and now expects global growth to shrink -4.9% in 2020, 1.9% below the April 2020 forecast of -3.0%.

The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, the IMF said, adding that the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4% down from 5.8%, a number which will also be revised lower, with China’s expected 1.0% growth (down from 1.2%) the big wildcard.

As shown in the table below, the IMF has made the following GDP revisions for 2020:

• US -8.0%, down from -6.1%
• China 1.0%, down from -1.2%
• Euro Area -10.2%, down from -7.5%
• India: -4.5%, down from +1.9%
• Japan -5.8%, down from -5.2%
• Canada -8.4%, down from -6.2%
• Latin America: -9.4%, down from -5.2%

Summarized:

India suffered the biggest downward GDP revision from the April forecasts, with a 4.5% contraction now expected, compared with a prior projection of a 1.9% expansion. Latin America has been hit by the virus due in part due to less developed health systems; its two biggest economies Brazil and Mexico are now forecast to contract 9.1% and 10.5%, respectively.

“With the relentless spread of the pandemic, prospects of long-lasting negative consequences for livelihoods, job security and inequality have grown more daunting,” the global emergency lender said in its update to the World Economic Outlook.
The IMF conceded that as with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast, with the baseline projection resting on key assumptions about the fallout from the pandemic.

In economies with declining infection rates, the slower recovery path in the updated forecast reflects:

• persistent social distancing into the second half of 2020;
• greater scarring (damage to supply potential) from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020;
• a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices.

The fund lowered its expectations for consumption in most economies based on a larger-than-expected disruption to domestic activity, demand shocks from social distancing and an increase in precautionary savings.

For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity. Moreover, the forecast assumes that financial conditions—which have eased following the release of theApril 2020 WEO—will remain broadly at current levels. Alternative outcomes to those in the baseline are clearly possible, and not just because of how the pandemic is evolving. The extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects—as the June 2020 Global Financial Stability Report (GFSR) Update discusses—raising the possibility that financial conditions may tighten more than assumed in the baseline.

Overall, this would leave 2021 GDP some 6.5% percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.

More importantly, the IMF also warned that the rebound in “financial market sentiment appears disconnected from shifts in underlying economic prospects raising the possibility that financial conditions may tighten more than assumed in the baseline.”

Back to the surprisingly gloomy forecast, the IMF said that downside risks remain significant, as “outbreaks could recur in places that appear to have gone past peak infection, requiring the reimposition of at least some containment measures. A more prolonged decline in activity could lead to further scarring, including from wider firm closures, as surviving firms hesitate to hire jobseekers after extended unemployment spells, and as unemployed workers leave the labor force entirely.”

Furthermore, financial conditions may again tighten as in January–March, exposing vulnerabilities among borrowers. “This could tip some economies into debt crises and slow activity further.” Moreover, the sizable policy response following the initial sudden stop in activity may end up being prematurely withdrawn or improperly targeted due to design and implementation challenges, leading to misallocation and the dissolution of productive economic relationships.

The IMF warned of a collapse in global trade volume in goods and services, which is expected to tumble 11.9% in 2020.

Finally, the IMF warned that the pandemic’s impact may significantly increase inequality, with more than 90% of emerging-market and developing economies forecast to show declines in per capita income.

Oddly enough, it had nothing to say about the biggest source of global inequality for the past decade: central banks that have injected over $30 trillion in liquidity in the past ten years, and whose actions assure that the next crash may well be the last.

* * *

Looking ahead, The IMF presents two alternative scenarios: In one, there’s a second virus outbreak in early 2021, with disruptions to domestic economic activity about half the size of those assumed for this year. The scenario assumes emerging markets experience greater damage than advanced economies, given more limited space to support incomes. In that case, output would be 4.9% below the baseline for 2021 and would remain below the baseline in 2022. In the second scenario, with a faster-than-expected recovery, global output would be about a half percentage point better than the baseline this year and 3% above the baseline in 2021.

The girlfriend of Rayshard Brooks has been taken into custody for suspicion of setting fire to the Wendy’s where Brooks was killed on June 12.

Brooks’ girlfriend, Natalie White, was arrested after a warrant was issued on June 20 and surveillance video was released showing her inside of another store.

Authorities say she is “partly” to blame for setting fire to the Wendy’s according to the Daily Mail. Brooks was married, but on the night he was killed he told officers he was there to pick up food for his “girlfriend Natalie White”. 

White’s attorney confirmed she was “very close” to Brooks but didn’t comment further, reportedly out of respect for Brooks’ wife, who was grieving him at his funeral at the time White was being taken into custody. 

When CNN asked if she knew Brooks, her lawyer responded: “Yes, but I will not comment on the extent of their relationship.”

The attorney did, however, confirm that White was the woman Brooks referred to as his girlfriend. He says the Wendy’s was “already on fire” by the time White arrived on the scene. She has no criminal record and her attorney insists she did not start the fire. 

“She is absolutely not responsible,” he said. He hopes she will be released on her own recognizance after a court hearing.

No one in Brooks’ family has spoken of him having a girlfriend, despite him admitting it to police on the night he was shot. He told officers he drank “one margarita” earlier in the night before falling asleep at the wheel of his vehicle. After a scuffle broke out with officers and Brooks turned one of their TASERs on the police officers, he was shot and killed.

Days after his death, the Wendy’s where the incident happened went up in flames. 

Falling just shy of its attempt to tag $1800, gold futures are plummeting this morning after ramping to fresh 8-year highs yesterday…

Note the big moves in markets every day around the London Fix and the fact that this plunge has stalled at yesterday’s fix…

Silver is getting hit even harder…

The question is – what changed? Or is Benoit back in da house?

Was gold’s resurgence exposing the failing faith in fiat and its omnipotent central planners just a little too much?

Authored by Bill Blain via MorningPorridge.com,

“We need to ensure financial support is available to companies so they can afford to remain shut.”

Stock markets are determined to surge, but the World Bank’s Carmen Reinhart is warning about the dangers of confusing rebound with recovery. European PMIs rose spectacularly, but remain far below normal. JP Morgan is talking about the sharpest, deepest and shortest recession on record. The US Treasury head is pontificating about further fiscal stimulus. There is a massive bubble around Tech stocks – a bubble within a bubble within a bubble as some describe it. Every single senior market talking-head is warning of dangers ahead. The new-minted day-trading hot-shots scream buy, buy, buy! (Which will likely morph into: “bye, bye!” fairly soon.)

These are just some of the many factors markets are trying to weigh – although the dominant one is just how much more QE Infinity and further support packages governments and central banks are set to throw at the problem.  

I did listen to a very good interview with Pimco’s Emmanuel Roman. Some excellent points about how the deluge of Credit issuance in recent weeks has bridged the liquidity gap, but now corporates face a potential solvency crisis. A short-term crisis has morphed into a longer one. It will take potentially years to repair business balance sheets, which will require massive restructuring. For smart investors, it’s a massive opportunity to purchase distressed companies and make outsize returns – said Roman. 

I would agree. But let’s not forget – the underlying force behind market moves remains The Pandemic. As the respected Dr Fauci warns; the next two weeks will be critical as new infection hot spots bloom in the US (and also Germany), what I definitely do know is: THE VIRUS DOESN’T CARE ABOUT ELECTORATES, RULES, ECONOMIES, GROWTH OR JOBS. 

It is what it is. And the western democracies are making a right pig’s ear addressing it. 

Although its increasingly clear much of the “science” behind estimating the pandemic dangers was absurdly pessimistic – its proving difficult for politicians to change course. They are hamstrung by their declared reliance on the data and scientists. Fear is still the dominant emotion. If you get Covid bad, it can be very bad indeed – here in the UK doctors are warning of multitudes of patients with irreversible long-term lung damage. We still don’t know enough about how the virus works – but it’s clear its less dangerous to the bulk of people than we thought. Were the policies wrong? Probably. 

Should we have changed path as a new information came to light? Yes. But information paralysis, inertia, and fear of explaining a reversal to voters meant they didn’t. 

It was always going to be a zero-sum game for Politicians. Standing up and admitting… “Gosh, we got this wrong. We should have done this, not that,” is unlikely to pass any politician’s lips. It’s no wonder confidence in them, and the political process is waning. I read the UK’s Labour party – which has done little except ineffectively grandstand the crisis – is closing on the Tories. 

Things might get worse. Even as an enthusiastic Boris announced the reopening of the UK economy next weekend, Bank America was telling clients sterling is now an EM currency, and dropped out the big league. They say Brexit has confirmed the UK is a small and shrinking economy. (In response, I say: the dollar is next as the US loses its “exceptionalism” and the cost of Trump peeving just about everyone has to be paid.) 

Brexit negotiations are just one of the many issues sidelined by the pandemic response. As in all things, the fear of a Brexit disaster is exaggerated. Solutions, half-baked and last minute perhaps, will be found. 

I suspect a bigger problem is going to be more political distrust and dither. (Ask yourself – who would replace Boris?) A snap back is possible. Trying to do the right thing, but badly advised, Governments have got it wrong. 

The sheer pointlessness of it all was demonstrated on TV last night:

A political spokesman was allowed to witter on for minutes about nothing much at all. She was followed by a very earnest person telling us how the government’s failure to provide a trace and contact app meant it is far too dangerous and far too early to cut social distancing to 1 meter from 2m. After she presented some “data” about it being 19 times more likely to catch Covid in a pub, we eventually got on to the proper economic data-scientist. 

He had some really interesting stuff to say about lockdown probably being the right thing to have done in March, but using the NHS’s own protocols and models for costing the value of lives when approving therapies, his team examined the excess death numbers, the numbers of direct deaths and infections, and presented the conclusion the UK should probably have ended the lockdown and got the country back to work weeks ago. His point was simple – the virus is now costing the UK far more than Lockdown its saving.

At least I think that’s what he was going to say… 

He didn’t get the chance as the femsplaining presenter decided about a minute into his spiel that both the women on the panel should be given a right of reply to this man. Which meant we never heard anything more from him. We heard the politician burble on about how she wasn’t here to talk about whatever she wasn’t there to not to talk about, while the earnest woman muttered darkly about ascribing values to human life – which is basically what the NHS has been doing since its inception. 

In short – the programme did not push the debate on. It did not inform us. It left us nowhere and will have convinced many people government has failed again. We can all continue to believe what we want to believe about the virus. 29% of the UK population apparently don’t care about the economic damage. They are going to keep isolating – and government (ie us) to pay for it. 

Meanwhile.. continuing the theme of political incompetency… 

If you want to know what markets really think, consider the reaction to Monday’s Peter Navarro market destabilising comment: “it’s over. Yes.” What a scoop. Navarro went on to say China had not revealed enough about the virus. The Trump administration went into full damage mitigation mode, and backtracked the mistake. Markets wobbled and then regained their upside. 

The subsequent narrative illustrated a whole series of truths:

1) The sell-off highlights how little faith markets have in the Trump administration’s ability or ever desire to work with China. Participants sold off so quickly because they believe there is a high probability trade negotiations between the two largest economies on the planet, that drive so much global economic activity, are fated to unravel.  They will sell on confirmation. 

2) Markets may even think a botched trade deal is good – it would generate further government stimulus. 

3) The swiftness of the Trump admin’s denial demonstrates how desperate the Man is to sustain the trade deal – knowing how important it will be in key swing agribusiness states. 

4) Do we know what China thinks? We can guess.. 

Summary:

• Global COVID deaths top 475k
• Cases top 9.2 million
• US cases near 2.5 million
• Deaths top 120k
• 27 states see cases increasing
• Australia sees another cluster
• Beijing says latest cluster is contained
• China has done 90 million nucleic acid tests
• UK moving to relax restrictions
• WHO warns Africa testing capacity improving

* * *

A pullback in risk assets on Wednesday has swerved the spotlight back to the burgeoning global coronavirus crisis, a resurgence in global cases driven primarily by the US, Latin America and a handful of Asian or Eurasian countries including India and Russia (and several of their neighbors).

Most alarmingly, the US is on track to seeing the average number of new infections reported daily eclipse the highs from the “peak” of the outbreak back in April, when New York, New Jersey, Massachusetts and Connecticut saw the number of patients hospitalized and in the ICU hit their peaks. While deaths have lagged amid evidence that the rising case counts in the US are being driven primarily by young people acting irresponsibly, in roughly a week, the US will eclipse the 50k cases per day mark, at which point a surge in deaths and more severe cases will be virtually inevitable.

At this point, the alarming surge in new cases seen along the sunbelt states from Florida to Arizona on to California is clearly being driven by loosening restrictions on the economy, as states that waited the longest to close down have also been among the first to reopen. At first, it looked like this strategy had been vindicated as Georgia appeared to have dodged the feared second wave. But the state has since seen its daily case counts move back into record territory: Arizona, California, Texas and Mississippi all reported record increases in new cases yesterday, along with other states.

A staggering 27 states are now seeing cases increase, according to the NY Times.

Per WaPo, 33 states and US territories have reported a higher rolling average than last week. But even as case numbers climb, the federal government is poised to turn off the taps for federal funding to boost testing in hard-hit states like Texas. We suppose that’s what Trump meant when he said he “wasn’t joking” about trying to slow down the testing.

As a team of analysts from Fundstrat put it: “The rise is across multiple states, and while testing is higher, the synchronized rise across states is the bigger driver. The trend in cases is not good, and at face value, should be alarming.”

But it’s not just the US and Brazil. Germany reported 712 new cases of COVID-19, an increase of more than 200 from the number reported yesterday as Germany struggles with an outbreak at a meatpacking plant, while Tokyo reports 55 infections, its highest daily tally since May 5.

Localized lockdowns have been adopted in Germany (in the area surrounding the meatpacking plant which also happens to be located in Germany’s most populous state, North Rhine-Westphalia), and Israel as well as PM Benamin Netanyahu uses the lockdown and the pandemic response more broadly to try and protect his interests during his ongoing legal troubles.

As some EU members reopen their borders to intra-bloc tourists, Brussels is weighing whether to keep Americans out past July, when the bloc will begin to reopen its borders to countries where the virus isn’t widely spreading. The US clearly doesn’t meet this criteria, and President Trump showed Europe no similar consideration when he barred travelers from the Continent as well as Great Britain a few months back.

China’s policy of responding to every new outbreak with overwhelming force (while its propagandists work to blame it on the US and the West) has managed to successfully contain an other outbreak. The latest outbreak in Beijing has now been contained, Lei Haichao, head of Beijing Municipal Health Commission, said during a briefing on Wednesday. The virus spread very fast and a large number of cases emerged in a short period, Lei said. Beijing reported just seven additional local coronavirus infections for June 23, down from 13 the day before, per the NHC.

NHC officials told WaPo that they’ve conducted more than 90 million nucleic acid swab tests since the pandemic began.

Even in Australia, the state of Victoria saw 20 new cases in the past 24 hours and one man in his 80s died, bringing the national death toll to 103, weeks after the country reopened on the view that the outbreak had been successfully quashed.

As the UK moves to lift most of its lockdown restrictions by July 4, the WHO declared Wednesday that all African countries have now developed laboratory capacity to test for the coronavirus, according to Dr.Tedros Adhanom Ghebreyesus, the organization’s director general, who celebrated the advance in testing capacity.

“The most recent one million cases of COVID-19 were reported in just one week,” Tedros Adhanom Ghebreyesus said during a virtual conference on COVID-19 vaccine development and access across the continent.

Though cases have picked up slightly in recent weeks, Africa has largely surprised health officials by avoiding the devastating outbreaks that many had feared.

Globally, the number of coronavirus cases topped 9.2 million, while the global death toll topped 475k. In the US, cases neared the 2.5 million mark, while deaths topped 120k.

As we reported last night, Texas Children’s Hospital began admitting adult patients, as hospitalizations have soared in Harris County in and around Houston. Meanwhile, Gov. Greg Abbott urged Texans to stay inside to avoid spreading the virus, finally acknowledging that “the safest place for you is at your home,” he said Tuesday.

On Tuesday, we noted that weekly bankruptcies are soaring, the most in over a decade, and there is a striking correlation between the unemployment rate and chapter 11 filings. Not too long ago, we said that a “biblical” wave of bankruptcies is about to flood the U.S. economy.

With that being said, and at no surprise, GNC Holdings, Inc. filed for bankruptcy protection on Tuesday night, intending to sell its business and shutter over 1,000 stores. 

The health and wellness brand, based in Pittsburgh and founded in 1935, “expects the Chapter 11 process will benefit its stakeholders and best position the Company for long-term success.” The Chapter 11 petition was filed in U.S. Bankruptcy Court in Delaware will allow the company “to restructure its balance sheet and accelerate its business strategy.” 

GNC said it reached a deal with its secured lenders for approximately $130 million in additional liquidity to continue operations through the bankruptcy process and work toward a prearranged reorganization plan with creditors. 

“GNC has secured approximately $130 million in additional liquidity through (i) a commitment from certain of its term lenders to provide $100 million in “new money” debtor-in-possession (DIP) financing and (ii) approximately $30 million to come from certain modifications to the existing ABL credit agreement,” GNC said. 

The company said it “reached an agreement in principle for the sale of the Company’s business” – with the starting bid price of $760 million, subject to court approval.

“With the support of its lenders and key stakeholders, the company expects to confirm a standalone plan of reorganization or consummate a sale that will enable the business to exit from this process in the fall of this year,” GNC said.

GNC estimated its total debts at $895 million and total assets of $1.4 billion. The company plans to close 800 to 1,200 of its 5,200 retail locations throughout the U.S. 

“This acceleration will allow GNC to invest in the appropriate areas to evolve for the future, better positioning the company to meet current and future consumer demand around the world,” GNC said in a statement.

Robinhood pajama daytraders panic buying, yet, another bankrupted company… 

The retail industry’s temporary shutdown of stores to mitigate the spread of the virus has been absolutely catastrophic – the ripple effect has led to some retailers not paying rent, which has pressured real estate companies. Several large mall operators are under severe financial distress thanks to retail tenants skipping out on rent payments:

• Default By Mall-Owner CBL Sparks Another Manic-Bid By Robinhood Daytraders
• Mall Giant Demands Rent Payments Even As It Skips Its Own

Ultimately, GNC will not be alone – many other retail outlets will be forced to file for bankruptcy this year, resulting in far more pain for commercial real estate companies. So for all the talk of a V-shaped economic recovery – well it’s just nonsense. 

Authored by Isabel van Brugen via The Epoch Times,

Rep. Alexandria Ocasio-Cortez (D-N.Y.), on Tuesday night won her Democratic primary in New York’s 14th District, defeating challenger Michelle Caruso-Cabrera, a former anchor for CNBC.

Progressive freshman lawmaker Ocasio-Cortez, who became the youngest woman ever to serve in Congress in the United States in 2018, brought a huge campaign war chest and a national profile to her bid for a second term in her diverse district encompassing parts of the Bronx and Queens in New York City. She won some 70 percent of the vote.

Democratic challenger Caruso-Cabrera, a former CNBC television anchor, had the backing of the conservative U.S. Chamber of Commerce, which usually supports Republicans.

As Robert Wenzel noted, you have to be a very special politician to defeat a socialist like AOC who is popular with the masses.

“When I won in 2018, many dismissed our victory as a ‘fluke.’ Our win was treated as an aberration, or because my opponent ‘didn’t try.’ So from the start, tonight’s race was important to me,” Ocasio-Cortez said on Twitter Tuesday night. “Tonight we are proving that the people’s movement in NY isn’t an accident. It’s a mandate.”

When I won in 2018, many dismissed our victory as a “fluke.”

Our win was treated as an aberration, or bc my opponent “didn’t try.”

So from the start, tonight’s race was important to me.

Tonight we are proving that the people’s movement in NY isn’t an accident. It‘s a mandate.

— Alexandria Ocasio-Cortez (@AOC) June 24, 2020

“No amount of money can buy a movement,” she said in a video shared on the social media platform, adding that her victory came despite Wall Street opposition. Wall Street executives raised more than $2 million to support the 51-year-old former television anchor Caruso-Cabrera.

Wall Street CEOs, from Goldman Sachs to Blackstone, poured in millions to defeat our grassroots campaign tonight.

But their money couldn’t buy a movement.

Thank you #NY14, and every person who pitched in for tonight’s victory.

Here’s to speaking truth to power. pic.twitter.com/g9aRV3Cu1B

— Alexandria Ocasio-Cortez (@AOC) June 24, 2020

Ocasio-Cortez, 30, raised more than $10.5 million, exceeding the totals collected by her other challengers by far. She rose to political stardom in 2018 after ousting Rep. Joe Crowley in a stunning primary. Crowley overwhelmingly outspent her and appeared to be in line to become House speaker.

Ocasio-Cortez’s victory came after a Republican candidate challenging the 30-year-old announced on May 25 that she had dropped out of the congressional GOP primary race.

Scherie Murray, a businesswoman and Jamaican immigrant, on May 25 announced the news citing executive orders issued by New York Gov. Andrew Cuomo in response to the CCP virus pandemic as hindering the electoral process.

“Governor Cuomo’s undemocratic Executive Orders overthrew New York’s electoral process,” Murray’s campaign said. “The right to access the ballot, freedom of association as a member of a political party, the exchange of ideas and free speech are so sacred that the Founding Fathers made it the First Amendment to the Constitution of the United States.”

“Notwithstanding, during the coronavirus pandemic, Governor Cuomo’s Executive Orders have gone unchecked, affirming the ability to silence Murray’s First Amendment rights,” the statement continued.

“As long as avowed socialists are legislators, you can rest assured I will use my platform to advocate for the kitchen table issues of the toughest, hardest working New Yorkers,” Murray said. “This is not the end for Scherie Murray because I will continue to work hard.”

Meanwhile, presumptive Democratic presidential nominee Joe Biden won the Democratic presidential primary in New York.

Ocasio-Cortez will face Republican John Cummings, a retired New York Police Department officer, in the November election for the Northwest Queens-East Bronx House seat.