Outstanding world economy last week (17/9-24/9): Gold price was 'blown away' by 100 USD, the US does not need an additional economic stimulus package

World economy highlights last week (23/7-30/7): Gold rises again after the Fed's decision

Global Economy

Three sessions lost 100 USD, the world gold price was the lowest in two months

Gold has lost the $1,900 mark an ounce. Closing the session on September 23, in the world market, each ounce of spot gold lost nearly 40 USD, to 1,863 USD. This is the lowest level since the end of July. This morning, the price continued to go down, currently trading around 1,856 USD. Thus, in just three sessions, the price of gold has been "blown away" by 100 USD.

Suki Cooper, an analyst at Standard Chartered, said, "Gold's upcoming technical support will be around $1,840 an ounce. However, gold seems to be approaching the oversold zone."

The Dollar Index - which measures the strength of the greenback against a basket of large currencies - yesterday hit an 8-week high. U.S. stocks fell after data showed business activity in the country fell in September. "Long-term uncertainty remains. Therefore, investors will not miss the opportunity to buy gold when the price is low," said Phillip Streible, Strategist at Blue Line Futures large, because at present, most of the monetary and fiscal policy has been implemented." (Reuters)

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The post-Covid-19 global recession is not as forecasted

In its latest report, the Organisation for Economic Co-operation and Development (OECD) said that the global recession this year will not be as deep as expected thanks to countries' efforts to combat the economic recession caused by the Covid-19 pandemic.

However, the recovery in 2021 will still be lower than forecast. According to the OECD, global GDP will decline by 4.5% this year and return to growth of about 5% in 2021. In its previous forecast, in June, the organization estimated that global GDP would shrink by 6% in 2020 and recover to 5.2% growth next year.

However, the OECD also emphasized that the outlook is not easy to achieve and depends greatly on a series of factors such as: the severity of the new Covid outbreak, what restrictive measures will be applied, etc the implementation of vaccines, fiscal and monetary policies for countries, etc. Forecasts show that China is the only G20 economy with a GDP expected to grow positively (at 1.8%) in 2020, while US growth, although improving, remained at a decline of 3.8%, the eurozone also improved, at a decline of 7.9%. Emerging economies, India and Mexico, are all forecast to decline by 10.2 percent, and South Africa by 11.5 percent. (OECD)

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For the first time in 60 years, Asia has negative growth

In its 2020 Asian Development Outlook (ADO) Update, the Asian Development Bank (ABD) forecasts that developing Asian economies will grow by minus (-) 0.7% this year. for the first time in 60 years; about three-quarters of the region's economies are expected to grow negatively in 2020.

The report said that the prolonged Covid-19 pandemic, escalating geopolitical tensions of the trade and technology conflict between the US and China are the factors that have the biggest impact on the region's growth prospects this year and 2021. To mitigate the impact, governments in the region have implemented a wide range of response policies, including policy support packages of up to $3.6 trillion, equivalent to about 15% of regional GDP. Southeast Asia is forecast to decline by 3.8% in 2020, before growing by 5.5% in 2021. Inflation in developing countries in the region is forecast to fall to 2.9% this year from 3.2% forecast in April, due to continued low oil prices and weak demand. Inflation for 2021 is expected to fall to 2.3%.  (ADB)

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US-China

According to an analysis by the U.S.-China Investment Project, the total direct investment and venture capital between the two countries stood at $10.9 billion in the first half of 2020, the lowest since the last six months of 2011, but China's direct investment in the U.S. stood at $4.7 billion in six in the first month of the year, still up from 3.4 billion USD in the same period last year.

The increase came from Tencent Holdings' $3.4 billion investment in Universal Music Group. The total value of transactions remains low as the U.S. imposes strict controls on Chinese investment, especially in the technology sector. 

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America

In a speech prepared on the eve of a hearing in the US Congress, US Federal Reserve (Fed) Chairman Jerome Powell said that the country's economy will only recover from the Covid-19 acute respiratory infection crisis when people feel safe enough to resume normal operations. On September 21, White House Economic Adviser Larry Kudlow said that the United States is experiencing a "strong self-recovery" and may not need additional stimulus measures. Kudlow said he doesn't think the recovery will depend on that new package. 

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After the policy meeting on September 17, Fed officials signaled not to raise interest rates until 2023, while pledging further support for an economy facing an uneven recovery from the Covid-19 pandemic.

The Fed said it would keep interest rates near 0% "until labor market conditions reach maximum employment, and inflation rises to 2% and may exceed 2% moderately for some time." In addition, officials also revised their forecasts for US GDP to decline by 3.7% in 2020 (a weaker decline than the 6.5% estimate in June 2020), then to grow by 4% in 2021; The unemployment rate reached 7.6% in 2020 (lower than the estimate of 9.3% in June), 5.5% in 2021; Inflation from the personal consumption expenditures index (PCE) reached 1.2% in 2020 (higher than the estimate of 0.8% in June 2020), 1.7% in 2021; The long-term Fed funds rate reached 2.5%, unchanged from June 2020. (WSJ)

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China

The European Statistics Agency (Eurostat) recently said that in the period from January to July 2020, China became the leading trading partner of the European Union (EU), the position previously belonged to the United States. Specifically, EU imports from China in the period from January to July 2020 increased by 4.9% over the same period last year, while EU imports from the US in the same period decreased by 11.7%. According to Eurostat, EU exports to China fell slightly by 1.8% while EU exports to the US fell by 9.9%. (THX)

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On September 21, China's State Council announced plans to build three new pilot free trade zones (FTZs) in the capital Beijing, Hunan Province and Anhui.

In recent years, China has set up FTZs in many provinces across the country in an effort to attract foreign investment, stimulate trade and promote regional development. In the most updated list released in August 2020, China approved six FTZs, including one in Guangxi that is tasked with becoming "China's Gateway Connecting the 21st Century Maritime Silk Road." The China-Malaysia Khamzhou Industrial Park is located in the Khamzhou Free Trade Zone, along with Nanning and Songta (bordering Vietnam) to form the Guangxi Free Trade Zone. The pilot FTZ in Caofeidian belongs to the Tangshan Street, Hebei Province, giving priority to the development of international trade in goods and attracting more foreign investment. (SCMP)

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Europe

The EU is expected to issue a world-class green bond last year to gauge investor interest in the shift to a cleaner economic model. The volume of bonds worth 225 billion euros will take Europe from a new face to the largest player in this market in the coming years.

In the context of not having a clear definition of green bonds, the EU's criteria are likely to become a benchmark for other countries to follow. The plan is seen as a major win for the green industry, just four years after the first green government bonds were issued. However, this effort will be a test of whether this type of bond will appeal to mainstream investment funds outside Europe, or only attract limited interest from a few specialized investors.  Strait Times)

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The President of the European Central Bank said that the regional economy is recovering, but the process is still uncertain, incomplete and depends on the ability to control the epidemic. ECB will inject 1.35 trillion euros of new money into the economy in the form of bonds from now to the end of the year. This is a large-scale monetary stimulus package to prevent the epidemic from causing disturbances in financial markets and maintain low lending rates for businesses to support growth. (AP)

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The IFO Research Institute has just issued a forecast that Germany, Europe's largest economy, will slump in growth by 5.2% this year, lower than the initial forecast of 6.7%, a sign that the damage caused by Covid-19 may be smaller than previously feared. "The extent of the decline decreased in the second quarter and the recent recovery rate is more positive than initial forecasts," said the chief economist of the IFO.

For 2021, the IFO lowered its forecast from 6.4% to 5.1%. This figure in 2022 will be 1.7%. The number of unemployed people is expected to rise to 2.7 million from 2.3 last year before falling to 2.6 million in 2021 and 2.5 million in 2022. However, the IFO also warned that the accuracy of these forecasts is not high due to many unpredictable variables such as the infection situation of the epidemic, Brexit and trade disputes remain unresolved. 

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Japan-Korea

A day after Japanese Prime Minister Yoshihide Suga took office, the Bank of Japan (BoJ) decided to continue to maintain a flexible, easy monetary policy with emergency loan programs to support the economy affected by Covid-19. The decision was made after the conclusion of a two-day session of the BoJ Policy Council. Accordingly, the BoJ has decided to maintain the short-term interest rate at minus 0.1% and the long-term interest rate at about 0%. (Mainichi, Nikkei Asia Review)

Japan's core CPI, which includes oil products but excludes fresh food prices, fell 0.4% in August 2020 from a year earlier, the fastest decline in nearly four years. Japan's new Prime Minister Yoshihide Suga on September 16 pledged to curb Covid-19 and maintain the "Abenomics" growth policies of his predecessor, while promoting reforms such as digitalization and cutting administrative regulations.  (Nikkei Asia Review)

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The OECD said that South Korea's economy is likely to shrink by up to 1% in 2020, higher than the latest forecast in August of a 0.8% contraction. However, this is considered the most positive outlook among the 37 OECD member countries (Japan down 5.8%; Germany down 5.4%; The United States fell 3.8%). (Yonhap News)

Yoo Myung Hee, chief of the trade negotiating office of the South Korean Ministry of Industry, Trade and Natural Resources, has passed the first round of the race for the post of director general of the World Trade Organization (WTO ) and will join the former trade minister British international trade Liam Fox, former Saudi Arabian Minister of Economy and Planning Mohammed Al-Tuwaijri, former Kenyan Culture Minister Amina Mohamed and senior Nigerian WB official Ngozi Okonjo-Iweala continue to compete for the third round of the election. (Yonhap)