Headwinds facing the business sector amid global economic shocks

Another week and another round of memories of the winds facing global affairs as it struggles with rising inflation, interest rates, an energy crisis and another message from China that the coronavirus is not over yet.

Chinese stocks fell this morning amid news of more infections caused by “Omicron” and its mutant in a number of cities, sparking fears of the return of damaging closures and disruption of global supply chains in the process, when Shanghai discovered its first case of. the sub-mutant (BA5). , which has raised fears of more restrictions in the most commercially important city in China, after just weeks of a two-month closure that caused chaos in global markets, while 11 cities are now subject to full or partial closure, including a week long closure of all non-businesses Base in Macau. At the same time, Omicron is also working to increase hospital admissions in Europe and the United States.

Investors also expect a sharper tightening in US monetary policy after unexpectedly strong job data on Friday, but they are also worried about the flow of gas to Europe after Russia closed the Nordstream 1 pipeline for 10 days of maintenance, which contributed to fears . That Moscow can seize the opportunity to stop or reduce its exports.

In the UK, consumer demand has slowed and costs continue to rise as the cash needed by poor families to buy a new school set has declined as holiday spending ends and energy costs rise. Businesses that rely on discretionary spending, such as travel and leisure groups, are likely to be hit particularly hard as spending dries up after the pandemic.

High interest rates and low savings

The impact of higher interest rates, lower savings and higher energy costs on corporate finances is likely to be more pronounced over the Christmas period, even though the corporate first quarter’s earnings season was good, according to the Financial Times.

The second quarter is also likely to be good, and one analyst said “the actual hit is more likely during the third or fourth quarter of this year, and new UK retail data for June (June), Tuesday, will also be close. looked after sales fell in April (April and May).

One of the few highlights is pet care, where the investment bank notes that “most consumers prioritize their pets for spending”. “We’d always thought the things going downhill were Sky Sports and dog grooming,” he added.

Even those companies that were supposed to thrive in bad times are fading away. Sweden’s Klarana (Buy Now Pay Later), once the highly regarded private fintech in Europe, is now being devalued in the sector has faced rising inflation and declining consumers. The cut in discretionary spending is also likely to hurt large U.S. retailers. Amazon hopes that its Prime Day promotional event, the annual transaction opportunity on July 12-13, will renew the sluggish sales growth, while stores like Wall Mattresses and Target have already issued warnings on the issue.

UK and Europe

30 per cent cuts in funds for England’s bus network as pandemic subsidies end could mean cutting unprofitable routes and isolating communities.

The Eurozone finance ministers meeting in Brussels have the task of alleviating families’ suffering under high energy prices, while not increasing upward pressure on inflation.

And according to Europe Express, Hungary has made concessions over the rule of law and transparency and is trying to unlock $ 15.1 billion (15 billion euros) in pandemic recovery funds.

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US President Joe Biden is on his way to the Middle East in hopes of restoring strained relations with Saudi Arabia and making some progress in addressing high oil prices, as the rise in the cost of petrol has led to a record drop in Americans’ visits to national parks.

While abortion bans across the United States will affect the most economically vulnerable women, who are already under pressure from rising living costs, one expert says it is “highly likely that the rich will be able to circumvent the laws of their country while the poor do not.”

According to a new analysis, more than one billion COVID-19 vaccines, more than 10 percent of all vaccines produced, have been wasted due to unbalanced distribution, vaccine hesitation and storage problems. European health agencies have supported a second booster dose of “Covid-19” for those over 60.

Extract $ 50 billion from emerging market bonds

In Asia, Sri Lankan President Gotabaya Rajapaksa stepped down after mass protests over the weekend over price increases and a shortage of goods that made him hide.

Currently, quantitative easing has been replaced by quantitative easing as central banks begin to shrink their balance sheets, but fund managers say they have no idea how things are going to turn out.

The “perfect storm” of high inflation, monetary tightening and the war in Ukraine caused investors to withdraw $ 50 billion from emerging market bond funds this year, the largest outflow in at least 17 years.

The United States may soon join today’s emerging markets, says author Rana Forouhar, as political dangers and volatility increase and the country declares war on itself.

Business second quarter data

And the second-quarter reporting season for major U.S. banks begins this week, as analysts expect an increase in profits for “JP Morgan”, “Bank of America” ​​and “Citigroup” and one analyst says banking “was below incredible pressure over the past decade due to interest rates. ” zero for most of that time.

Wizz Air was the latest airline to cut off flights as unrest continued at Heathrow Airport. The Hungary-based airline reported an operating loss of 285 million euros ($ 287 million) during the last quarter, becoming one of the first airlines in Europe. It set out the financial impact of this summer’s turmoil, which he said cost $ 50.3 million (€ 50 million).

In better news for the aviation sector, Airbus revised its estimate of global demand for aircraft over the next 20 years, although it said the number of passengers would not grow as fast as previously thought.

GlobalFoundries, STMaker and Electronics are building a semiconductor manufacturing plant in France, a project that will receive significant government support as part of the European Union’s efforts to secure supplies and reduce dependence on Asian supplies, French Finance Minister Bruno said. Le Maire, said. the largest industrial investment in recent decades outside the nuclear sector, and a major step for our industrial sovereignty. ”

A number of financial innovations over the past decade, in particular names such as leverage financing, net asset financing and subscription financing, are about to be tested for the first time in a “bear market” while lawyers prepare for a series of bankruptcy cases. Most of the new decisions will almost certainly be in the crypto world.

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