Economic growth in the eurozone plummeted in June, a key survey showed on Thursday, as high prices took the wind out the strong recovery from the deep lows of the coronavirus pandemic.
The closely-watched monthly purchase managers’ index (PMI) by S&P Global fell from 54.8 in May to 51.9. A figure above 50 indicates growth.
The slowdown, caused by a “cost-of-living shock”, is “the most abrupt recorded by the survey since the height of the global financial crisis in November 2008”, excluding the pandemic lockdown, said Chris Williamson, Chief Business Economist at S&P Global.
Since the beginning of the year, the European economy has recovered strongly from the lifting of restrictions linked to the Covid-19 pandemic, which revived tourism to countries like Spain and Greece as well as transport.
It also benefited from household spending, as consumers burned through savings accumulated during many months of confinement, offsetting the negative impact of the war in Ukraine.
But in June, the “tailwind” of this pent-up demand “is already fading”, Williamson warned.
The latest data “is now consistent with Gross Domestic Product (GDP) growth of just 0.2 percent for the second quarter, compared to quarterly growth of 0.6 percent at the start of the year”, he said.
“The situation is likely to deteriorate in the second half of the year”, he added, raising the spectre of negative growth and recession.
Monkeypox vaccine maker Bavarian Nordic ready to meet demand
As the lone laboratory manufacturing a licensed vaccine against monkeypox, Danish company Bavarian Nordic has seen its order book fill up as the usually rare disease spreads around the world.
“The approval we got in 2019, when we only sold maybe a few hundred doses, all of a sudden became very, very relevant for international health,” the company’s vice president Rolf Sass Sorensen says with a smile at the biotech company’s headquarters in Copenhagen’s harbour.
Bavarian Nordic was caught by surprise by the disease’s sudden spread earlier this year to dozens of countries outside West and Central Africa where it had previously been generally confined.
But Sorensen says he is confident the company can meet global demand even though it only has one production facility.
“With the current demand we can easily supply the global market. We have a couple of million doses in bulk that we can put into vials and make sure that the current outbreak is handled,” he told AFP in an interview.
Bavarian Nordic has an annual production capacity of 30 million vaccine doses.
The Danish company’s smallpox vaccine, marketed as Imvanex in Europe, Jynneos in the US and Imvamune in Canada, is a third-generation serum (a live vaccine that does not replicate in the human body).
It has been licensed in Europe since 2013.
It was designed against smallpox in adults, a disease considered eradicated some 40 years ago, and requires two doses for inoculation.
– World clamouring for vaccine –
According to Sorensen, the vaccine is in stock “in many countries” and can also be used against monkeypox, both before and after exposure to the virus.
“If you are vaccinated a few days after you are exposed, you can also be protected”, he explained.
After getting the green light from the US Food and Drug Administration (FDA) three years ago to use its smallpox vaccine against monkeypox, Bavarian Nordic is now applying to do the same in Europe.
The European Health Emergency Preparedness and Response Authority (HERA), created by the European Commission during the Covid-19 pandemic, has already bought more than 100,000 doses for the 27 EU countries as well as Norway and Iceland.
The first deliveries are due at the end of June for those countries deemed a priority.
The United States has also filled up their stocks with an order for 500,000 doses, in addition to 100 million doses of an older smallpox vaccine previously made by France’s Sanofi but which is known to have some side effects.
Canada and Denmark have also placed orders with Bavarian Nordic.
Other than these announcements made by the countries themselves, Bavarian Nordic — which also makes vaccines against tick-borne encephalitis, rabies, Ebola, Covid-19 and the RS respiratory virus — does not disclose which countries have placed orders.
“But I can say we have procurement requests from all over the world. We have procurement requests from the US, European countries, Middle Eastern countries, Asian countries”, Sorensen said.
The value of the contracts hasn’t been disclosed either, but for Bavarian Nordic it has clearly been a windfall: it raised its 2022 full-year outlook four times in three weeks.
– Rarely fatal –
Despite the rise in monkeypox cases worldwide, the World Health Organization has not recommended that countries mass vaccinate their populations at this stage.
The United States has so far recommended the vaccination of people who have been in close contact with an infected person, while France has recommended a single dose for contact cases in risk groups who were vaccinated for smallpox before 1980.
The European Medicines Agency approved a smallpox medication, Tecovirimat, for treatment of monkeypox earlier this year, but it is not yet widely available.
Most people recover from monkeypox within several weeks and the disease has only been fatal in rare cases.
Symptoms include lesions, eruptions on the face, palms or soles, scabs, fever, muscle ache and chills.
From January 1 to June 15, the WHO registered more than 2,103 cases and one death in 42 countries.
Europe has been the epicentre of the outbreak, with 1,773 confirmed cases, or 84 percent of the global total.
China’s Xi calls for stronger fintech oversight, security
A high-level Chinese government meeting led by President Xi Jinping has called for stronger oversight and better security in financial tech, state media reported, with the sector hit hard by a regulatory crackdown.
The government action has pummelled some of China’s biggest tech firms, wiping out hundreds of billions of dollars in market value since last year.
But with the Chinese economy hammered by Covid lockdowns, the government has rolled out a series of support measures, including a call for “predictable” tech regulation.
“Regarding large payment and fintech platform enterprises, Xi called for efforts to improve regulations, strengthen institutional weak links, ensure the security of payment and financial infrastructure, and guard against and defuse potential systemic financial risks,” according to a readout of the Wednesday meeting by the official Xinhua news agency.
The Chinese leader also “called for these enterprises to be better supported in serving the real economy”, Xinhua said.
The officials at the meeting discussed promoting the “healthy development” of fintech companies, it added, and said “China will tighten oversight” of financial holding firms and internet financial services.
Investors have been heartened in recent weeks by similar statements by the Chinese government, with some perceiving them as signals that the tech crackdown is finally easing.
Hopes also soared this month when dozens of new video games were approved, and tech stocks rose on reports that authorities were wrapping up a cybersecurity probe into ride-hailing giant Didi.
But regulators this month denied reports that they were discussing the potential revival of Ant Group’s scuppered IPO, which would have been the world’s largest public offering at the time.
Ant Group — the payments affiliate of e-commerce giant Alibaba — had its share offering cancelled at the last minute in 2020.
Alibaba was later hit with a $2.75 billion fine over alleged unfair practices.
Ant Group is set to apply for a financial licence as soon as this month, Bloomberg News reported Wednesday, citing unnamed people familiar with the matter.
Markets fluctuate, oil falls again as recession warnings build
Asian markets struggled Thursday to recover from the previous day’s battering, while oil extended losses, after Federal Reserve boss Jerome Powell admitted the economy could tip into recession as the bank hikes interest rates to fight runaway inflation.
Soaring prices and central banks’ battle to rein them in have sent a chill through global trading floors this year, while investors are also having to deal with the uncertainty wrought by the Ukraine war and patchy pandemic recovery.
Commentators have warned for some time that the world economy could be heading for another contraction owing to the sharp increase in borrowing costs and rampant inflation, which is at decades highs in several countries.
And on Wednesday the head of the most powerful central bank in the world told lawmakers that it was “certainly a possibility”.
While saying the economy was strong enough for rates to rise, he added that “frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want, which is two percent inflation and still a strong labour market.”
He also warned: “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store”.
The Fed this month hiked rates by 75 basis points and is expected to do the same in July, with some observers predicting two more such moves after that.
After a day of swings, Wall Street ended in negative territory, though off big early lows.
Asia fluctuated after a big sell-off Wednesday, with optimism at a premium among investors and analysts saying it is unlikely to improve anytime soon.
Hong Kong, Sydney, Singapore and Wellington were slightly higher but Tokyo, Shanghai, Seoul, Taipei, Manila and Jakarta fell.
“Having listened to Powell’s lengthy Senate testimony… it is clear that inflation is the domestic issue at the top of the political agenda,” said SPI Asset Management’s Stephen Innes.
“Powell consistently bobbed and weaved his way through commenting on anything of fiscal nature but was focused on deploying the tools within the Fed’s power to address their dual mandate” of reining in inflation and keeping unemployment in check.
“So we should still position for more rate hike fallout to occur.”
Powell’s comments came as other top economists added to the recession talk, with former New York Fed President Bill Dudley saying it was “inevitable within the next 12 to 18 months”.
And Deutsche Bank CEO Christian Sewing said there was a 50 percent chance of a contraction next year.
Elon Musk, JP Morgan boss Jamie Dimon and Nouriel Roubini are among several others to have made similar forecasts.
“We are still in an era where uncertainty is elevated and is expected to remain so for quite a while,” said JoAnne Feeney, of Advisors Capital Management, on Bloomberg Television.
“It’s risky right now in terms of the forward outlook for the global economy. Recession risk has clearly risen.”
The prospect of a retreat in the global economy continued to drag oil prices down as traders fret over demand, with both main contracts down more than three percent, having tumbled on Wednesday.
Brent and WTI have dropped around 15 percent over the past week, even with sanctions on Russian crude exports and China’s gradual reopening from lockdowns.
Adding to the selling was data Wednesday indicating a jump in US stockpiles.
“A slowdown in global growth is a risk to oil demand, which could help ease some of the tightness in the market,” Warren Patterson, at ING Groep, said.
“Already, we have seen demand estimates revised lower.”
– Key figures at around 0230 GMT –
Tokyo – Nikkei 225: FLAT at 26,146.71 (break)
Hong Kong – Hang Seng Index: UP 0.2 percent at 21,039.28
Shanghai – Composite: DOWN 0.1 percent at 3,263.02
West Texas Intermediate: DOWN 3.5 percent at $102.51 per barrel
Brent North Sea crude: DOWN 3.2 percent at $108.14 per barrel
Dollar/yen: DOWN at 135.74 yen from 136.22 yen late Wednesday
Pound/dollar: DOWN at $1.2241 from $1.2263
Euro/dollar: DOWN at $1.0561 from $1.0570
Euro/pound: UP at 86.27 pence from 86.17 pence
New York – Dow: DOWN 0.2 percent at 30,483.13 (close)
London – FTSE 100: DOWN 0.9 percent at 7,089.22 (close)
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