Overview of a constantly changing summer

The july 13, 2021

We are pleased to share with you this this new weekly article discussing perspectives for this summer 2021.

On the menu :

Global economy facing the Variant Delta :

This Saturday, the G7 was able to warn in particular against the Delta variant which is growing in importance, posing risks to the world economy. We can fear a slowdown in the recovery, because while vaccination in France has made itself heard by a large number of people and continues to gain traction, the converse is not quite as true in many countries. It should be noted, however, that some 500 million doses of vaccine are distributed across all regions of Europe. Even though the fear that the current vaccines will not perform as well as one would hope in the face of the different variants, the governments of the 27 member states have a responsibility to administer them to their citizens. We can be reassuring in the face of the fourth wave, with a high probability that this last resembles the third wave that we have known, that is to say more cases in view of a more virulent contagion, but with however less severe cases. The global economic recovery remains exposed, although an impact on economic activity ultimately remains very small.

We can indulge in a positive projection, at least with regard to France, following the announcements of our President of the Republic on Monday, July 12, 2021, on the occasion of the government announcements which follow the results of the development. of the pandemic.

Indeed, the data are rather reassuring with growth for 2021 at 6%.

The employment figures are also rather encouraging with more than 187,000 jobs created since the start of the year. We can also boast of being the most attractive country in Europe for two years.

US data and the Fed :

The Fed will remain very attentive to the data to decide on the timetable for monetary tightening.

Inflation in general will be high, however, special attention will be paid to real estate prices as well as wage growth.

As we were able to talk about last week, with the expiration of unemployment benefit entitlements coming in the fall in various US states, employment figures are expected to jump in the coming months.

Taking into consideration all of these aforementioned elements, a transition or monetary tightening from September is very likely.

Chinese economic policy :

The People's Bank of China recently decided to reduce the reserve requirement ratio (RRR) of all banks by 50 points, which is equivalent to 1 trillion yuan in the long run (to give a more precise idea, this represents 154 billion from July 15, 2021. However, banks subject to an RRR of 5% will be exempt from the further reduction. According to investment bank UBS, the move could prove positive by boosting market sentiment for stocks in certain sectors.

You will understand, this measure was considered to support its post-Covid economic recovery.

Despite a significant rebound leading to growth levels seen before the pandemic, thanks in particular to a surprisingly resilient export sector, growth is tending to run out of steam and it is small businesses that are paying the heaviest price in the recent past. soaring commodity prices.

We can see in this a primary support given to local financial assets which have underperformed at the start of the year, and in particular the equity markets. The deduction is as follows: China is giving itself the means to once again support its economy by making improvements in terms of liquidity.

Oil and OPEC's positioning :

 As you may have seen, last week OPEC members failed to reach unanimous agreement on increasing the production of barrels of oil. This lack of agreement could result in a sharp increase in the latter's markets. Recall that in June, the threshold of 70 dollars was crossed, a record for more than two years. Indeed, the postponement of the OPEC + meeting is approaching August with no more barrels from the alliance.

The closing up of the oil price suggests a renewal in August of the production quotas already applied in July and not, as had been envisaged for a time, an increase in production. Moreover, without an agreement on an increase in oil production, the $ 80 threshold could be exceeded in the coming weeks.

Translation : a price war could be envisaged with as a reference an unbalanced increase in production, which would lead to drops in the price of oil considerably.

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Article by : Noémie MARZLOFF

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