The tentative attempts are restarting June’s rally were struck down on Wednesday by a series of dire warnings from the OECD.
Lamenting the ‘most severe economic recession in nearly a century’, the Organisation for Economic Co-Operation and Development’s latest projections have the global economy contracting by 6% in 2020 – and by 7.6% in the event of a second wave of coronavirus cases.
In a sign of how poorly the outbreak has been handled in the UK, the country itself is facing a far worse slump of 11.5%, or 14% if a second wave emerges. That is worse than the likes of Spain (-11.1%), France (-11.3%) and Italy (-11.4%), countries that went through comparable situations but got a handle on this marginally quicker.
Those UK projections are, technically, better than the Bank of England’s internal forecasts, which have the economy contracting by 14%. However, that’s small comfort given that the OECD has stated the UK will likely suffer more than any other country in the ‘developed’ world.
At the strong end of things, Germany is facing a 6.6% contraction – almost half that of its major European peers – while China is looking at a positively manageable 2.6% decline.
As for the US, the OECD is currently forecasting a 7.3% contraction, rising to 8.5% in the event of a second wave. It will be interesting to see how these estimates match up with the Federal Reserve’s economic projections this evening.
Feeling sensitive after yesterday’s losses, Europe’s early gains were wiped out after the OECD’s grim announcement. The DAX dropped 0.7%, with the CAC falling 0.4%. The FTSE actually only slipped 0.3%, something that could be attributed to the OECD’s estimates not being quite as bad as those provided by the BoE.
As for the Dow Jones, the futures are currently flat ahead of this afternoon’s open, a reticence inspired by both this morning’s alarming headlines, and the fact that more are likely on their way from the Fed later today.
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