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Focus on safe havens and unemployment

US President Donald Trump and his wife Melania have contracted COVID-19. (File/Reuters)
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Updated 02 October 2020
Cornelia Meyer
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Focus on safe havens and unemployment

Updated 02 October 2020
Cornelia Meyer

The week that was:
US President Donald Trump and his wife Melania contracted COVID-19. This had an immediate impact on US futures. Markets turned risk off. Some of the immediate market action was likely triggered by algorithms responding sharply to the headlines.

This is an unprecedented situation with the presidential election due on Nov. 3. Its effect on the presidential race remains unknown. The initial assessment of some analysts is that it will improve the odds for Democrat candidate Joe Biden.
The Saudi economy contracted by 7 percent during the second quarter, with the non-oil sector shrinking by 8.2 percent and the oil sector by 5.3 percent. The non-oil private sector contracted by more than 10 percent, which is significant because it is usually the biggest contributor to jobs’ growth. The IMF predicts the Saudi economy will shrink by 6.8 percent this year and grow by 3.1 percent in 2021.
Unemployment hit record levels at 15.4 percent, despite the government supporting 60 percent of many wages. The Kingdom’s “youth bulge” will require the Saudi economy to generate around 150,000 jobs per annum. Crown Prince Mohammed bin Salman’s Vision 2020 program plays an integral part in achieving this goal. S&P affirmed KSA’s sovereign credit rating at A-/A-2 with a stable outlook.

The oil price fell for the second consecutive week amid the lukewarm economic outlook. At noon on Friday, Brent traded at $39.49 and WTI at $37.35 per barrel.
Shareholders voted to dissolve the UAE’s Arabtec Holding PJSC, putting 40,000 jobs at risk. The company and its subsidiaries racked up $216 million in losses during the first half of 2020. The Mubadala-backed group had 5 billion UAE dirhams ($1.4 billion) in receivables and 1.8 billion dirhams in debt. This is a sign of the difficulties the construction sector faces in the UAE and beyond amid shrinking GCC economies.
On Monday, Siemens Energy had a lacklustre start on the Frankfurt Stock Exchange. Shares initially slumped after its IPO valued the company’s equity at €16 billion ($18.8 billion), €5 billion lower than anticipated. This was the last puzzle in the strategy of outgoing CEO Joe Kaeser to unlock value in the conglomerate. The middling debut is an indication of how difficult it is for original equipment manufacturers to navigate energy transition, especially during an economic downturn.
The world’s third-largest equity market, the Tokyo Stock Exchange, resumed trading on Friday after an all-day outage due to technical glitches. This was the worst outage in its history and a sign of how dependent we have become on technology.
Focus:
News that the US president had contracted coronavirus precipitated a flight to safe havens. The dollar, the yen and gold did particularly well. Volatility was up, with the VIX rising to 29, which was below last week’s spike.

The question of how these investment categories can keep investors whole remains: Gold may look attractive, while other safe havens such as government bonds yield little, with interest rates near or below zero.
The dollar may benefit in the short run. However, downward pressure will remain in the long term, with further fiscal packages to follow and interest rates remaining low amid the Fed’s dovish stance.
Trump’s predicament is bound to have an impact on the stimulus negotiations between Speaker of the House of Representatives Nancy Pelosi and US Treasury Secretary Steven Mnuchin, which have resumed in person for the first time since August.
The two positions are still miles apart, with Pelosi demanding $2.2 trillion (the bill for which has passed the Democratic-controlled House) and Mnuchin’s offer of $1.6 trillion. The Democrats want to leave unemployment benefits at $600 a month, while the Republicans want to scale them down to $400. The Republicans have upped their offer of support for state and local governments by $100 billion to $250 billion. Talks are set to continue. Meanwhile, on Thursday, the president signed a stop-gap funding bill to avert a government shutdown.
Unemployment was the big theme of the week across the globe as economies slowed markedly in Europe and the US.
The hold-up on a rescue package in the US puts jobs at risk: United Airlines and American announced plans to shed 32,000 employees. Some of the redundancies could be reversed with sufficient government stimulus. US banks have fired 70,000 workers since the start of the pandemic. This week Allstate and Goldman Sachs announced a further 3,800 to 4,000 job cuts. Disney is slashing 28,000 jobs, two thirds of which are part-time roles.
Bayer announced plans to cut costs by €1.5 billion, which is bound to result in job losses, while Shell said it will slash 9,000 jobs. In Europe, many more jobs are expected to be lost as furlough schemes are trimmed.
Winter is on the doorstep in the northern hemisphere, and with the pandemic showing no sign of abating in Europe, the US and elsewhere, the effect on job markets is likely to be negative.
On Thursday, US first-time jobless claims came in at 837,000 for the week ending Sept. 26. This is 36,000 better than the preceding week, although the metric has never fallen below the 800,000 mark since March.
September non-farm payroll rose by 661,000, which was below forecasts. The unemployment rate came down to 7.9 percent, which was above expectations. Labor participation stood at 61.4 percent. This marks a downshift in the economic recovery. The question is how companies will calibrate staffing needs for 2021.
Where we go from here:
The EU summit threatened sanctions against Belarus, demanding President Alexander Lukashenko end a campaign of repression and free all political prisoners. It also threatened to “keep all options and instruments at its disposal” regarding Turkey, while offering a “positive” political EU-Turkey agenda, which indicates a double-tracked approach.
The EU issued a letter of notice to the UK in response to the House of Commons having passed the Internal Market Bill, which reneges on parts of the withdrawal agreement. Sterling fell 0.7 percent on the news.
The last round of Brexit negotiations made little headway. UK Prime Minister Boris Johnson will intervene directly for the first time since June, and is scheduled to call EU Commission President Ursula von der Leyen on Saturday.

— Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources. Twitter: @MeyerResources

Topics: coronanomics

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Houthis claim attack on Greek merchant vessel off Yemen

Updated 2 min 56 sec ago
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Houthis claim attack on Greek merchant vessel off Yemen

Updated 2 min 56 sec ago
DUBAI: Yemen’s Houthi rebels claimed responsibility for attacks on Monday along the Red Sea shipping route, including on a Greek commercial vessel, according to a British maritime agency and the US military.
The US Central Command, or CENTCOM, said the Houthis had targeted MV Cyclades, a Greek commercial vessel flying the Maltese flag, with three anti-ship ballistic missiles and three drone strikes.
“Initial reports indicate there were no injuries and the vessel continued on its way,” CENCOM posted on X, formerly Twitter.
Earlier, the UK Maritime Safety Agency (UKMTO) reported explosions “in close proximity” to a commercial ship sailing off the Yemeni coast northwest of Mokha.
“Vessel and crew are reported safe,” the agency, run by the Royal Navy, added.
Maritime security firm Ambrey said the Malta-flagged container ship was en route from Djibouti to Jeddah and was likely targeted “due to its listed operator’s ongoing trade with Israel.”
Houthi rebels claimed responsibility for firing at the Cyclades, MSC Orion and two US vessels.
The Iran-backed group, which controls the Yemeni capital Sanaa and much of the country’s Red Sea coast, has launched a flurry of attacks against ships since November.
It says their campaign is in solidarity with Palestinians amid the Gaza war.
CENTCOM also said that US forces shot down an unmanned aerial vehicle (UAV) over the Red Sea on Monday morning as it was headed on a flight path “toward USS Philippine Sea and USS Laboon.”
“The UAV presented an imminent threat to US, coalition, and merchant vessels in the region,” it wrote on X, adding that there had been no injuries or damage reported by US forces or nearby commercial ships.
Since January, the United States and Britain have launched repeated strikes on Houthi targets in Yemen in response to the ship attacks.

Death toll from heavy rains in northwestern Pakistan surges to 92

Updated 12 min 18 sec ago
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Death toll from heavy rains in northwestern Pakistan surges to 92

  • Heavy rains in Pakistan’s northwest have injured 110, destroyed 4,200 houses since Apr. 10, says authority
  • Prone to natural disasters, Pakistan consistently ranks among countries most affected by impacts of climate change
Updated 12 min 18 sec ago
REHMAT MEHSUD

PESHAWAR: The death toll from rain-related incidents in Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province since Apr. 10 has surged to 92 while the number of injured has increased to 116, a spokesperson of the Provincial Disaster Management Authority (PDMA) confirmed on Tuesday. 

The rains which began on Apr. 10 have destroyed 4,200 houses and damaged 5,900 others, PDMA spokesperson Anwar Shehzad shared. At least 17 people have been killed and 23 injured in rain-related incidents over the past three days, as per data from the PDMA’s latest report on Tuesday. 

The report said the 17 dead included nine men, three women and five children while the 23 injured included nine men, three women and 11 children. Deaths and financial losses due to heavy rains were reported in Bajaur, Swat, Mansehra, Battagram, Dir Lower, Malakand, Lakki Marwat, Shangla, Mohmand and South Waziristan districts, the PDMA report added. 

“At least 92 persons have died including women, children, and elderly people while 116 others were wounded since Apr. 10 in incidents involving roof collapse and lightning in parts of the province,” Shehzad told Arab News.

The PDMA’s report said the authority, district administrations and relief teams are engaged in relief activities in the affected districts. “The PDMA has also directed district administrations of the affected districts to provide immediate financial support to the victims,” it added. 

Pakistan has received heavy rains this month that have triggered landslides and flash floods in several parts of the country.

The eastern province of Punjab has reported 21 lighting- and roof collapse-related deaths, while Balochistan, in the country’s southwest, reported at least 15 deaths this month from torrential rains. 

In 2022, unprecedented rains swelled Pakistan’s rivers and at one point flooded a third of the country, killing 1,739 people. The floods also caused over $30 billion in damages, from which Pakistan is still trying to rebuild.

Pakistan has been prone to natural disasters and consistently ranks among the most severely affected countries in the world due to the effects of climate change.

Topics: Pakistan Arab News Pakistan rainfall

Hamas prepares response to Gaza truce offer

Updated 14 min 17 sec ago
AFP
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Hamas prepares response to Gaza truce offer

  • Returning to Qatar after the latest talks in Cairo, the Hamas delegation said it would “discuss the ideas and the proposal”
Updated 14 min 17 sec ago
AFP

JERUSALEM: Hamas was studying Tuesday Israel’s offer of a 40-day truce in the war in the Gaza Strip in exchange for the release of scores of hostages held since the Palestinian militant group’s October 7 attacks.
Returning to Qatar after the latest talks in Cairo, the Hamas delegation said it would “discuss the ideas and the proposal... we are keen to respond as quickly as possible,” a Hamas source told AFP on condition of anonymity.
Egyptian sources told Al-Qahera News, a site linked to Egyptian intelligence services, that the Hamas delegation would “return with a written response.”
US Secretary of State Antony Blinken described the truce terms as “extraordinarily generous,” while the White House asked fellow mediators Egypt and Qatar to increase pressure on Hamas to accept the latest push to halt the nearly seven-month-old war.
According to Monday night call readouts, US President Joe Biden urged the Egyptian and Qatari leaders “to exert all efforts to secure the release of hostages held by Hamas,” calling this “the only obstacle” to securing relief for civilians in the besieged strip.
For months, Egypt, Qatar and the United States have been trying to secure a new agreement between the combatants. A one-week truce in November saw 80 Israeli hostages exchanged for 240 Palestinians held in Israeli prisons.
Relentless Israeli bombardment has meanwhile devastated Hamas-run Gaza, flattening much of the territory and bringing its people to the brink of famine, while threatening to unfurl into a wider regional conflict.
In the far southern city of Rafah, Palestinians despaired over the war while searching for victims of the latest strike.
“Civilian individuals with no ties to Hamas or any other group were struck by a rocket, torn apart,” Um Louay Masri said at a destroyed building where children were being pulled out from underneath the rubble. “Why did this occur?“
To global alarm, Israel has vowed to go after Hamas battalions in Rafah, where the majority of Gaza’s 2.4 million people have sought refuge.
But Foreign Minister Israel Katz said over the weekend the government may “suspend” that operation if a truce is reached.

Blinken’s Mideast tour
Speaking in Riyadh on his seventh visit to the region since the start of the war in Gaza, top US diplomat Blinken underscored the need for Hamas to “decide quickly” on the truce.
He told a World Economic Forum special meeting that he was “hopeful that they will make the right decision.”
At the WEF meeting, Egypt’s Foreign Minister Sameh Shoukry said “the proposal has taken into account the positions of both sides.”
“We are hopeful,” he added.
British Foreign Secretary David Cameron said that Hamas has been offered a “sustained 40 days’ ceasefire, the release of potentially thousands of Palestinian prisoners, in return for the release of these hostages.”
On the sidelines of the WEF, US, European and Arab representatives met to discuss how to advance a two-state solution to the Israeli-Palestinian conflict.
Saudi Foreign Minister Prince Faisal bin Farhan told the gathering that tangible and irreversible steps toward establishing a Palestinian state would be an essential component of any durable ceasefire deal.
To incentivise Israel to support a Palestinian state, Washington has pushed the prospect of normalized Israel-Saudi relations, with Blinken suggesting Monday that some progress was being made in that arena.
Israeli Prime Minister Benjamin Netanyahu is a long-standing opponent of Palestinian statehood however, and Israel has previously rejected a permanent ceasefire.
A Hamas source has told AFP the group is keen for a deal that “guarantees a permanent ceasefire, the free return of displaced people, an acceptable deal for (a prisoner-hostage) exchange and an end to the siege” in Gaza.

Mounting pressure
Netanyahu is under tremendous pressure from the families of hostages taken by Hamas in the October 7 attack to secure their release.
On Monday, the families of two Israeli captives seen alive in a video released by Hamas last weekend called for their release.
“I demand the leaders of the free world to help us bring our people home,” said Aviva Siegel, who was freed in the November truce and is the wife of captive Keith Siegel.
Israel estimates 129 hostages remain in Gaza, including 34 believed to be dead.
Hamas’s attack resulted in the deaths of about 1,170 people in Israel, mostly civilians, according to an AFP tally based on Israeli official figures.
Israel’s retaliatory offensive has killed at least 34,488 people in Gaza, mostly women and children, according to the health ministry in the Hamas-run territory.
That tally includes at least 34 deaths in a 24-hour window, the ministry said Monday, down from a peak this month of at least 153 deaths on April 9.
At Rafah’s Al-Najjar hospital, a crowd of grief-stricken relatives jostled over the dead, shrouded in white.
“We demand the entire world to call for a lasting truce,” Abu Taha said at the hospital.

Access of aid
After an Israeli drone strike in early April killed seven workers from a US-based charity, Biden suggested to Netanyahu, for the first time, that continued US support could be conditional on protection and aid for civilians.
On Sunday, the White House said Israel was letting more aid trucks into Gaza in line with “commitments” Biden asked it to meet.
The UN has, however, continued to cite “access constraints” that significantly hinder delivery.
The US military is building a pier to help boost humanitarian supplies — an effort that the Pentagon on Monday said would cost Washington at least $320 million.
The UN has warned a heatwave and the proliferation of insects are increasing the risk for diseases at the swelling tent cities in Gaza.
“I have sick children who cannot tolerate the heat,” said Alaa Al-Saleh, a Palestinian displaced to an encampment in Rafah. “We are cramped inside the tent, rarely going outside.”

Topics: War on Gaza

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Pakistani PM says IMF approval of $1.1 billion funding to bring economic stability

Updated 24 min 26 sec ago
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Pakistani PM says IMF approval of $1.1 billion funding to bring economic stability

  • Funding is last tranche of a $3 billion standby arrangement with the IMF secured last year
  • Islamabad is seeking a new, larger long-term Extended Fund Facility agreement with the IMF
Updated 24 min 26 sec ago
SAIMA SHABBIR

ISLAMABAD: Prime Minister Shehbaz Sharif said on Tuesday the International Monetary Fund’s approval of $1.1 billion in funding for Pakistan would bring economic stability, amid discussions for a new bailout loan.

The funding is the second and last tranche of a $3 billion standby arrangement with the IMF, which Islamabad secured last summer to help avert a sovereign default.

The approval came a day after Sharif discussed a new loan program with IMF Managing Director Kristalina Georgieva on the sidelines of the World Economic Forum in Riyadh.

“Sharif expressed his satisfaction over the release of the last financial tranche of the IMF today,” the Prime Minister’s Office (PMO) said in a statement. “Receiving the last tranche of 1.1 billion dollars from the IMF will bring more economic stability in Pakistan.”

This is the second Stand-by Arrangement (SBA) for short-term financial assistance that Pakistan has completed, the last one being in 2016 during the government of three-time PM Nawaz Sharif, who is Sharif’s elder brother. 

“Bitter and difficult decisions were taken for the economic security of Pakistan, but their fruits are coming in the form of economic stability,” Sharif added about reforms under the IMF program.

The $350 billion economy faces a chronic balance of payments crisis, with nearly $24 billion to repay in debt and interest over the next fiscal year — three-time more than its central bank’s foreign currency reserves.

Islamabad is seeking a new, larger long-term Extended Fund Facility (EFF) agreement with the fund after the current standby arrangement expires this month, and continuing with necessary policy reforms to rein in deficits, build up reserves and manage soaring debt servicing.

Topics: Pakistan IMF Talks IMF Pakistan Shehbaz Sharif Arab News Pakistan

Aramco acquires 40% stake in GO, marking first entry into Pakistani fuel retail market

Updated 43 min 50 sec ago
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Aramco acquires 40% stake in GO, marking first entry into Pakistani fuel retail market

  • Saudi oil giant Aramco inked agreement to buy 40 percent stake in Gas and Oil Pakistan Ltd. in December 2023 
  • Acquisition to bring much-needed foreign direct investment in Pakistan’s energy sector, says competition commission
Updated 43 min 50 sec ago
KHURSHID AHMED   

KARACHI: The Competition Commission of Pakistan (CCP) this week approved Saudi oil giant Aramco’s decision to acquire a 40 percent stake in local company Gas & Oil Pakistan Ltd, officially marking the Saudi company’s entry into Pakistan’s fuels retail market. 

Aramco and Gas signed the agreement to acquire 40 percent stake in Gas and Oil Pakistan Ltd., a licensed oil marketing company, in December 2023. Gas and Oil Pakistan Ltd. is involved in the procurement, storage, sale, and marketing of petroleum products and lubricants. It is also one of Pakistan’s largest retail and storage companies.

Aramco is a global integrated energy and chemicals company that produces approximately one in every eight barrels of the world’s oil supply and develops cutting-edge energy technologies. Aramco Asia Singapore Pte. Ltd., a Singaporean company wholly owned by Saudi Aramco, filed the pre-merger application with the CCP. It specializes in sales, marketing, procurement, logistics, and related services, with a focus on prospecting, exploring, drilling, extracting, processing, manufacturing, refining, and marketing hydrocarbon substances.

“The Competition Commission of Pakistan (CCP) approved a 40 percent equity stake acquisition in Gas & Oil Pakistan Ltd. (GO) by Aramco, a global leader in integrated energy and chemicals,” the CCP said in a statement on Monday. “This transaction marks Aramco’s first entry into Pakistan’s fuels retail market, underscoring its confidence in the country’s economic potential and its commitment to its growth.”

The CCP said it had authorized the merger after determining that the acquisition would not result in the acquirers’ “dominance” in the relevant market post-transaction.

“Aramco’s acquisition indicates a significant milestone in Pakistan’s energy sector, bringing advanced expertise and technology to the fuels retail market,” it said. “This development is expected to boost competition, elevate service standards, and provide consumers with a broader range of high-quality products.”

The CCP said the acquisition would help bring much-needed foreign direct investment in Pakistan’s energy sector, contributing to economic growth and development of the country. 

In February 2019, Pakistan and Saudi Arabia inked investment deals totaling $21 billion during the visit of Saudi Crown Prince Mohammed Bin Salman to Islamabad. The agreements included about $10 billion for an Aramco oil refinery and $1 billion for a petrochemical complex at the strategic Gwadar Port in Balochistan.

Pakistan’s Prime Minister Shehbaz Sharif, who is in Saudi Arabia for a special meeting of the World Economic Forum, held meetings this week with Saudi Arabia’s ministers of energy, economy and planning, and environment, according to his office.

In a meeting with Saudi Energy Minister Prince Abdulaziz bin Salman on Monday evening, Sharif highlighted initiatives undertaken by Pakistan to facilitate investment in the energy sector. The Saudi side showed keen interest in Pakistan’s energy projects highlighted by Sharif, the Prime Minister’s Office (PMO) said. 

The proposed projects included building new and improving existing energy infrastructure, increasing focus on renewable energy, and bringing efficiency across entire energy ecosystem in Pakistan, according to the statement. 

Pakistan and Saudi Arabia enjoy strong trade, defense and cultural ties. The Kingdom is home to over 2.7 million Pakistani expatriates and serves as the top source of remittances to the cash-strapped South Asian country.

Both countries have been closely working to increase bilateral trade and investment deals, and the Kingdom recently reaffirmed its commitment to expedite an investment package worth $5 billion.

Topics: Pakistan Saudi Ties Pakistan Aramco

Latest updates

Houthis claim attack on Greek merchant vessel off Yemen
Death toll from heavy rains in northwestern Pakistan surges to 92
Hamas prepares response to Gaza truce offer
Pakistani PM says IMF approval of $1.1 billion funding to bring economic stability
Aramco acquires 40% stake in GO, marking first entry into Pakistani fuel retail market

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