Weekly Roundup - 31/01/2021

Goods shortages as shipping costs increase:

The continuous and dramatic increase of the cost of shipping goods from Asia is a negative effect on the consumer goods in Europe for importers of everything from home furnishings, bicycles and sports activities to children’s toys and dried fruits. A lack of empty containers in China has increased the prices on sea trade routes to Europe in the space of eight weeks, with costs hitting record highs as shippers and freight forwarders compete to secure space on vessels. As a consequence, retailers and manufactures were facing shortages of both finished goods and components. These shortages have an impact on many industries and could affect the trade between Europe and Asia. The secretary-general at the Federation of the European Sporting Goods Industry told that delays of several weeks of Nike, Puma or Adidas clothes could have a “huge impact” on businesses because the winter collection is supposed to be now in the shops and not in spring. The supply constraints are also having an impact on production across the eurozone. The European Commission is aware of the situation; however, it is still unclear whether the situation was the result of anti-competitive behaviour or other causes.

UK’s businesses in the Pacific:

After leaving the EU, the world’s largest trading bloc, Britain is ready to apply for joining a trade group in the Pacific. The idea behind the respective joining is to strengthen the trade relations among London and Washington, after the US will join the group as well. However, the Biden administration is not very convinced about joining the group, their priorities being to improve their own economy. There are some critics that a trade deal with 11 countries on the other side of the world would bring limited economic benefit to the UK, but Mr Johnson intention is to prove that after leaving the European Union, Britain is not affecting and is looking forward for new partnerships across the world, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP includes fast-growing economies including Mexico, Malaysia and Vietnam along with established regional economies such as Japan, Australia, New Zealand and Canada. A UK government study in 2008 showed that trade deals with non-EU countries and blocs only raise British GDP by a total of 0.1-0.4% over the long term, but we will see if the situation has changed or not.

Third vaccine approved by the EU:

The struggle of Europe’s vaccination campaign received help when AstraZeneca secured EU regulatory approval for its coronavirus vaccine, even if there were doubts over the effectiveness of the vaccine for older people. The concerns coming from Germany and France regarding the effectiveness on those aged 65 and over, were clarified when the European Medicines Agency said it backed the Oxford/AstraZeneca jab for all individuals aged 18 and over. The EMA specified that most study participants were aged between 18 and 55, and that it was a lack of results in participants older than 55 to provide the efficacy in those groups. After facing gaps in the distribution of the vaccine among its member states especially in Madrid and Paris areas, the EU is content to approve its third vaccine, after BioNTech/Pfizer and Moderna. Brussels is pressing AstraZeneca to provide a cut of about three-quarters to the 100m doses that have been ordered. The jab is a key factor for many countries in the EU and beyond because it is cheaper and requires less intense refrigeration than the mRNA technology vaccines of BioNTech/Pfizer and Moderna. The European bloc has ordered 300m doses of the AstraZeneca drug, with an option to take 100m more.

The US economy is still on the edges:

The discovery of a vaccine against the Covid-19 will not bring the economy as it was before. According to Jay Powell, the battle against the economic fallout is far from over and the Federal Reserve is justified to hold its main interest rate close to zero and its asset purchases steady. The Fed described a weakening in the recovery as the US suffers through the latest wave of coronavirus infections, which led to net job losses in December. The next months will be very important for the US economy and achieving collective immunity through vaccinations will be a big step. The decisions made in August, by the Fed for maintaining loose monetary policy with a higher tolerance for inflation increases and deeper responsibilities to full employment were reapproved by Mr Powel. US stocks extended earlier losses; the S&P 500 had its largest drop since October, closing the day down 2.6%. The Fed meeting came as Mr Biden urged the Congress to approve a $1.9tn fiscal stimulus plan in addition to the $900bn already implemented by Mr Trump. However, the IMF expects the US and China to be the most successful at improving their economies through the pandemic, leaving Europe and other emerging markets behind.

Robinhood’s restrictions on GameStop:

US regulators confirmed that they would review trading curbs imposed by online brokerages and act on any evidence of market manipulation, as Robinhood tightened restrictions on purchases of hot stocks including GameStop, again. GameStop, a video games retailer, is one of a number of stocks targeted by users of Reddit message boards. A day after Robinhood had stopped clients buying more stock, GameStop shares made another huge move, rebounding to close up 68%. After securing its own finances with a $1bn fundraising overnight, the broker had allowed clients to resume purchases. Robinhood did not stop there with the restrictions and started limiting users to purchase one additional share in GameStop and other stocks including AMC and BlackBerry. The US Securities and Exchange Commission (SEC) intervened and will review the restrictions imposed by Robinhood and others to see if they may disadvantage clients or inability to trade certain securities. The SEC said market infrastructure was shaken by the huge trading volumes, and it warned “extreme stock price changes are likely to reveal investors to rapid and negative losses and sabotage market confidence.

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