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Deutsche Bank bullish about a global economic recovery in 2021



Traders work the floor of the New York Stock Exchange.


LONDON — Deutsche Bank upgraded its global growth outlook for 2021 but cautioned that two key risks could still spoil the economic recovery from the coronavirus crisis.

In the bank’s latest report out Wednesday — entitled “Hope on the horizon” — Deutsche Bank researchers updated their calls due to what it called “the incredibly positive” coronavirus vaccine news in recent weeks, with pharmaceutical giants Pfizer, Moderna and AstraZeneca all saying their vaccine candidates were highly effective at preventing Covid-19.

“With efficacy rates at the upper end of expectations, this opens up the possibility of a much more rapid return to normal than had been anticipated only a month ago,” Deutsche Bank’s Group Chief Economist David Folkerts-Landau noted. “By the end of 2021 it may no longer have much impact on day to day life,” he added in the report.

With a vaccine on the horizon, Deutsche Bank said “it is likely that global GDP (gross domestic product) will return to its pre-virus levels in the second quarter of next year.”

The house view is for global GDP to contract by 3.7% in 2020 with the U.S. economy shrinking by 3.6%, the euro zone seeing a contraction of 7.4% and China growing 2.2%.

In 2021, Deutsche Bank forecasts that the U.S. economy will grow 4%, the euro zone economy will rebound by 5.6% and China’s economy will gain 9.5%.

Two key risks

The German lender warned there are two key risks that could overcloud this scenario, however.

The first risk is the challenges posed by flattening the virus curve as winter sets in and possible delays in vaccine production, distribution and acceptance by the public — given the rise of anti-vaccination movements and mis-information in recent years.

Deutsche Bank expects widespread vaccination to begin by the first quarter of 2021 in advanced economies, and then to continue more widely in the second quarter. Yet, it said “the big unknown is whether the population will accept to be vaccinated and if the vaccine may be made mandatory.”

The World Health Organization already warned, back in 2019, that vaccine hesitancy was one of the top 10 threats to global health.

The second key risk emanates from possible financial disruption given that “central banks and fiscal authorities have taken aggressive actions, especially in the U.S. and Europe” to counter the economic crisis caused by the pandemic.

“We see an increasing risk of financial disruption down the road stemming from the growing overvaluation of assets and mounting debt levels driven by the necessary extremes to which monetary and fiscal policy stimulus have moved,” the researchers said.

“Financial crises have often been touched off in the past under such conditions by the inevitable shift from policy ease to policy tightening, which is likely still at least several years away, but could surprise sooner,” they added.

Market views

Deutsche Bank said that its market views had not been changed from its previous report: “We stick to our view that the S&P 500 is fully valued and that rotation into cyclicals from the heavyweight stay-at-home mega caps is the main trade. This may mean a rare period of European equity outperformance.”

Meanwhile, the U.S election results, in which a divided government (with Republicans likely to retain a majority in the Senate while Democrats retain one in the House) appears the most likely outcome, “will also constrain the policy ambitions of the new administration,” it said.

Nevertheless, Folkerts-Landau noted, if the Democrats were to win the runoff elections in Georgia and take control of the Senate, a significantly larger fiscal stimulus could result. “So this will be a big focus in January,” he added.

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House opens probe into security failures in deadly U.S. Capitol attack



House Intelligence Committee Chairman Adam Schiff (D-CA) speaks to reporters next to U.S. House Majority Leader Steny Hoyer (D-MD) as House Democrats respond to a White House briefing on reports Russia paid the Taliban bounties to kill U.S. troops during a news conference following the briefing at the U.S. Capitol in Washington, U.S., June 30, 2020.

Jonathan Ernst | Reuters

The Democratic-led House of Representatives on Saturday sent a letter to FBI Director Chris Wray and other agency chiefs seeking information on the intelligence and security failures that led up to the breach of the U.S. Capitol on Jan. 6 that forced lawmakers into hiding.

Four House committee chairs signed onto the letter, which called for documents and briefings from the FBI, the Department of Homeland Security, the National Counterterrorism Center and the Director of National Intelligence on what was known ahead of the attack.

“This still-emerging story is one of astounding bravery by some U.S. Capitol Police and other officers; of staggering treachery by violent criminals; and of apparent and high-level failures — in particular, with respect to intelligence and security preparedness,” the committees wrote.

The letter was signed by Intelligence Committee Chair Adam Schiff, D-Calif., Homeland Security Committee Chair Bennie Thompson, D-Miss., Judiciary Committee Chair Jerry Nadler, D-N.Y. and Oversight Committee Chair Carolyn Maloney, D-N.Y. 

The probe comes as lawmakers — and Democrats in particular — are clamoring for more information on how a mob of President Donald Trump supporters was able to break into the so-called “People’s House,” which has its own police force, and delay the certification of President-elect Joe Biden‘s Electoral College victory by several hours.

The inspectors general of the Department of Justice, Defense, Homeland Security and Interior have launched reviews of their agency’s actions connected to the attack.

In the letter, lawmakers cited press reporting that the U.S. Capitol Police had been warned that Trump supporters would attempt to violently enter into the Capitol.

NBC News reported on Jan. 10 that the FBI and the New York Police Department passed information to the Capitol Police about threats of violence directed at the counting of the Electoral College votes.

The Washington Post reported on Jan. 12 that an FBI field office in Virginia had warned ahead of the attack that extremists headed to Washington were planning for “war.”

“Security and logistical preparations before January 6 were not consistent with the prospect of serious and widespread violence. Yet, according to media accounts that have surfaced in recent days, federal and other authorities earlier on possessed — and may have shared with some parties — intelligence and other information forecasting a dire security threat against the Congress’s meeting to certify the election results,” the committee chairs wrote.

“These latter reports, if acted upon, might have prompted more extensive planning for the event, and the infusion of far greater security and other resources,” they added.

Capitol Police officials have said they did not see FBI intelligence ahead of the attack.

The committee chairs lay out three broad lines of inquiry that they will pursue.

The first is what was known by the intelligence community and law enforcement ahead of, during and after the attack. The lawmakers also said they will be probing whether any foreign powers played a role in exploiting the crisis.

The second prong the committees are examining is whether any current or former holders of national security clearances participated in the insurrection.

The committees are also asking for information on government policy in response to the attack, including measures to prevent those implicated in crimes from traveling.

“The Committees expect and appreciate your full cooperation with this matter – while of course recognizing that resources appropriately and immediately must be allocated to efforts to counter any continuing threats to the transfer of power, including the presidential inauguration and related activities,” the committee chairs wrote.

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Armin Laschet picked as new leader of Germany’s ruling CDU party 



Candidate for the chairmanship of Germany’s Christian Democratic Union party, Armin Laschet, gestures as he takes part in a discussion at the party’s headquarters in Berlin on Jan. 8, 2021.


FRANKFURT, Germany — Germany’s ruling CDU party picked Armin Laschet to be its new chairman on Saturday, possibly paving the way for him to replace Angela Merkel as chancellor at elections later this year. 

Laschet is currently the prime minister of Germany’s North Rhine-Westphalia region, the most populous federal state in the country. He beat rival Friedrich Merz by 521 to 466 in a vote that was forced online due to the coronavirus pandemic.

Born in 1961, he was first elected to the Bundestag (German Parliament) in 1994 and his election is seen as a continuation of Merkel’s policies, as he has pledged to keep the CDU firmly in the “middle of society.” 

With him as chairman, the CDU will likely stay on message and focus on more climate change policies and environmental topics. He has a strong Catholic background which brings him support from Christian circles within the party. 

He is a trained lawyer and also worked as a journalist at the time of German reunification between 1986 and 1991. He is seen as being very liberal and is popular with the immigrant community in his home state.

If he becomes the CDU’s candidate for chancellor at September’s elections, he could be open to various coalitions — power sharing is somewhat of a recent tradition in German politics.

He has floated the idea of a government alongside the liberals, the FDP, in a bid to win over parts of the business camp inside the CDU. But he is also seen as a natural fit for a coalition with the Greens too, as he is on good speaking terms with the party and favors environmental issues.

But the CDU’s candidate for chancellor will only be determined in the spring. And it’s not certain that the newly-elected chairman will automatically move into Merkel’s role. Markus Söder, the very popular Bavarian prime minister, and also Jens Spahn, the current health minister, may also join the race to lead Europe’s largest economy.

Merkel stepped down as leader of the CDU in 2018, and her replacement Annegret Kramp-Karrenbauer quit in February 2020 after a series of communication mishaps exposed her as being too weak to lead the chancellery.

This is a breaking news story, please check back later for more.

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Biden heads into inauguration with a stock market tailwind



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