How will we get over Covid-19? US stocks perk up; IMF warns of humanitarian crisis

There’s little festive cheer anywhere in the world as Covid-19 containment measures have stopped business activity at the busiest time for the retail and hospitality sectors. Although vaccines are being rolled out in the US and the UK, New Yorkers have been warned by their mayor, Bill de Blasio, to prepare for a full shutdown and Londoners headed into stricter rules this week. Other countries have gone into a hard lockdown, including European economic giant Germany.

US stock markets reflected optimism at the start of this week that 2021 will be better. Gold, a safe haven, depreciated by 0.8% to $1,825.47 an ounce, the weakest in almost two weeks, reports Bloomberg. Major indices, including the MSCI All-Country, Stoxx Europe 600, S&P500 and Nasdaq Composite, all rose. “There is huge pent-up investment demand across the entire institutional world,” Michael Strobaek, global chief investment officer at Credit Suisse Group, is quoted as saying on Bloomberg TV while other analysts said the US economy would improve on the back of vaccine roll-out.

In stark contrast, the International Monetary Fund (IMF) warns that Covid-19 has exacerbated problems. “Employment has collapsed, threatening a major humanitarian crisis in many economies, and inflation has been further depressed by weak activity and falling commodity prices. While more stimulus is needed — along with better ways to anchor inflation expectations — the post-2008 playbook won’t suffice,” cautions Tobias Adrian, the Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department.

“Policy rates have already been pushed to zero or below, and very low yields on long-term government bonds limit the scope to provide stimulus through purchases of these instruments,” says Adrian, in a note released on Monday. His analysis is a stark reminder of the challenging road ahead for countries with already high unemployment like SA, with finance minister Tito Mboweni warning several times that the risk of a financial crisis is high.

PS: For an uplifting, inspiring story of resilience from an entrepreneur who rebuilt his fortunes after losing his business and begging creditors for time to keep the shirt on his back and roof over his head, download this week’s The Alec Hogg Show. It features Port Elizabeth’s Adrian Gardiner, who remains heavily invested in the Covid-19 affected hospitality sector, but retains all the optimism of his youth (here, on Spotify or here, on BizNews Radio).

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