-More voices join the chorus singing a tune of unlikely recovery
-Norway’s Equinor sees continued demand weakness
The price for Brent crude oil was slipping away from gains in Asian trading early Friday after a weaker dollar supported the global benchmark overnight. Data, meanwhile, continue to show the market is clearly oversupplied and demand signals are weakening as pandemic stubbornness competes with public restlessness. The European economy got a shot in the arm with recent stimulus efforts, and manufacturing indices are strong. The US economy, however, may fall victim to the election-inspired infighting hobbling the US political machine. Elsewhere, Norwegian major Equinor reported a sharp drop in income during the second quarter and expected weak demand to continue.
Positive manufacturing data from the core continental economies in the euro-zone may be behind an early-morning boost for commodities. The price for Brent crude oil was up 0.16% as of 8 a.m. to hit $43.38 per barrel, though gains were below the highs posted during the Asian session. Tropical Storm Hanna poses a flood risk, meanwhile, to the US shale patch.
Manufacturing indices in the French, German and Spanish economies all came in on the positive side of growth, putting the composite PMI reading for the euro area at 54.8, better than expected and above the previous reading of 48.5, the wrong side of the 50 mark that separates growth from contraction. Bankruptcies and signs of redundancies elsewhere, however, are creating headwinds. Bert Colijn, an economist at ING Bank, told the Bloomberg news agency early Friday that, for the European economy, “a V-shaped recovery seems quite unrealistic, despite the encouraging numbers.” In the energy sector, Norwegian major Equinor posted negative income during the second quarter as the quarantine economy took a bite out of demand. President and CEO Eldar Saetre said his company was bracing itself for an extended period of lower demand and reduced investments.
France and Germany spearheaded efforts last weekend to pump stimulus money into the continental economy after fending off opposition from the so-called frugal states, led by the Netherlands. In the US economy, measures meant to prevent foreclosures and evictions during the quarantine expire on Friday. And extra financial support for the estimated 19.5 million people without a job in the world’s largest economy expires next week, meaning those without a job will see biweekly financial support shrink by more than 60%. Lawmakers, however, do not expect to see another bid for a formal stimulus package again until Monday. Without an extension, the US economy will undoubtably contract in the second half and the logistics of a late-game push for more relief will leave any additional support stuck in the bureaucratic gears. Mark Zandi, the chief economist at Moody’s Analytics, said he expected unemployment levels “will remain in the double digits until well after the pandemic is over,” leaving many US households in dire straits.
That sentiment is in stark contrast to the narrative pitched by the Trump administration, which continues to see stock market figures as indicative of the health of the US economy. The disconnect is apparent in other policy arenas as well. Sometimes violent protests have continued across the United States, inspired by concerns about racial injustice. Federal authorities have been accused of using, and planning to use, paramilitary tactics against civilians to control the unrest. Timothy Snyder, a Yale professor of history wary of authoritarianism in the US political arena, drew parallels in Foreign Policy magazine between the Trump administration and fascists strains in Europe under Nazi Germany.
“As the German parliament burned [in 1933], the Nazis mischaracterized the event, speaking of a vast left-wing conspiracy to destroy the country, the race, and so on,” he wrote. “Something not so dissimilar is taking place now, as Attorney General William Barr and acting Secretary of Homeland Security Chad Wolf rationalize the use of force against Americans on the basis of a dark fairy tale about what the protests mean.”
It is ironic, then, that US Secretary of State Mike Pompeo said in remarks on former President Nixon’s legacy on Chinese engagement that US patience with containment had run its course. Against charges of fascism at home, Pompeo said it’s time for a “new alliance of democracies” to stem the ascendancy of Communist China, arguing that Beijing has set the rules of engagement for too long.
“Free nations must set the tone,” he said. “We must operate on the same principles.”