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UK risks lasting economic scars from Covid and Brexit, OECD warns

UK risks lasting economic scars from Covid and Brexit, OECD warns

The UK will need to invest heavily in digital infrastructure and drive through reforms to raise productivity if it is to repair long-term economic damage left by the Covid-19 crisis and the effects of Brexit, the OECD said on Wednesday.

Britain’s economy is one of the hardest hit by the pandemic among the 37 tracked by the international organisation, which said UK gross domestic product was set to be 10.1 per cent smaller at the end of 2020 than it was a year earlier and to recover only some of the ground in 2021, with growth of 7.6 per cent.

These forecasts are contingent on the course of the virus, and the extent of restrictions needed to contain it, but the UK’s prospects are even more uncertain because of the risk of a disorderly exit from the EU single market, which the OECD said could depress GDP by 5 per cent over two years.

Further public investment would be needed in digital infrastructure, such as high-speed broadband in deprived or rural areas, and the government could do more to push the transition to green technology, for example by making support to businesses in polluting industries conditional on switching to cleaner processes.

“Actions taken to address the pandemic and decisions made on future trading relationships will have a lasting impact on the UK’s economic trajectory for years to come, so they should be in line with long-term objectives,” said Laurence Boone, the OECD’s chief economist. “Productivity growth in service sectors will have to accelerate significantly for the recovery to be long-lasting and sustainable,” she said.

The immediate challenge is to support low-income households and get people back into good jobs, it found. Alvaro Santos Pereira, the OECD’s director of country studies, said higher unemployment would have “a massive impact” if it

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Billionaire investor Howard Marks warns investors should expect the lowest returns in history and the market is vulnerable to ‘negative surprises’

Billionaire investor Howard Marks warns investors should expect the lowest returns in history and the market is vulnerable to ‘negative surprises’

Howard marks


  • In a memo released Tuesday, billionaire investor Howard Marks warned investors to expect the “lowest prospective returns in history.” 
  • The Oaktree Capital Management co-founder said he’s been forecasting low returns for the last few years, but when the pandemic caused the Fed to move interest rates lower, expected returns lowered as well. 
  • Marks listed an array of reasons interest rates lowered returns, ranging from their stimulative effect to the reduction in the risk-free rate. 
  • “In my view, when uncertainty is high, asset prices should be low, creating high prospective returns that are compensatory,” Marks said. “But because the Fed has set rates so low, returns are just the opposite.”

Billionaire investor Howard Marks warned investors in his latest memo to expect the lowest returns in history, and said that the market is vulnerable to “negative surprises.” 

“In my view, the low interest rates represent the dominant characteristic of the current financial environment, creating the dominant consideration for investors: the lowest prospective returns in history,” the co-founder and co-chairman of Oaktree Capital Management wrote. 

In his memo titled “Coming Into Focus” released Tuesday, he said that for years he has been describing a vulnerable investment environment with the “lowest prospective returns ever,” pro-risk behavior from investors hunting for high returns, excessive asset prices, and an unusually high level of uncertainty.

Read more: MORGAN STANLEY: Buy these 44 cheap stocks poised to surge as the economy continues to recover and reopening expands.

When the coronavirus pandemic prompted the Federal Reserve to lower interest rates, a policy  move Marks viewed as necessary, expected returns lowered even more, he said. Marks listed an array of reasons interest rates lowered returns, ranging from their stimulative effect to the reduction in the risk-free rate. 

“After a brief foray into bargain-land in March,

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A prolonged COVID-19 pandemic could lead to a sharp correction in the stock market, IMF warns

A prolonged COVID-19 pandemic could lead to a sharp correction in the stock market, IMF warns

nyse trader mask


  • Should the COVID-19 pandemic continue for longer than expected, the economic consequences will likely lead to a sharp correction in global stocks, the IMF warned on Tuesday.
  • Extraordinary policy measures from governments around the world helped stem the decline in stocks since the initial February decline, but underlying economic conditions remain weak and the future outlook is highly uncertain, the IMF said. 
  • Investor worry over a potential prolonged COVID-19 pandemic could have been heightened on Tuesday after Johnson & Johnson paused its phase III vaccine trial due to an unexpected illness.
  • As long as investor optimism over easy fiscal and monetary policy continues, stocks can stay elevated for some time, but a significantly delayed economic recovery due to the persistence of COVID-19 could put a serious dent in that optimism, according to the IMF.
  • Visit Business Insider’s homepage for more stories.

The COVID-19 pandemic and its associated economic decline led to a sizable stock market correction that was stabilized thanks to extraordinary fiscal and monetary policy measures from governments around the world.

But there’s a real financial disconnect between the stock market and the economy, and while the disconnect could narrow if a swift and sustainable economic recovery materializes, the opposite could happen if the economic recovery is delayed due to it taking longer to get COVID-19 under control, the IMF warned on Tuesday.

“As long as investors believe that markets will continue to benefit from policy support, asset valuations may stay elevated for some time. Nonetheless, and especially if the economic recovery is delayed, there is a risk of a sharp adjustment in asset prices or periodic bouts of volatility,” the IMF said. 

Easy monetary policies like low interest rates and the buying of distressed assets, combined with fiscal stimulus, helped maintain the flow

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IMF upgrades economic forecast but warns of long-term coronavirus damage

IMF upgrades economic forecast but warns of long-term coronavirus damage

The global economy may take a smaller hit from the coronavirus recession in 2020 than was once expected but faces significant long-term challenges that will likely widen inequality, the International Monetary Fund (IMF) said Tuesday.

In a set of new projections, the IMF slightly upgraded its outlook on the 2020 economic decline while warning that a lack of further fiscal and monetary support could cause deeper damage to the global economy.

The IMF now expects global growth in 2020 to fall to -4.4 percent, 0.5 percentage points better than its June projection of -4.9 percent. The international lender expects growth to rebound to 5.2 percent in 2021, down 0.2 percentage points from a June a projection of 5.4 percent.

“As a result of eased lockdowns and the rapid deployment of policy support at an unprecedented scale by central banks and governments around the world, the global economy is coming back from the depths of its collapse in the first half of this year,” wrote IMF chief economist Gita Gopinath in a Tuesday article

“This crisis is however far from over,” she continued. “The ascent out of this calamity is likely to be long, uneven, and highly uncertain.”

The global economy has gradually rebounded from the onset of the coronavirus pandemic earlier this year, which caused the steepest economic decline since the Great Depression.

Employment and global economic activity has begun to recover as countries adapt to life amid COVID-19, which has claimed more than 1 million lives globally and more than 215,000 in the U.S.

Gopinath wrote that “signs of a stronger recovery” in the third quarter warranted the IMF’s slight upgrade to its forecast. But she warned that the total economic blow of the pandemic would linger for years and restrain the recovery for long after 2020.

“This

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Citigroup profit hit by consumer bank woes; warns of more pain

Citigroup profit hit by consumer bank woes; warns of more pain

By Imani Moise and Niket Nishant

(Reuters) – Citigroup Inc beat analysts’ estimates for third-quarter profit on Tuesday, driven largely by a surge in trading, but its results underscored deeper troubles in its consumer bank that struggled with a decline in customers and spending.

The bank, which will have Wall Street’s first woman CEO, Jane Fraser, at its helm early next year after long-time Chief Executive Michael Corbat retires, faces a series of challenges as a coronavirus-induced recession grips American households.

Citi’s shares fell over 4% in early trade as management on a conference call indicated that the third-largest U.S. lender was bracing for prolonged pain, a view that contrasted with JPMorgan Chase Inc’s more upbeat views on loan losses.

“We are expecting a somewhat more muted and slower recovery in both unemployment and GDP through 2022,” said Chief Financial Officer Mark Mason.

“In the crisis we are managing through, we’re not seeing acquisitions or new account openings.”

With the recession crushing consumer and business confidence, and with it demand for loans, Citi reported its first outright fall in revenue this year, down 7% to $17.3 billion in the third quarter.

Profit tumbled by more than a third as its credit card customers closed accounts and spent less.

Revenue in North American branded cards, the growth engine for Citi’s consumer bank going into the year, fell 12%.

The bank, one of the largest credit card issuers globally, said end of period open accounts across its portfolio dropped by 4%, or more than 5 million, and purchase sales slid 10%.

BRIGHT SPOTS

There were, however, some bright spots.

Citi’s trading business turned in another strong quarter, with revenue from bond and stock market trading jumping 18% and 15%, respectively.

Credit costs were helped in part by lower loan volumes, particularly in

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