IMF Says Global Economic Recovery to Pre-Covid-19 Levels Will Take 2-Years

In the US, the average cost of single-family houses whose mortgage is guaranteed by Fannie Mae and Freddie Mac rose 0.2% m-o-m in April, following a 0.1% increase in the earlier month.

While the house prices fell 0.5% in the South Atlantic division, it rose 0.8% in the West South Central division. On y-o-y basis, housing prices increased 5.5%, with Middle Atlantic division recording 5% increase, while Mountain division posting a 6.8% rise.

Commenting on the real estate sector, Dr. Lynn Fisher, Deputy Director of the Division of Research and Statistics at Federal Housing Finance Agency (FHFA), said “We expect the normal spring bump in sales was pushed off by the COVID-19 shutdowns and may extend into the summer months as states reopen and real estate sales pick back up.”

According to Mortgage Bankers Association, mortgage applications fell 8.7% in the week ended June 19, after recording an 8% increase in the earlier week.

Applications related to home purchase and refinancing of home loans decreased 3% and 11.7%, respectively. While refinance applications increased 76% y-o-y, purchase mortgage volume surged 18%.

The Swiss franc is trading at the strongest level in the past two weeks, at roughly 0.95 per US dollar, as investor are avoiding risks against the backdrop of fears over second wave of Covid-19 infections.

The gloomy outlook posted by the IMF is also a reason for the market to buy the franc, a safe haven asset. Notably, the economic data indicates that the Swiss investor morale has bounced to its highest level since December 2017.

The Swiss National Bank, last week, left the interest rates unchanged at -0.75% and indicated its willingness to intervene further in the Forex market to halt further strengthening of the franc.

In South America, Brazil reported a $1.33 billion current account surplus in May, compared with a $1.38 billion deficit in the similar period last year, but lower than Consensus estimates of a $1.90 billion surplus.

While the services shortfall decreased to $1.72 billion, from $3.26 billion last year, the primary income gap fell to $1.30 billion, from $3.43 billion. On the contrary, the goods surplus declined to $4.21 billion, from $5.02 billion in May 2019. Similarly, the secondary income surplus also decreased to $0.14 billion from $0.30 billion.

Oil prices declined over 2% Wednesday, with WTI crude trading at about $39.4 per barrel and Brent crude contract exchanging hands at roughly $41.70 a barrel against the backdrop of rising demand and oversupply worries.

The continuous increase in Covid-19 infections in the US, Germany, Latin America, India and China is a cause of worry to investors. The concerns have amplified on news reports that Trump administration is also looking at fresh duties on $3.10 billion worth exports from France, Spain, the UK and Germany.

The US crude inventories rose by 1.40 million barrels, versus the 1.20 million barrels increase expected, in the week ended June 19.

Notably, the IMF has downwardly revised its GDP outlook for 2020 and 2021 and a minimum of two years is required for output to reach pre-Covid-19 levels.

The Fund forecast a contraction of the world economy by 4.9% in 2020, compared to the April forecast of a 3% shrinking, before reversing 5.4% in 2021, instead of the 5.8% two months earlier.

The US GDP is expected to decline 8% in 2020, while both the Eurozone and the UK are forecast to contract by 10.2%. China, on the contrary, is expected to grow by 1%. However, India’s economy is expected to contract by 4.5%.