World Bank Warns of Fragile Economic Recovery

A Saudi Aramco oil tank in Abqaiq, Saudi Arabia. At an OPEC Plus meeting, Saudi Arabia said it would take a big cut in production in order to support the price of oil. 
Credit…Maxim Shemetov/Reuters

OPEC, Russia and other oil producers reached an agreement on Tuesday that includes a commitment by Saudi Arabia to reduce its oil production by one million barrels a day in February and March — a cut of more than 10 percent from its daily target in January — while Russia and Kazakhstan won relatively modest increases.

The overall effect will be a reduction in oil production, a move that pushed prices up to levels not seen since February.

Traders, who had worried that the group might agree to an increase, pushed prices up more than 4 percent for the day. Brent crude crossed over $53 a barrel, and West Texas Intermediate exceeded $50 a barrel.

Essentially, Saudi Arabia and Russia, the two major producers in the OPEC Plus group, appear to have agreed to disagree. Russian officials wanted an increase in production, arguing that a cut by OPEC and its allies would risk losing market share to shale oil producers in the United States. The Saudis urged caution, with the pandemic still far from under control.

Unable to come to an agreement on Monday, the big producers reached a compromise on Tuesday. Saudi Arabia and Russia had been moving in lock step, with identical production quotas, since last spring’s price war, when the Saudis unexpectedly raised production, forcing prices to plummet.

But Russia will now be permitted to raise production by 65,000 barrels a day in February and another 65,000 barrels a day in March.

“Instead of letting everything fall apart, the Saudis let the Russians have what they want,” said Bhushan Bahree, an executive director at IHS Markit, a research firm.

At the same time, the Saudis volunteered to cut by the equivalent of about 1 percent of world supply. This cut of one million barrels a day would be a reduction from the kingdom’s target of about 9.1 million barrels a day.

“This was a homegrown idea,” said Prince Abdulaziz bin Salman, the Saudi oil minister, said during a news conference after the meeting. The prince, who led the meeting, said Saudi Arabia was making a gesture of “good will.”

OPEC released a statement after the meeting, noting the “shocking impact of the Covid-19 pandemic on the world economy and markets.”

“Rising infections, the return of stricter lockdown measures and growing uncertainties have resulted in a more fragile economic recovery that is expected to carry over into 2021,” it said.

By: Ella Koeze·Source: Refinitiv

  • Stocks on Wall Street rose on Tuesday, rebounding from a steep loss the day before as shares of energy producers surged after Saudi Arabia agreed to cut oil production.

  • The S&P 500 rose about half a percent, after a 1.5 percent loss on Monday that had been the index’s sharpest daily decline since late October. The Stoxx Europe 600 index fell 0.3 percent after gaining 0.7 percent on Monday, while the FTSE 100 in Britain gained 0.6 percent.

  • Investors in the United States are waiting for the outcome of a pair of runoff elections in Georgia that will determine which party controls the Senate and how successful President-elect Joseph R Biden Jr. might be in getting his agenda through Congress. That agenda includes more government spending to bolster the economy, which would be good news for stock investors. At the same time, however, Mr. Biden has said he plans to raise some taxes.

  • The uncertainty around Tuesday’s vote kept Wall Street somewhat restrained, with the S&P 500 drifting only slightly higher early in the day. But financial markets were boosted after OPEC, Russia and other oil producers reached a production deal that includes voluntary cuts of 1 million barrels a day by Saudi Arabia. Crude oil futures jumped about 5 percent.

  • Marathon Oil, Occidental Petroleum and Halliburton were among the best performing shares in the S&P 500, gaining more than 10 percent. Chevron rose more than 4 percent, while Exxon Mobil rallied about 7 percent.

London’s financial district was deserted on Tuesday as the United Kingdom re-entered a nationwide lockdown.
Credit…Andrew Testa for The New York Times

The global economy faces a subdued recovery in 2021 as countries race to roll out coronavirus vaccines and businesses around the world try to emerge from pandemic lockdowns that have widened income inequality and piled on debt, the World Bank said on Tuesday.

The global economy will expand 4 percent in 2021 after contracting 4.3 percent last year, the World Bank projected in its Global Economic Prospects report. The bank described the nascent recovery as “fragile” and said that its trajectory would depend on the success of widespread vaccine distribution.

“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges — in public health, debt management, budget policies, central banking and structural reforms — as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” said David Malpass, the World Bank’s president.

  • The bank projects that advanced economies will expand 3.3 percent this year after contracting 5.4 percent in 2020.

  • Developing economies are projected to expand 5 percent after shrinking by 2.6 percent last year.

  • The United States economy is expected to expand 3.5 percent this year, while in China, where the virus first emerged, the economy is projected to expand 7.9 percent.

The forecasts are based on the assumption that the rollout of the vaccine will be widespread by the middle of the year. However, if logistical problems arise or if people resist vaccinations, the global economy could expand at a much slower rate of 1.6 percent, the World Bank said.

The pandemic has cast millions of people into poverty as governments locked down their countries to contain the virus. As many as 150 million people are expected to be pushed into extreme poverty by this year, the World Bank said in October.

Policymakers will need to take steps to reverse the devastating increase in extreme poverty, Mr. Malpass said in a briefing on Tuesday. “It may take years for people at the bottom of the income scale to see a sustained improvement in their circumstances,” he said.

The World Bank has $12 billion to help countries coordinate vaccine distribution. The world economy faces an “Amber Alert” when it came to debt, Mr. Malpass said, and the bank will be working to help poor countries ease their debt burdens so that they can focus their resources on health care needs.

Sales of Chevrolet cars and other makes in the fourth quarter offset a 10-percent drop in sales of Buicks, General Motors reported.
Credit…David Zalubowski/Associated Press

General Motors said its vehicle sales in the United States fell 12 percent in 2020, but increased 5 percent in the fourth quarter from the same period a year earlier, a hopeful sign for the auto industry at the end of a difficult year.

The automaker reported solid performances from its Chevrolet, GMC and Cadillac brands in the final three months of the year. They offset a 10 percent drop in sales of Buick vehicles.

Overall, G.M. sold 2.5 million cars and light trucks in 2020, down from nearly 2.9 million a year earlier.

Auto sales fell sharply last spring as consumers stayed away from dealerships because of the coronavirus pandemic. G.M. and other automakers were forced to halt production for most of the second quarter when government officials forced many businesses to shut down to stop the spread of the virus.

But sales rebounded once factories restarted in part because of pent-up demand for cars and trucks. Some Americans bought cars in order to avoid mass transit and shared rides. It helped that people had more disposable income because they were spending less on travel, dining and entertainment.

G.M. said its strong sales momentum continued through the end of the year. The company sold 771,323 cars and light trucks in the final three months of last year in what it described as its strongest fourth quarter since 2007.

“We look forward to an inflection point for the U.S. economy in spring,” G.M.’s chief economist, Elaine Buckberg, said in a statement. “Widening vaccination rates and warmer weather should enable consumers and businesses to return to a more normal range of activities, lifting the job market, consumer sentiment and auto demand.”

Most other automakers are expected to report 2020 sales totals later on Tuesday.

Also on Tuesday, Toyota Motor said it sold 2.1 million cars and light trucks in the United States last year, 11 percent less than in 2019. In December, however, its sales jumped more than 20 percent, lifted by strong demand for sport-utility vehicles and pickup trucks.

The New York Post is getting a new top editor, News Corp announced Tuesday.

Keith Poole, the deputy editor in chief of The Sun, the British tabloid that is also part of Rupert Murdoch’s media empire, will become editor in chief of The New York Post Group, which encompasses the print newspaper and related websites.

He will start in the new role in March, the company said, as Col Allan, a longtime Murdoch lieutenant, retires. Stephen Lynch, The Post’s current editor in chief for print, and Michelle Gotthelf, editor in chief for digital, will report to Mr. Poole.

Mr. Allan came out of retirement in 2019 to serve as an adviser to the paper in the lead-up to the presidential election. He had been editor in chief of The Post from 2001 to 2016.

He was a driving force behind The Post’s reporting in October on emails it said it had obtained from a laptop belonging to Hunter Biden and that it sought to link to Joseph R. Biden Jr., then the Democratic presidential candidate. The paper’s first article on the emails was published amid newsroom doubts, and its lead writer refused to have a byline.

The Post has noticeably shifted its tone on the president in recent months. Previously supportive of President Trump, the conservative tabloid seemed to take a more critical view of him as his downfall became clear. In an editorial on Dec. 27, The Post urged Mr. Trump to “stop the insanity” and to accept the results of the election.

Mr. Poole joined The Sun in 2016. He was previously the managing editor of the The Daily Mail’s U.S. website.

Steve Mollenkopf led Qualcomm for nearly seven years.
Credit…Guerin Blask for The New York Times

Qualcomm said its chief executive, Steve Mollenkopf, will retire in June after nearly seven years leading the big mobile chip maker through stiff legal and business challenges.

Mr. Mollenkopf will be succeeded by Cristiano Amon, a Qualcomm veteran who has been the public face of the company’s effort to develop 5G wireless technology.

Mr. Mollenkopf, 52, grappled with a hostile takeover attempt by Broadcom that was blocked by the Trump administration, an aborted $44 billion purchase of NXP Semiconductors, and an adverse 2019 ruling in an antitrust suit brought by the Federal Trade Commission. The ruling was overturned by an appeals court in August, and Qualcomm’s share price is up more than 40 percent since then.

The company said it was Mr. Mollenkopf’s decision to hand the top job to Mr. Amon, 50, who previously held the title of president. Mr. Amon helped push acquisitions that has allowed Qualcomm to begin selling new categories of radio chips for smartphones.

For the past two months, Wall Street’s investors have found comfort in the idea that the government was heading for gridlock, with Democrats controlling the White House and Republicans in the majority at the Senate.

It’s a view that highlights Wall Street’s preference for the low-tax, low-regulation policies championed by the Republican Party. President-elect Joseph R. Biden Jr. is expected to push for more spending on infrastructure and more support for the economy, but without the Senate’s backing, he wouldn’t be able to reverse the Trump tax cuts have been a boon to corporate profits or enact major laws that increase regulation.

That consensus helped bolster stocks late last year, adding to the rally that lifted the S&P 500 to a record.

But there’s one more threshold to cross before investors can be sure of that outcome.

On Tuesday, two Democratic Senate candidates — Jon Ossoff and the Rev. Raphael Warnock — are challenging two Republican incumbent senators — David Perdue and Kelly Loeffler — in a runoff. If both Democrats win, the party will take control of the upper chamber of Congress. (Democrats already have control of the House of Representatives.)

In recent days, analysts and traders have fixated on polling data and prediction markets that show a growing chance that the race could be closer than expected.

That Democrats could in fact win was one factor behind Monday’s 1.5 percent drop in the S&P 500, the index’s steepest daily decline since the days before the election.

At the same time, the economic crisis caused by the pandemic has scrambled the usual political calculus for investors.

On Wall Street, it’s generally agreed upon that Democratic control of the Senate could lead to a large amount of deficit spending in the early days of the Biden administration, a potential boon to the still-struggling American economy.

“A unified Democratic government will have broad leeway on fiscal policy, and in the current economic environment, unified Democratic government will mean more stimulus,” economists with Mizuho Securities wrote in a note to clients on Monday.

And there are parts of the economy that definitely stand to gain from the Biden agenda, such as alternative energy, infrastructure and some parts of the health care industry. On the other hand, businesses such as military contractors and larger pharmaceutical companies are expected to fare better if Republican keep control of the Senate.

How else might Wall Street find an upside in a Democratic victory? One answer comes from the rationalizations that investors offered before the November election, when polls (incorrectly as it turns out) indicated that Democrats would clobber Republicans up and down the ballot in a so-called Blue Wave.

Back then, analysts offered the view that even if Mr. Biden had the backing of both houses of Congress, tax increases wouldn’t be his first priority anyway.

So even if Tuesday’s election gives investors a reason to worry, they might also get over it quickly.

A China Telecom office in Shanghai in November.
Credit…Alex Plavevski/EPA, via Shutterstock

The New York Stock Exchange said late on Monday that it had reversed a decision to delist China’s three major state-run telecommunications companies.

The Big Board said it took the step after consulting with the U.S. Treasury Department.

Last week, the exchange said it would stop the trading of shares in China Unicom, China Telecom and China Mobile by Jan. 11 in response to a Trump administration executive order that blocked Americans from investing in companies tied to the Chinese military.

The statement did not give a reason for the decision, though it appeared that the executive order may not require the exchange to delist the companies. The exchange said that its regulatory department would continue to evaluate the applicability of the order to the telecommunications companies.

The delisting would have had little practical impact on the companies, which also have shares listed in Hong Kong and are state-owned. Still, the disappearance from the American exchange had hefty symbolic value for worsening economic ties between China and the United States.

Quibi, founded by Jeffrey Katzenberg, struggled as soon as it became available in April.
Credit…Etienne Laurent/EPA, via Shutterstock
  • Quibi, the much-hyped short-form video platform, is in talks to sell its content to Roku, the streaming device maker with a streaming app of its own. The deal is close to completion, said one person with knowledge of the discussions, who was not authorized to speak publicly. Quibi and Roku declined to comment. Quibi was a quixotic attempt to capitalize on the streaming boom. Its shows, chopped into installments no longer than 10 minutes, were meant to be watched on smartphones. But it announced it would close just six months after it launched.

  • Haven, the joint venture of Amazon, Berkshire Hathaway and JPMorgan Chase that was formed three years ago to explore new ways to deliver health care to the companies’ employees, is disbanding, according to a statement posted on its website. It will cease its operations at the end of February. Haven aimed to improve how people gain access to health care by pulling together the know-how and scale of three of the largest employers in America. Its formation sent shock waves through the markets. But two people familiar with the collaboration said logistical hurdles had made it harder than expected to come up with new ideas that made sense for all three companies.

  • Chief executives and other leaders from many of America’s largest businesses on Monday urged Congress to certify the electoral vote on Wednesday to confirm Joseph R. Biden Jr.’s presidential victory. “Attempts to thwart or delay this process run counter to the essential tenets of our democracy,” the 170 leaders said in a statement. The statement, which was organized by Partnership for New York City, a business advocacy organization, came on the same day that Thomas J. Donohue, the head of the U.S. Chamber of Commerce, issued a statement urging certification of the vote.

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Written by NEWS.COM.SE


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