The fear, so far largely unfounded, at the start of the pandemic outbreak is that it would be bad for developed economies with well-funded health care systems but disastrous for developing economies with immature or underfunded health care systems.
The stock market has had its best month in decades and many are clearly looking forward to May with more optimism than they could April, but a series of articles in The Economist suggest we are far from the prospect of a return to normal.
The initial reaction to the collapse in oil prices this week, initiated by Saudi Arabia’s unilateral declaration that it would open the spigots and flood the market with oil while simultaneously heavily discounting prices, was followed by optimism in some quarters.
That optimism came with the thought that lower oil prices would aid economies struggling with supply chain and worker attendance challenges as a result of the novel coronavirus (Covid-19) pandemic.
Certainly, lower oil prices will help level balance of payments deficits run by some heavy oil consumers, like India and China. Even Europe, which is a net oil importer, will benefit to varying degrees.
But the size of the price fall will also prove a mixed blessing causing acute pain in other areas, not least among the major players themselves.
Reuters recently reported on Tesla’s announcement that it is in advanced talks to use batteries from China’s Contemporary Amperex Technology Co Ltd (CATL) that contain no cobalt specifically for use in cars made at Tesla’s Shanghai plant.
The statement went on to say as a result of using CATL’s lithium-iron-phosphate (LFP) batteries, Tesla would be able to substantially lower the cost of those cars using the alternative battery technology, as cobalt is the most expensive component in traditional nickel-cobalt-aluminum (NCA) and nickel-manganese-cobalt (NMC) batteries.
In some part that’s due to a stronger dollar. To a larger degree, however, it’s due to fear that the steps being taken to contain the spread of the new coronavirus (2019-nCoV) are going to cause insurmountable problems for global supply chains and a significant drop in demand from the No. 2 economy in the world, China.
After a dithery start, the Chinese authorities reacted swiftly to close Wuhan, then the whole province of Hubei.
But with cases spreading rapidly all over China and the Lunar New Year being officially extended for an extra week, the whole country has now almost gone into lockdown.
Although the clocks will count down to 11 p.m. this evening to mark Brexit and Prime Minister Boris Johnson will pronounce “the dawn of a new era” for Britain, ending almost half a century of European Union membership, it will remain an issue of intense division within the U.K. with half the population feeling a sense of satisfaction and half a sense of intense sadness.
What the future holds for the U.K. after Europe will be decided in part during the next 12 months of negotiations with the E.U. on what kind, if any, of trade deal the U.K. manages to agree with the remaining 27 members of the E.U.
That may not be surprising, as it was only announced last month. While it sounds like the latest fruit and veg special offer at your local supermarket, it is likely to be one of the most profound policy changes to hit Europe since the formation of the Common Agricultural Policy or the creation of the Euro — or so says Nick Butler, chair of the Policy Institute at Kings College London, writing in the Financial Times this week.