Bank of England (BoE) Governor Andrew Bailey said on Thursday that the risks to the UK economy were “very much on the downside” as the recovery from the coronavirus crisis takes place.

Bailey warning

Bailey told an online webinar hosted by the European Commission that the British gross domestic product would likely remain 7–10% below pre-epidemic levels in the third quarter.

While this represents a recovery after a decline of more than 20% earlier in the year, the recovery remains highly uneven as some sectors continue to face restrictions.

“There is an unprecedented level of uncertainty at the moment. And the risks, I’m afraid — certainly, as we see them — are very much on the downside,” Bailey said, referring to the recent increases in COVID-19 cases in Britain.

Asked about the possibility of a trade agreement between the Kingdom and the European Union before the post-Brexit transition ended on December 31st, Bailey said it is vital that economies remain open.

He reiterated his support for multilateral and free trade, saying “nobody benefits from protectionism in my view.”

Bailey also said that banks should not hesitate to use capital buffers to continue lending to the economy hit by the coronavirus.

ECB ammunition

European Central Bank (ECB) vice president Luis de Guindos said on Thursday that the bank must use the tools at its disposal as the coronavirus epidemic lowers inflation expectations and the incipient recovery loses momentum.

Speaking during a live interview with the Spanish newspaper El Economista, de Guindos said in response to a question about the ECB’s bond purchases, “as a result of the epidemic and some specific factors, inflation expectations have decreased very much and we need to act with the tools we have available.”

Oil support

Oil rose over $42 a barrel on Thursday due to the US production cuts in the Gulf of Mexico, the prospects of further loss of supply in Norway, and the failure of the Trump administration and Congressional Democrats in Washington to agree on an economic aid package negotiations.

American oil and gas companies withdrew their workers from production facilities in the gulf due to Category 4 Hurricane Delta raging, thus halting production of approximately 1.5 million barrels per day.

Brent crude oil rose 67 cents, or 1.6%, after falling 1.6% on Wednesday to $42.66 a barrel before the London afternoon session. U.S. West Texas Intermediate (WTI) crude oil climbed 52 cents, or 1.3%, to $ 40.47 after dropping 1.8% on Wednesday.

Oil also received support from the possibility of further production cuts in Norway’s North Sea operations due to workers’ strike. If the strike doesn’t end by 14 October, the huge Johan Sverdrup field will have to close.

President Donald Trump wrote on Twitter that Congress should transfer money for airlines, small businesses, and individuals, after ending talks on a larger stimulus deal.

Harris-Pence debate

Wednesday’s live television debate between the US vice-presidential candidates has fueled concerns that the November 3 presidential elections will be tight and could damage the stock markets.

Republican Vice President Mike Pence and his Democratic rival candidate Kamala Harris clashed over President Donald Trump’s handling of the coronavirus epidemic, economic policy, law enforcement, and racial relations.

The S&P 500 index futures rose 0.3% when the debate ended, but analysts say neither side was a clear winner. The dollar index barely moved, and US Treasury bond yields remained stable.

Opinion polls show increased support for Democratic presidential candidate Joe Biden, but some investors are more skeptical and warn that market volatility may increase after the election.


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