Prime Minister Boris Johnson recently announced a detailed new four-step roadmap out of the current lockdown period, finally giving some clarity as to when we can expect a return to varying levels of normality. The plan could see all legal limits on social contact lifted by June 21st. Shops, hairdressers, gyms, and outdoor hospitality could reopen on April 12th in England and from May 17th, two households might be allowed to mix in homes, while the rule of six could apply in places like pubs. The plan requires four tests on vaccines, infection rates and new coronavirus variants to be met at each stage. The prime minister has described this plan as a “one-way road to freedom” whilst refusing to confirm it would be irreversible, but stating the intention is that it will be.
Bank of England signals potential for negative interest rates if the UK economy continues to struggle or gets worse. This is a position never taken before from the UK central Bank and would mark a significant shift in the Bank’s monetary policy and into unchartered territory. Experiments elsewhere in the world have hardly proven negative rates particularly useful, and there is concern the cost would be passed on to consumers rather than be absorbed by the banking sector.
The latest data shows the UK economy has recorded the worst slump since 1709, with GDP contracting 9.9% for the whole of 2020. Fourth quarter GDP was 7.8% lower than a year earlier, further below pre-pandemic levels than any other G7 economy. The UK economy was hit particularly hard due to its large service-based economy and lower reliance on manufacturing.
Following Brexit, the UK is so far struggling with some aspects of trade with the EU. Fisherman have seen their catch rotting as they await the appropriate paperwork, forcing the government to commit millions to subsidise them during this time The EU is so far refusing to grant the UK financial sector equivalence in what is a major blow to the City, with thousands of jobs and billions in assets already having been transferred to the bloc. It is noteworthy that the UK has not altered its financial regulation at all since leaving the EU at the end of 2020, and so currently the EU is refusing to recognise its own regulations as equivalent, raising questions over the true nature of the bloc’s stance, with some suggesting it is a protectionist attempt to grab market share from London.
The European Union continues to struggle with a coherent plan for exiting its own lockdown, with France and Germany continuing to struggle greatly in containing the virus, and France still seeing increases in COVID cases in some parts of the country. The EU looks set to approve the new Johnson & Johnson one-shot vaccine, which could ease some of the concern over the coming weeks, but the bloc looks a long way off of exiting COVID restrictions and remains far behind other developed nations/regions in its vaccine programme, which has sparked fury in nation states.
Former ECB President Mario Draghi has been sworn in as the next Italian PM, which many believe ushers in a new era of political stability for Italy, which has struggled under various leaders over the past decade as it grapples with its own sovereign debt burden. Draghi’s new cabinet has impressed political commentators who say the list of lawmakers from across the political spectrum should help appease what has been a very divided parliament.
In an ongoing battle with big tech, EU states have backed a plan to expose companies partaking in extreme tax avoidance. The proposals will force multinational companies to publish a breakdown of the tax they pay in each of the bloc’s member states and in tax havens. The move may well provoke a response from the US which, under President Trump, took a hard line against the EU for going after its tech industry.
The impeachment trial of former President Donald Trump began in February, with lawmakers deeming the trial can indeed proceed as planned. New evidence was presented early with footage not previously seen, showing the true extent of the violence inside the Capitol building. However, despite a majority voting in favour of the impeachment, votes fell short of the required two-thirds majority, meaning President Trump was once again acquitted, leaving him potentially free to run for office again in 2024, something he has since commented on in his first interview since leaving the White House. Whether or not he would receive the support of his Republican party remains in question, as many of his former colleagues have since distanced themselves from him and his views, though 2024 remains a long way off currently.
Federal Reserve chair Powell has again commented that the Fed is in no hurry to raise rates and reiterated that the central bank would not attempt to head-off inflation, rather would like to see it head above the stated 2% target, saying that it could take more than three years before inflation actually neared reached 2%. His comments were positive for risk assets which are currently sensitive to the outlook for longer-term interest rates.
Current negotiations on the $2 trillion stimulus package put forward by Biden continue on, with sticking points around support for business and the proposed minimum wage increase. The vote is likely to be extremely close with Democrats hoping for support from moderate Republicans to help ease the vote over the line. With unemployment benefits for millions of Americans beginning to lapse pressure is on to get a deal secured and much-needed economic aid into the economy.
Japan has started its vaccination programme after finally approving the Pfizer vaccine. Whilst seen in the West as a success story of how to handle a pandemic, news from within Japan itself is more sobering. The country has recently ha to discard millions of doses of the Pfizer vaccine because it did not have enough of the specialist syringes needed.
Myanmar's military government imposed martial law in its biggest cities after thousands of people swarmed the streets for a third day, calling for Aung San Suu Kyi's release and recognition of the election results. It banned gatherings of more than five people. There will also be curfews. The country has recently seen its deadliest day since the coup and the US has indicated it is preparing additional sanctions.
China meanwhile has stepped up its control in Hong Kong by charging dozens of leading Hong Kong democrats. In total, forty-seven activists were charged with conspiracy to commit subversion under the controversial national security law. The legislation introduced new crimes in the territory and included penalties of up to life in prison. China’s fight against democracy in Hong Kong is longstanding and unfortunately not likely to come to an end until the government feel they have full control of the region, meaning more convergence in law and oversight between the two nations.