Financial Observation: Britain once again implements a blockade of the economy, “a second dip”-Xinhuanet

Xinhua News Agency, London, November 2nd. Financial Observation: The United Kingdom once again implements a blockade of the economy, “a second dip”

Xinhua News Agency reporter Yang Hairuo

British Prime Minister Johnson announced on October 31 that in view of the increasingly severe situation of the new crown epidemic, he planned to implement a four-week large-scale “foot-free” measure again in England from November 5th. Scotland, Wales and Northern Ireland have implemented stricter anti-epidemic regulations since October. In March of this year, the United Kingdom implemented a comprehensive “foot ban” order.

British economists worry that the large-scale blockade measures may cause the British economy to experience a “second dip”, but the economic losses caused are expected to be less than the first blockade.

The economy may shrink again

Capital Investment International Macroeconomic Consulting Company economist Paul Dale predicts that affected by the blockade, the UK economy may experience zero growth or even a slight contraction in the fourth quarter of this year. He said: “All signs point to a’second bottom’.” Investment bank Goldman Sachs also predicts that the UK’s economic growth rate in the fourth quarter will change from a previously expected increase of 3.6% to a contraction of 2.4%.

The Oxford Institute for Economic Research, a British think tank, believes that since the new round of blockade measures are not strict for the first time, the blockade will do less damage to the economy than the first. It is reported that the manufacturing and construction industries will continue to operate, and the continued opening of schools will enable parents to work normally. In addition, many industries are still operating at a level much lower than before the epidemic, and a low base makes the room for a substantial economic decline smaller.

However, representatives of British business groups believe that a new round of large-scale blockade will put more companies into trouble. Caroline Fairbairn, head of the Federation of British Industry, said: “The second total blockade marks the beginning of a cold winter.”

Adam Marshall, director general of the British Chamber of Commerce, also said that the new restrictions will cause a devastating blow to the business community. He said: “Many companies are now in a much worse situation than they were at the beginning of the outbreak. Surviving under demand constraints has become more challenging.”

The market response is temporarily stable

On the first trading day after the new epidemic lockdown measures were announced, the London Stock Market “Financial Times” 100 stock average price index (FTSE 100 Index) closed at 5654.97 points on the 2nd, an increase of 77.70 points from the previous trading day. It is 1.39%.

In this regard, AJ Bell’s investment director Ross Maud believes that although the blockade will affect investor sentiment, about three-quarters of the FTSE 100 index stocks receive income from overseas, so the local blockade measures in the UK will not affect it. Big. In addition, the market has digested the lockdown expectations in advance last week.

In terms of individual stocks, online retailer Ocado Inc., which has raised its profit forecast, led the day, with an increase of 8.04%. Maude believes this can clearly show that investors are screening in the market, looking for companies that will benefit from the lockdown period.

But the British Interactive Investment Company market manager Chad Hunt said that investors still face a series of concerns in the future, after all, the impact of the second blockade will spread across all industries. The aviation and tourism industries will continue to be paralyzed, the retail industry is adapting to shifting sales focus to online, and banks should consider increasing non-performing loan reserves.

The central bank may push quantitative easing

Market analysis believes that the Bank of England’s Monetary Policy Committee is unlikely to reduce the already low interest rates and will rely on quantitative easing to cope with the coming economic contraction.

Samuel Thoms, chief economist of the Pantheon Macroeconomics Research Company, said that the Bank of England’s current 745 billion pounds debt purchase target will not be achieved until the end of this year, considering the new blockade policy and the future of the United Kingdom and the EU The uncertainty of relationship negotiations may not be too late to expand quantitative easing until December. The central bank is expected to announce this week that it will purchase another 100 billion pounds of Phnom Penh bonds in the first half of 2021.

Martin Baker, an economist at the Oxford Economics Institute, said that further injecting quantitative easing policies may “raise the sentiment of financial markets and businesses and consumers”, which will also help prevent unnecessary risks.

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