Business

WASHINGTON — Public investment should play a "central role" in the recovery of both emerging and advanced economies from the coronavirus downturn, the International Monetary Fund (IMF) said on Monday ahead of its fall meetings.

Stepping up such spending with interest rates low globally could "create millions of jobs directly in the short term and millions more indirectly over a longer period", officials with the International Monetary Fund wrote in a blog post.

Assuming investments are of "high quality", the Washington-based crisis lender said increasing public investment by 1 per cent of gross domestic product (GDP) could raise private investment by 10 per cent, employment by 1.2 per cent, GDP by 2.7 per cent along with overall confidence in the recovery.

The coronavirus pandemic has caused a sharp economic downturn globally, but even before the pandemic the IMF said public investment "had been weak for over a decade, despite crumbling roads and bridges in some advanced economies and massive infrastructure needs for transportation, clean water, sanitation" in poorer countries.

The time to invest is now, officials said, with many countries still fighting off COVID-19 and people who lost their job amid the downturn looking for work.

The IMF estimates two to eight jobs are created for every $1 million spent on traditional infrastructure, and 5 to 14 for every $1 million spent on research, development and green technology.

While encouraging countries to maintain existing infrastructure, the IMF encouraged governments to take a second look at projects that had been delayed in the past and plan new ones focused on their needs after the pandemic is over.

LONDON — The coronavirus pandemic that has slammed oil demand and prices is forcing energy majors to tighten their belts on exploration, even if finding new deposits remain essential to their existence.

While the sector is increasingly diversifying into greener energies such as electricity and wind power, its core business remains oil and gas.

"Questions abound over whether it is still profitable to look for oil given subdued demand growth prospects and a low-price environment," Stephen Brennock, analyst at oil brokers PVM, indicated.

"The answer seems not, judging by the recent spate of massive hydrocarbon asset writedowns.”

"Set against this backdrop, I don't expect a rebound in drilling in the medium-term. 

"Instead, oil majors will be forced to beef up their green energy portfolios in order to survive," Brennock said.

Slashed projects 

Compared to pre-virus plans, the energy sector has slashed exploration projects in UK North Sea waters by 70 per cent and by 30 per cent off the coast of Norway, according to research group Westwood.

US oil giant ExxonMobil has cut its total exploration plans by 30 per cent, or an investment reduction of $10 billion (8.4 billion euros).

European rivals ENI, BP and Equinor have carried out similar moves, which have in turn hurt subcontractors including French oil services group CGG, which expects revenue to slump 40 per cent this year.

In the United States, more than 30 oil exploration and production companies have this year filed for bankruptcy, according to Texan law firm Haynes & Boone.

If oil prices remain stuck around the current $40 per barrel level, a further 150 such companies could be lost by 2022, estimates research group Rystad Energy.

"Drilling programmes will be hampered in the near-term, in particular in US shale areas but also elsewhere, because of immediate cost-cutting measures," said JBC Energy analyst Raphaela Hein.

"In the past, we have seen that massive capital expenditure cuts to majors' budgets did not really impact their future production.” 

"As such, we think that they will continue to look for new fields — maybe to a slightly lesser extent... and keep production within their long-term plans. 

"Of course this will contribute to ensuring their survival," she added. 

Hein, however, said that Arctic projects appeared to be "economically unviable".

This despite the vast area forecast to have 13 per cent of the world's oil reserves and 30 per cent of its undiscovered natural gas.

In July, Russia's Gazprom Neft and Anglo-Dutch giant Shell announced a partnership to explore in the Arctic.

'Markets don't believe' 

While oil prices rebounded strongly after briefly turning negative in the early days of the coronavirus pandemic, the world's main oil contracts Brent North Sea and West Texas Intermediate have failed to build on those gains — and last week fell heavily to under $40.

"Markets right now do not believe there is a future for oil," said SEB analyst Bjarne Schieldrop. 

"For how long we'll have reduced drilling depends on the oil price," he added.

Even so, the administration of US President Donald Trump in August approved oil and gas drilling in Alaska's Arctic National Wildlife Refuge, angering environmentalists in the process.

While the oil price crisis is making the realisation of such projects unlikely, "political will may still trump" that, said Hein of JBC energy.

NEW YORK — Wall Street stocks fell on Friday following a weak US jobs report and President Donald Trump's shock announcement that he tested positive for coronavirus.

Those negatives were offset somewhat by more encouraging commentary from Washington policymakers about a long-anticipated stimulus package, limiting equity market losses.

The Dow Jones Industrial Average finished down 0.5 per cent at 27,682.81.

The broad-based S&P 500 dropped 1 per cent to 3,348.44, while the tech-rich Nasdaq Composite Index tumbled 2.2 per cent to 11,075.02.

US stock futures plunged on Trump announcement's of the positive COVID-19 test early Friday morning, but recovered somewhat during the session.

Trump experienced only "mild symptoms" on Friday after contracting COVID-19, a top aide said, but the Republican's already struggling reelection campaign was grounded.

The Labour Department reported that the United States added 661,000 jobs in September, below expectations and less than half of the gains seen in August, even as the unemployment rate dipped to 7.9 per cent.

"It's a bad jobs report and likely there's a much worse one coming next month," said Art Hogan, chief market strategist at National Securities, who noted lay-off announcements this week from Disney, Allstate and other companies that were not counted for September.

Hogan said upbeat comments from House Speaker Nancy Pelosi about ongoing talks with Treasury Secretary Steven Mnuchin had lifted hopes that Washington may still be able to produce a meaningful stimulus package.

In September, stocks fell as the stimulus odds receded, but would benefit if a major fiscal package picked up momentum, Hogan said.

MEXICO CITY — Latin America's e-commerce industry is booming as millions of shoppers across the region venture online during the pandemic, many for the first time, forcing traditional businesses to adapt to survive.

The sector has been one of the big winners of the coronavirus outbreak as fears of infection and lockdown measures keep people at home.

"Covid-19 has been an accelerator of trends, and in electronic commerce it has been very powerful," said Oscar Silva, an expert in global strategies with the consultancy firm KPMG in Mexico.

"More than 10 million Latin Americans who had never bought online now do so regularly," he said.

The dominant regional force is not Amazon or eBay but Mercado Libre, which has a similar business model and is present in 18 countries.

Despite the economic turmoil unleashed by the pandemic, the Argentinian company doubled its sales in the second quarter of this year thanks to a 45 per cent rise in the number of customers to 51.1 million.

Its market capitalisation reached $55 billion, challenging Brazilian mining giant Vale for the title of Latin America's most valuable company.

The tectonic shift in consumer habits is likely to endure, said Silva.

"People were afraid of fraud or that the product wouldn't be what they expected. It's very likely that a large percentage of these customers will stay after realizing how easy and efficient online commerce is," he said.

 Survival of the fittest 

David Geisen, head of Mercado Libre's Mexican arm, said that "loyal users now buy in 12 days what they bought before in 17, frequent users in 24 days what they bought in 79, and sporadic users in 29 days what they bought in almost a year."

At the start of the pandemic, top sellers included face masks, antibacterial gel, thermometers and oximeters, but demand gradually spread to other goods and services.

The boom even reached Cuba's tightly controlled economy, with sales soaring on the government's tuenvio.com platform, which struggled to meet the expectations of some customers.

"I've made around 40 purchases and I've had about 40 problems," Jorge Noris, a 34-year-old IT worker, told AFP in Havana.

There have also been hiccups in Mexico.

One man who tried to buy a cellphone online complained he received a soft drink instead, although the store -- part of Mexican magnate Carlos Slim's empire -- eventually sent him the right order.

Many businesses have gone bankrupt because they had a poor online offering or none at all, Silva said.

"The big platforms are the winners, but we also see neighborhood businesses that keep their customers or win new ones using something as simple as WhatsApp," he said.

Boost to jobs 

According to the firm AppsFlyer, downloads of e-commerce mobile applications grew 93 per cent in the second quarter of the year in Latin America, with Brazil and Mexico leading the way.

Brazil, the region's biggest economy, saw online commerce grow nearly 57 per cent between January and August, with 135,000 new stores, according to the Brazilian Association of Electronic Commerce.

Governments in the region are eyeing the online boom as a source of tax income to fund increased public spending during the pandemic.

New jobs are also being created, replacing some of those lost during the economic downturn.

While unemployment stalks millions around the region, Sergio Garcia is optimistic about his future after a year as a parcel courier for a global e-commerce giant.

"Demand has grown a lot during the pandemic," said the 60-year-old, who earns the equivalent of about $0.30 for each package he delivers on foot.

"It doesn't sound like much, but it's more than other jobs," he said.

LONDON — European stock markets fell back on Wednesday as investors left the chaotic US presidential debate behind, while strong US jobs data helped the mood on Wall Street.

With the debate out of the way, the markets could switch their focus to more concrete topics, several analysts stated.

In London, investors had to digest data that confirmed Britain's virus-hit economy collapsed by almost a fifth in the second quarter.

They pushed the FTSE 100 index into negative territory at the close of the day.

In New York, the Dow Jones index was 1.6 per cent higher in midday exchanges following the release of positive job numbers in the private sector.

The payroll services firm ADP said that private US employers added 749,000 jobs in September as employment continues to rebound from the economic hit caused by the coronavirus.

Economists view the ADP data as a preview of the monthly Labour Department employment report due Friday that encompasses both private and government hiring.

ADP said that private-sector hiring was seen in businesses of all sizes, with services accounting for most of it.

"Traders are likely to key on economic data more than political developments, with the focus shifting to Friday's highly-anticipated Non-Farm Payrolls report sooner rather than later," noted Matt Weller, head of market research at GAIN Capital.

"The [US] jobs report on Friday will be very interesting, particularly against the backdrop of an exhaustive battle in Congress over the next installment of critical economic aid," agreed Craig Erlam, an analyst at the online brokerage Oanda.

Markets were encouraged by news that US Democratic House Speaker Nancy Pelosi had spoken for a second straight day with Treasury Secretary Steven Mnuchin over a much-anticipated stimulus package to rescue the battered US economy.

The pair have agreed to continue negotiating. 

Earlier in the day, a Chinese purchasing managers index also showed improvement in both manufacturing and services in September.

But that produced only mixed results in Asia, as the persistent gloom of rising virus infections continued to dampen the mood.