• Latin American sovereigns provided financial assistance to local and regional governments (LRGs) in 2020 through extraordinary transfers, debt relief measures, and additional loans to diminish the pandemic's harsh impact. 
• Brazil's substantial support prevented COVID-19 from squeezing local budgets; while aid to LRGs in Mexico and Argentina only mitigated fiscal erosion in 2020. 
• The subnational governments' finances could be pressured this year, as central governments shift away from propping LRGs' finances and towards fiscal correction and economic recovery, while the pandemic continues to take a severe toll on the region. 
• Meanwhile, limited financing sources will continue to constrain Latin American LRGs' fiscal room to maneuver through economic shocks. While the impact from the public health crisis on Latin American local government budgets has been less severe than initially expected, S&P believes that fiscal pressure is likely to mount this year. As central governments curb fiscal support for LRGs, their credit quality will depend on the economic recovery's trajectory, as well as on their financial performance. GDP of Mexico and Argentina will likely return to the pre-pandemic levels only by the fourth quarter of 2022 and even in 2023. Moreover, spending pressures remain because the region is still severely affected by the pandemic given the slow vaccine rollout.

(Source: S&P)

• The economic recovery continued to pick up pace, but the dearth of skilled labour and rising input prices are expected to continue in the months ahead, according to the Fed's Beige Book released Wednesday. 
• The central bank’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through May. 25, showed that while the economy continued its recovery, inflation and labour supply shortages have not ebbed.  
• Continuing supply chain disruptions have propped up inflation, with many "contacts noting sharp increases in construction and manufacturing raw materials prices. Increases were also noted in freight, packaging, and petrochemicals prices," the report showed. But the strengthening in demand has allowed some businesses in sectors including manufacturers, builders, and transportation to pass much of the cost increases to their customers.

(Source: Investing.com)

• Oil prices surged on Wednesday, hitting their highest in more than a year from a decision by OPEC and allies to stick to the plan to gradually restore supply, along with the slow pace of nuclear talks between Iran and the United States. 
• Brent rose $1.1, or 1.6%, to settle at $71.35 a barrel. It reached $71.48 a barrel, its highest since January 2020. U.S. West Texas Intermediate (WTI) crude rose $1.11, or 1.6%, to settle at $68.83 a barrel. It hit $69.00 during the session, its highest since October 2018. 
• "The oil market welcomed the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, decision to stick with its existing production plan, and in conjunction with positive global demand indications, prices are gaining further today," said Louise Dickson, Rystad Energy oil markets analyst. 
• Expecting a recovery in demand, OPEC+, agreed on Tuesday to maintain their plan to gradually ease supply curbs through July. 
• The OPEC+ meeting took 20 minutes, shortest in the group's history, indicating unity among members and their confidence in the market's recovery, analysts said. OPEC+ data shows the group is now more upbeat about the pace of rebalancing in the oil market than it was a month ago.

(Source: Reuters)

• Greater revenues and lower indirect expenses supported a 40.5% (or $397.96Mn) year-over-year increase in Lasco Manufacturing’s audited net profit to $1.40Bn (EPS$:0.33). Owing to the effects of product mix and gains in manufacturing efficiencies, revenues were able to grow by 4.2% (or $332.00Mn) and influence a 90 basis point increase in the gross margin. Cost containment measures were also very instrumental in the improvement in net profit. Selling and promotional expenses fell by 53.0% (or $154.16Mn), while admin and other expenses dropped by 13.0% (or $177.13Mn). 
• In 2020 the Junior market tax break ended and the full income tax rate of 25% became applicable to the company’s earnings. Higher tax expenses ($159.06Mn) and a $135.33Mn rise in the cost of sales, therefore, tempered the overall improvement in LASM’s financial performance. 
• Management has indicated that notwithstanding the roll-out of effective vaccines and mass vaccinations to contain the virus and its adverse impacts, material prices and shipping costs are escalating, while the general availability of some materials become problematic. These and other headwinds, such as currency volatility and depressed consumer purchasing power, may adversely affect the company in the near-term. 
• Management has also indicated that it will continue to give special attention to cost as well as cash management, and protecting its supply chain to minimize the impact of the pandemic on the business. 
• The stock has appreciated by 45.1% since the start of 2021 and currently trades at a P/E of 16.7x, which is below the Junior market manufacturing sector average of 17.5x.       

(Source: Company Financials)

• Real GDP in Brazil grew 1.0% y-o-y in Q1 2021, outperforming prior expectation of stagnant 0.0% growth. The figure suggests that despite continuing to have one of the world's worst COVID-19 outbreaks, the government's avoidance of imposing nationwide restrictions on mobility has allowed its economy to continue to trend towards pre-pandemic levels. 
• Growth was led by gross fixed capital formation, which grew 17.0%, offsetting declines of 1.7% and 4.9% in private and public consumption, respectively. 
• Consequently, Fitch Solutions has revised its annual growth forecast to 3.5%, from 3.2% previously. Bloomberg consensus expectations also moved up, to 3.5% from 3.0% in late April, reflecting relatively resilient high-frequency data from Q1 2021 and the approval of additional household income support measures in the 2021 budget enacted in April. 
• While Fitch expects strong y-o-y growth in Q2 due to favourable base effects, the agency nonetheless retained its expectation that the pace of Brazil’s rebound will slow in the second quarter of this year and be visible in a weak q-o-q growth print. 
• As of the end of May, new confirmed cases and deaths due to COVID-19 remain near the highest levels of the crisis yet, which has triggered a retightening of restrictions in some localities and disruptions to some economic activity. 
• The aforementioned factors have resulted in an unemployment rate of 14.7% in March, the highest level since at least 2012. The disruptions to emergency aid payments, rising inflation (6.8% y-o-y in April), and interest rate hikes, have increased the risk of rising debt burdens.

(Source: Fitch Solutions)

• In February 2020, the Treasury of Social Security (TSS) in DomRep registered 2,122,037 workers, a figure that was reduced in the following months, reaching its lowest level in May of that same year, when the number stood at 1,593,310 employees, due to the stoppage of economic activities to curb the virus contagions. 
• However, as of June, the economy began to recover part of the jobs lost, and at the end of April 2021, 406,730 jobs have been recovered since then, equivalent to 77% of the total loss. This shows that to reach the February 2020 level, only 121,997 jobs need to be added. 
• On average, during the first four months of 2021, 15,941 jobs were recovered each month. Of that period, February was the best in terms of job recovery, with 25,420 jobs added that month. 
• The crisis caused by COVID-19 resulted not only in the loss of jobs but also of employers. However, a comparison of April 2020 with the same month of this year shows an increase of 38.4% in the number of employers. Improvements in both employer and employee count point to the gradual recovery on display in the country. 
• Fitch Solutions is anticipating GDP growth of 5.2% in 2021 driven by rebounds in private consumption, investment and exports. In addition, the country’s robust investment environment, free trade agreement with the US and increasing chance of ‘near shoring’ by US-based companies could lift the Dominican Republic’s long-term growth outlook.

(Source: Dominican Today)

• Canada's economy likely contracted in April, the first decline in a year, due to widespread lockdowns amid a third wave of coronavirus infections, slowing the country's march toward recovery, data showed on Tuesday. 
• In a preliminary estimate, Statistics Canada said the economy contracted 0.8% in April. By contrast, real GDP had grown 11 months in a row through March, when it grew 1.1%. Economists said the April decline was largely expected and is unlikely to change the Bank of Canada's outlook for interest rate hikes. 
• "They were talking about the output gap and inflation getting back to target by late 2022. That's still a long way from here," said Doug Porter, chief economist at BMO Capital Markets. The Bank of Canada last month signaled rates could begin to rise in 2022, noting the economy had rebounded more quickly than it had expected. 
• The Canadian economy grew 5.6% on an annualized basis in the first quarter, as restrictions were eased between the second and third waves of COVID-19, and buoyed by strong housing investment and more mortgage debt. The gain missed analyst expectations of 6.7%. Still, the economy is in a good position to hit the Bank of Canada's GDP forecast of 6.5% for the year, said economists, meaning it will likely ease some stimulus this year.

(Source: Reuters)

• China’s Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen spoke Wednesday for the first time since President Joe Biden took office.
• Both the U.S. and China said the two leaders talked about the economy and cooperation, and “frankly” discussed issues of concern. Yellen discussed the Biden administration’s plans to “support a continued strong economic recovery and the importance of cooperating on areas that are in U.S. interests,” the Treasury said in a statement. 
• Liu and Yellen agreed the two countries’ economic relationship is “very important,” Chinese state media said, according to a CNBC translation. The report said the leaders held a wide-ranging discussion on the macroeconomic situation and multilateral cooperation. 
• Many economists in China are also concerned about spillover effects from massive U.S. government spending meant to support growth. Investors have been betting on a recovery, sending commodity prices surging. The rising prices have hit Chinese businesses, prompting the central Chinese government to announce additional support and clamp down on market speculation. 
• Chinese state media characterized the two leaders’ discussion Wednesday as one bearing an attitude of “mutual respect,” a phrase Beijing often uses when calling for more favorable communication with the U.S.

(Source: CNBC News)

• Jamaica has received another batch of COVID-19 vaccine manufactured by AstraZeneca. Some 55,200 doses of the COVID-19 Vaccine arrived in the island on Sunday, May 30. This batch represents another allocation from the COVAX Facility (COVID-19 Global Access). 
• The arrival of new vaccines will be added to the pool of vaccines being used in the National Vaccination Implementation programme to inoculate persons, who are due their second dose, as well as persons that have not yet been vaccinated. 
• Currently Jamaicans 50 years and older, healthcare workers, JCF, JDF, Jamaica Fire Brigade and staff members from PICA, Jamaica Customs Agency and Department of Correctional Services are eligible to be vaccinated based on the implementation plan. 
• As at Friday, May 28, 2021, approximately 155,683 Jamaicans have received the first dose of the COVID-19 Vaccine, representing 8% of the target population (1,924,759) while 22,206 persons have received their second dose. This 8% is below the vaccination rate in countries such as Bermuda (58%), Barbados (27%), Dominica Republic (30%), Guyana (24%), and Bahamas (12%). It is however above the 6.8% rate of vaccination in Trinidad and Tobago. 
• The arrival of the additional batch bodes well for the country’s trek to recovery and quest for herd immunity.

(Source: JIS)

• Lasco Distributors saw a 25.3% increase in net profit to $909.48Mn (EPS: $0.26) for FY 2020-21 reflecting higher revenues and lower operating expenses, which were tempered by the 5.8% (or $ 919.05Mn) increase in cost of sales for the period. 
• Revenues rose 4.1% (or $789.81Mn) buoyed by growth in its consumer division yoy of 5.6% (or $877.62Mn). However, its Pharmaceutical division saw a slight decline for the period of 2.3% (or -$87.80Mn) when compared to the corresponding 2020 period. 
• The company’s bottom-line also benefited from a 10.3% and 21.9% reduction in administrative and other expenses, and selling and promotion expenses, respectively, reflecting lower staff costs, advertising and promotion expenses. 
• Higher tax expenses also tempered the improvement in the bottom-line as LASD commenced paying corporate tax at 25% in October 2020, as its 10 year tax benefit under the JSE Junior Market expired. 
• In 2021, margins could also be affected by rising global commodity prices, the weaker local currency and supply chain restrictions that are driving up imported input costs. This would raise direct costs and put downward pressure on LASD’s gross margin, especially as the weak local economy limits its ability to fully pass the higher costs unto consumers. 
• Since the start of the year, Lasco Distributors’ stock price has appreciated by 25.0% and currently trades at a P/E ratio of 16.1x earnings, which is below the junior market distribution sector average of 28.2x earnings.

(Source: Company Financials)