The global COVID-19 case count surged past 18 million and the death toll now stands above 700 000. Infection trends are diverging across the globe, driven by large, populous countries such as the US, Brazil and India. Countries in western Europe and north and Pacific Asia that had been successful in containing the virus in the spring are experiencing resurgences.
The World Health Organization (WHO) warned that there might never be a ‘silver bullet’ for COVID-19 in the form of a perfect vaccine. The WHO added that the road to normality would be long, with some countries requiring a reset of strategy and urging countries generally to keep safeguards and monitoring in place.
US – Urban and rural spread rates are converging
In the US, July saw a reversal in gains made in the early stages of the pandemic, with new cases rising to the highest number since the outbreak began. Test positivity rates rose in over 30 states and several large states reported record hospitalisations. This surge resulted in the nationwide daily death toll rising to above 1 000 over the past eight days. It raised questions over whether the economy was healing or sputtering, unsettling some investors.
According to Dr Deborah Birx, lead adviser to the White House coronavirus task force, the pandemic “has entered a new phase. No longer are hot spots or outbreaks contained to densely populated metro areas like New York City; instead, urban and rural areas are seeing similar rates of spread.”
At a state level, it looks like situation is improving in the former hot spot states of Texas, Florida, California and Arizona, although the death toll has yet to reverse its course in these states. At the same time, new hot spots are emerging, with cases and hospitalisations rising in Indiana, Nevada, Ohio, Virginia, and Wisconsin.
New lockdowns as cases spread elsewhere?
Outside the US, cases continued to surge in parts of western Europe and north and Pacific Asia. In Spain, cases rose to above 2 700 for the past seven days. Germany and France reported a steady rise, as did Belgium and the Netherlands, although from a lower base. The resurgence appears to be fuelled in part by young people ignoring social-distancing rules and flocking to beaches and bars.
Note that Belgium already tightened measures locally last week in response. It looks like the rest of Europe could be tested with the second round of lockdowns as people are returning from holidays, schools are about to open and the weather changes.
Japan’s second wave now dwarfs the peak seen in April with 1 400 new daily cases nationwide. Similarly, Australia’s cases have surpassed the March peak, prompting the state of Victoria to declare a ‘State of Disaster’, introducing a nightly curfew and banning virtually all trips outdoors.
Vietnam, the poster child of North Asia in keeping the virus under control, reported its first three deaths as new cases rose to above 30.
The bottom line: current trends from around the world appear to be showing what happens when suppression measures are relaxed – especially in countries that actually managed to control the virus. It reminds us that containing the virus requires early proactive and reactive measures such as extensive testing and surveillance tracing, while practising self-quarantine, social distancing and closing venues that might contribute to mass-spreading. Indeed, England's chief medical officer said the easing of restrictions had "probably reached near the limit" if the virus was to be controlled.
Economic data – Improvements and trepidation
In the US, markets are focusing on this week’s July labour market data. It should shed light on the strength of the recovery and the extent to which rising COVID-19 risk is holding back employers. Indeed, higher frequency indicators such as restaurant bookings, petrol demand and population mobility have already pointed to activity in certain services sectors stalling or even reversing.
The data could influence businesses’ hiring strategies, consumer confidence, voters’ moods and policymakers’ actions. As for the latter, lawmakers have struggled to hammer out a new stimulus plan, with extra jobless benefits and aid to cities and states seen as areas of contention. There is concern that the economy is in peril now that the supplemental jobless payments have expired.
Jobless claims have risen recently, indicating workers are staying longer on unemployment rolls and that rehiring has slowed. Federal Reserve (Fed) Chairman Powell said the labour market “has a long way to go to recover”. The Fed warned a resurgence of the virus threatened the economic recovery as it held rates near zero and extended measures to deal with a risk of an international shortage of US dollars.
Global purchasing managers (PMI) data continued to improve, led by a stronger recovery in manufacturing output in developed markets, while the recovery in emerging markets still lagged. Given the recent resurgence in the COVID-19 cases globally, there is still much uncertainty as to whether the recovery in the sentiment surveys will translate into more demand and investment.
Markets – Gold continues to shine
US stocks saw a rally in the tech sector, which ran aground amid concerns that the run-up had gone too far, while news of the Fed’s measures on US dollar liquidity and a return of M&A deals provided support to the wider market. Downside pressure emerged as president Trump floated the idea of delaying the 2020 elections and amid news of a grim second-quarter contraction in US GDP. Global stocks piggybacked on upbeat earnings reports and positive economic data, but the rally soon stalled.
Yields fell as bond investors signalled concern over the outlook for the US and other major economies, even though equity investors appeared less worried. Flagging stimulus talks in the US clouded the Treasury market, as did the Fed’s comments (see above) which appeared to indicate a need for more central bank support.
Stimulus-related inflation concerns, falling Treasury yields and the COVID-19 induced worries over the global economic outlook helped push gold to a record high above USD 2 000. The yellow metal benefited from its safe haven status and the search for an alternative store of value to the US dollar and government bonds.
Massive virus-related spending, political uncertainty in the US, growing strains in Sino-US relations and the possibility of a darker economic outlook for the US, and by extension for the world, drove the US dollar to a multi-year low (see Exhibit 1).
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