Virus cases versus virus fear

Posted by: Paul Donovan

26 Jun 2020

Daily update

  • Florida and Texas have suspended the reopening of their economies from lockdown (but do not appear to be increasing restrictions). This follows an increase in case numbers. Financial markets are comparing the prospects for stimulus with the risk of reduced economic activity. So far, investors seem to be betting that fear of the virus (and thus consumer behaviour) is different from what it was in March.
  • US personal income and spending data is survey based (so not much use), and on both numbers the consensus range is over 20% wide. This is not forecasting. It is not even educated guesswork. It is just guesswork.
  • Japanese inflation data was low and essentially stable. Oil prices helped keep German import price inflation negative. The virus has created spare capacity in the global economy, which is likely to continue to keep inflation low for the next year or so. ECB President Lagarde is to speak, but is unlikely to give markets new information.
  • Unsurprisingly, estimates of global trade volumes are negative in April – there may be some revival in May as economies started to open up. The US is considering taxing American buyers of European wines by 100%, rather than the current 25%.

Explore more CIO Daily Updates