A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Real Time Tracker
Share this story:
Andrew Kositkun Foreign Exchange Head Trader
The spread of the virus since the middle of June has had a clear negative impact on economic activity. Data out of the Dallas Fed and Google shows that mobility has stalled in July. Consumers have become more hesitant to take part in activities for which distancing is difficult to do with air travel and dining in at restaurants showing the clearest change; it is clear that the economic recovery cannot be separated from the path of the virus.
Nevertheless, there are some positive signs. The growth in new COVID-19 cases in the US appears to be slowing as the 7-day moving average has turned lower. To be clear, the number of daily new cases remains elevated and the 7-day moving average is still up from the beginning of last week but is marginally lower when compared to the 7-day average as of the end of last week. The positivity rate has also moved down to 8.5% from 9.0%.
While these are positive developments, it is important to remember that it’s still too early to signal the all clear. Daily deaths continue to move higher following the spike in infections since mid-June. Unfortunately, this trend should continue over the next couple weeks even if new infections stabilize or drop given the correlation and lag time between cases and deaths. The good news is the correlation has dropped so the uptick in mortality shouldn’t rise as quickly as it did in March and April. The bad news is that mortality numbers should not stabilize for several weeks, even if infection numbers do, which could weigh on economic performance.
Looking ahead, President Trump’s course reversal to endorse the use of masks as “patriotic” has the potential to be an inflection point. Like seatbelts, mask wearing has virtually no impact on the economy, but there is compelling evidence that its widespread usage slows the spread of the virus. Public opinion polls find that Republicans are much less likely to wear masks than Democrats or Independents. Should the President’s endorsement carry more weight with people who don’t wear masks regardless of what any scientist or other politician says, it could be a positive factor for controlling the virus and the economy.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
Equity markets around the world have turned negative due to US-China concerns. China has asked the US to close its consulate in the city of Chengdu in retaliation to the US’s decision to shut down the Chinese consulate in Houston. The US consulate in Chengdu is a key listening post for developments in Tibet. Closing the consulate in Chengdu is seen as less impactful than closing missions in Hong Kong or Shanghai but more impactful than closing the consulate in Wuhan.
The GOP’s stimulus package proposal has been delayed until Monday as the party continues to work on consensus.
Data from the Main Street Lending Program suggests it may not be as impactful as hoped. Lenders and borrowers have raised questions around the complexity of terms. Conversely, the Fed attributes the low usage as a sign that companies are able to access capital elsewhere.
Euro area economic activity grew for the first time in five months as July composite PMI came in better than expected at 54.8 with both services and manufacturing picking up momentum as they both reentered grow territory. Given that, today’s reading more likely represents a rebound from depressed levels than a definitive return to a post COVID-19 growth trajectory.
UK PMI also beat expectations with the composite reading coming in at 57.1 against expectations for a 51.7 print. Services and manufacturing also beat expectations and moved back into expansionary territory. The uptick in services momentum is especially notable as it was a key driver for the weak May GDP number.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Here's what this indicator is saying about US stocks right now. ACTIVE INVESTOR WEEKLY EDITION: January 21, 2022 View in a browser FIDELITY VIEWPOINTS ® WEEKLY EDITION: January 21, 2022 Bollinger band stock signal Here's what this indicator is saying about US stocks right now. Read more CHART OF THE WEEK Inflation and corporate consolidation US industries have become
Learn how to keep all your accounts—not just the ones at Fidelity—secure. November 18, 2021 View in a browser FIDELITY VIEWPOINTS ® WEEKLY EDITION: November 18, 2021 What to do after a data breach Learn how to keep all your accounts—not just the ones at Fidelity—secure. Read more What's ahead for your RMDs Make sure to take your required withdrawals this year, then start to plan ahead.