- Stock markets have started the week much more strongly after mostly slipping a little last week, with the Japanese Nikkei 225 Index up by almost 3% by the end of Monday’s Tokyo session. Stock markets have been surprisingly strong even as the economic damage of the coronavirus pandemic increases. U.S. indices have regained more than half of their losses, which is technically significant as an inflection point. Many market analysts think the bottom of this bear market has already been reached, but other analysts see further strong falls likely in stocks over the coming weeks and months. There is a strong divergence of opinion.
- The Bank of Japan has announced it has no self-imposed limits on its purchases of government bonds, signaling a big expansion of monetary stimulus, which has helped boost its stock market and Asian stock markets generally.
- The rate of increase globally in new confirmed infections and deaths from the coronavirus pandemic seems to have peaked, at least for a first wave, although this may be at least partially due to the pandemic moving towards nations with worse reporting, with total confirmed cases of almost 3 million and an average case fatality rate of 6.95%. The pandemic’s epicenter is still located in the U.S.A., but even there it seems likely that the peak of this wave has already been reached, as it probably has in every European nation. A world recession or possibly even depression from the pandemic appears to be inevitable, with Goldman Sachs forecasting a 34% drop in U.S. Q2 annualized GDP and other analysts seeing a 30% unemployment rate in the near future. If correct, these will be the worst such numbers seen since the 1930s, but it should be noted many analysts continue to see a much better outlook for U.S. unemployment. The WTO has forecasted that global trade is set to fall by one third.
- Data from New York City suggests that 0.21% of the entire population of the city has recently died while infected with the coronavirus, which is one of the strongest pieces of hard evidence that the disease has a significantly higher mortality rate than any common flu. Similar data from Bergamo, Italy suggests an estimate from between 0.20% to 0.50%, indicating that claims of coronavirus having a significantly lower IFR are unlikely to be accurate. With recent antibody tests suggesting 21% of the city has been infected, this suggests an infection fatality rate of 1%.
- There is increasing focus on of the economic cost of the pandemic, especially in the United States where the unemployment rate is currently estimated to have hit 15%. Some nations (mostly in Europe) have begun to relax restrictions, including three U.S. states while the federal government has released plans for a wider opening soon. Italy and Spain are finally beginning to begin to ease their lockdowns as data improves, while other countries easing include Germany, Poland, Norway, the Czech Republic, Albania, Italy, and Israel. It is becoming clear that the infected nations which have suffered least from this first wave are New Zealand (which is close to having eliminated the disease completely), Australia, Norway, Austria, and Israel.
- The rate of new coronavirus infections appears to be increasing in Brazil, Turkey, Russia, India, Singapore, and Japan, although the Indian lockdown has been surprisingly efficient.
- Although the U.K. seems to be past the peak of its new cases, its government has firmly ruled out relaxing its lockdown yet, as Prime Minister Boris Johnson returns to work after having recuperated from his serious coronavirus illness.
- While the vast majority of confirmed cases are still in Europe and the U.S.A., with the U.S.A. accounting for approximately one third of all cases, infections are beginning to increase notably in Latin America, especially in Brazil which is confirming more than 3,000 new cases daily. The President of Brazil Jair Bolsonaro has been seen in public recently suffering from a dry cough, leading to speculation he is infected, as he continues to play down the disease as no worse than the flu.
- The price of Gold reached close to its multi-year high price towards the end of last week, but failed to exceed the $1735 area, although it still trades well above $1700 per ounce.
- Currency markets are currently dominated by relative strength in the Australian Dollar, while the U.S. Dollar looks likely to be the weakest currency today.
- Markets have been affected recently by high relative volatility, but this has decreased back to more normal levels, although stocks are still showing relatively high volatility.