Sunday marked a record increase in global coronavirus cases with a 230k increase in cases recorded. The pool of countries contributing the most to the increase in cases is comprised by the usual suspects US, Brazil, India and South Africa. In the US, Florida keeps hitting daily records in number of infections with Sunday’s reading hitting 14k. A positive statistic is that South Korean health authorities reported that one in three South Korean patients seriously ill with COVID-19 showed an improvement in their condition after they were treated with Gilead Sciences Inc’s antiviral remdesivir. Positive news from the remdesivir drug that it may reduce deaths turned the markets around on Friday al though the findings need to be confirmed.
Notwithstanding the increasing COVID cases, Asian markets trade higher this morning with Japan and China outperforming. The Chinese markets staged a stellar performance last week after an enthusiastic chorus from the nation’s influential state media in the China Securities Journal which said that fostering a ‘healthy’ bull market after the pandemic is now more important to the economy than ever before. It is said that Chinese social media exploded with searches on the term “open a stock account”. European markets are also opening higher and US futures are in the green on stimulus hopes while they face a tough week ahead as the earnings season commences. However, looking at it optimistically the plunge in profits is already counted into analysts estimates and the markets could be surprised with beats in sectors outside healthcare and tech.
This week is an important week for oil as OPEC+ meets at an online meeting on Wednesday and the group may follow plans to start tapering the historic production cuts albeit the surge in coronavirus cases globally. The International Energy Agency said in a report on Friday that although fuel demand should rebound sharply over the next 3 months as global economic activity rebounds the increase in infection rates globally is casting a shadow over the outlook (Brent and WTI trade at 40 and 42 handle respectively this morning).
The weekend of the 17/18 is very important on the recovery plan as the Frugal Four will highlight the stance on 1) reducing the size of the fund and in particular the grants 2) redistribution of funds to favour the poorest countries 3) conditionality on fund disbursement. Although an agreement next weekend is deemed unlikely another meeting date will be set in August so it limits the downside to risk. Analysts expect the eventual outcome to be positive on peripherals and risk.
The next leg up for risk assets will be determined by the next stimulus package from the US government which should be approved by the end of July. But the details will not be announced until the Senate is back in session i.e. who will benefit and the amount of the stimulus check.
Looking at how some of our markets traded last week, Peripheral debt continues to perform while the higher beta Italy and Greece gave up some of the gains towards the end of the week with the risk off mode in the markets. GREECE 35 traded down form 109 handle to high 107 handle while BTPS 3.1 03/01/40 is similarly down a point to 119 handle. The Angola curve traded lower on its revised budget and oil and risk off weakness to be later bid on news of its commitment with the IMF program. Angola 25s reached as high as 91 handle last week to trade around 87 handle this morning. The Nigeria curve is stable with little volatility to lure yield hunting investors; NGERIA 31s are trading at 99 handle this morning from 101 highs. Other notable credit performances has been the Saudi curve with the new KSA 60 trading at 120 highs while the new EGYPT 50 also came off 98s lows of beginning of last week to trade as high as 101.750 towards the end of last week.