Back to life, back to reality

Market Update: 14 July 2020

As Victoria is back in isolation and NSW looks to be treading a fine line with some reimposed restrictions on pubs and clubs, the Stock markets show some jittery behaviour. Having said that, there are some glimmers of hope such as NAB business confidence moving up to 1 from -20 and the ABS tell us by June end, 35% of jobs lost have been regained, but that was before Victoria closed. So what we again face as with the rest of the world are spikes in cases after reopening and an uncertainty for businesses of how/if they can adapt and if they afford to be closed for 6+ weeks.

These types of concerns weighed on US stocks as well but interestingly didn’t translate into bonds selling off in yield – even safe haven Gold is back below 1,800 so correlations are a bit out of sync with nowhere to hide. Even the darling of the world NZ has lost some mojo with 25 cases outstanding – elimination is not achievable unless you remain with draconian measures.

Put into some context though… we are talking about fortunately in Australia, a low mortality rate of 1% and 0.04% of the population have contracted COVID-19 and 18 people fighting it in ICU. So it’s the high rate of infection that’s alarming and we’re drawing out this by flattening the curve to ensure hospitals are ready to act, but it’s easily another 6 months or more before vaccines can be used globally and we can go back to “normal”.

Besides strong trade data from China today – the US-China tensions seem to grow and threats against Australian exports, but the data is certainly painting a different picture. We have quite a bit of US earnings out tonight to give some perspective on today’s reality and a good gauge for sentiment going forward.

Sources: Bloomberg

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