growth in mortality rates, however, has fallen by nearly
half from the March-April peaks, reflecting the shift in the focus of the
pandemic towards emerging markets. Here, mortality rates have been consistently
lower than in developed markets. Meanwhile, curves continue to flatten in the US
and in particular in major European economies. Globally, deaths topped 382
000, as of 3 June.
Easing spreads across Europe
All major European countries have now eased the restrictions
put in place to slow the spread of COVID-19, the Oxford Stringency index shows.
Some countries are easing faster than others. Italy, in particular, stands out. Where the restrictions were once seen
as the toughest in Europe, Italy now ranks as the laxest, with Spain now assessed
to have the toughest regime.
Latin America
remains the current pandemic hotspot: four out of the 10 countries
reporting the highest number of new infections in recent days are from the
region: Brazil, Peru, Chile and Mexico.
Brazil is now
second only to the US in terms of confirmed cases and is fourth in fatalities
after the US, UK and Italy. Brazil’s mortality curve remains worrying, and
since there is no national lockdown, it is hard to tell when the peak will be
reached.
No plain sailing after lockdown
Meanwhile, events in South
Korea remind us that managing the virus outside of lockdown is not straightforward
even for the best-in-class regime. South Korea reintroduced quarantine measures
for the next two weeks due to the recent uptick in cases: parks, museums and
art galleries were temporarily closed and school quarantine and distancing
rules in Seoul were tightened.
On Thursday, 79 new cases had emerged, the highest since
early April. Most of them were attributed to a single distribution centre for
an online retailer. The new cluster led provincial governments in the region to
postpone plans to reopen schools for kindergarteners and primary schoolers on
Wednesday, although most of the country’s schools have reopened as planned.
Economic policy
The main news in recent days has been the announcement by
the European Commission of the
details of the long-term budget, the Multiannual Financial Framework (MFF), and
its response to the current crisis, Next Generation EU.
Markets had focused on the latter. The Commission proposes a
EUR 500 billion package of grants and EUR 250 billion in loans to be financed
by debt issued in the capital markets. This is backed by the headroom in the EU
budget between actual spending and the theoretical limit on the funds that the
EU can claim from the member states.
Next Generation EU sets out an important principle:
establishing a genuine fiscal capacity
at the centre of Europe, which can be deployed to support demand in member,
states that are hit by large shocks.
However, the details of the package are yet to be agreed by
all member states. It seems likely that the generosity of the scheme may be
diluted in the search for a compromise. The scale of the net transfers may be
reduced. The conditionality attached to funds that already exists may be
strengthened. The split between grants and loans may be recalibrated.
Political news
There have been two significant developments:
The fallout from the decision by the Chinese
authorities to introduce national security legislation in Hong Kong’s Basic Law.
This has added to tensions in Sino-US
relations over and above the blame game over the virus and an uneasy truce
in the trade/tech war. There is a real risk of an escalation with obvious
market consequences: China’s Foreign Ministry has warned, “Any words or actions
by the US that harm China’s interests will meet with China’s firm counterattack.”
In the US, George Floyd’s death has led to
widespread public protest and
instances of violence that prompted the authorities to impose curfews in cities
and deploy the National Guard in multiple states. As yet, it is unclear
whether this latest tragedy will trigger a moment of national reflection on the
question of racial injustice and ultimately positive change, and whether more
immediately it affects the presidential election.
Market Outlook
In an encouraging sign, US continuing claims for unemployment benefits have dropped for the
first time since February. This points to the first green shoots in the labour
market as quarantine restrictions are lifted. Any recovery hinges on improving
employment for the bounce-back to be sustainable over the medium term. It is
also crucial to keep social tensions to a minimum.
We believe the economic environment remains weak and that the recovery will take
longer than expected. This assessment is echoed by the ECB. Most developed
economies will not have returned to the 2019 levels of activity by the end of
2021. In Europe, a greater dispersion in growth among countries has increased
divergence. This is a key reason to have a unified fiscal approach, as per the
latest European Commission proposal (see above).
We expect further
stimulus and central bank support given this weak outlook. On 4 June, the
ECB is expected to announce a EUR 500 billion increase of its PEPP programme.
It comes on top of the EUR 750 billion package proposed by the Commission.
Extra packages by Japan, China and Germany all aim at securing a recovery and
stabilising badly hit small and medium-sized firms.
Government and central bank support is expected
to ease financial conditions,
especially in Europe where they have remained restrictive, and could lower the
risk premium of eurozone assets and support the euro.
The current backdrop supports risky asset valuations, even as the
real economy struggles. The outlook for the US dollar is less solid: carry and
growth advantages over the rest of the world have dissipated and political
risk, once a US dollar supportive factor, has become a headwind.
Investment-grade (IG) corporates have been tapping
the market at a record pace and rotating away from funding via commercial paper
(CP). This is further easing the stress
on USD liquidity and demand for the US currency. Moreover, it creates a
stronger liquidity backdrop for higher-rated corporates. That said, we see continued
stress for the weaker companies and sectors most affected by the virus
outbreak, creating greater dispersion in credit and equity markets.
A slow weakening of the USD could enhance
emerging market (EM) carry trades.
Prospects look better for the less volatile Asian currencies over the more
market-sensitive currencies as many of these countries have now become the new
epicentres of the COVID-19 crisis (see above).
Any views expressed here are those of the author as of
the date of publication, are based on available information, and are subject to
change without notice. Individual portfolio management teams may hold different
views and may take different investment decisions for different clients.
The value of investments and the income they generate may
go down as well as up and it is possible that investors will not recover their
initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or
restricted sectors is likely to be subject to a higher-than-average volatility
due to a high degree of concentration, greater uncertainty because less
information is available, there is less liquidity or due to greater sensitivity
to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the
majority of international developed markets. For this reason, services for
portfolio transactions, liquidation and conservation on behalf of funds
invested in emerging markets may carry greater risk.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.