Morning 5-27

Risk On, again  

News from Europe the Driving force  “ the European Commission’s proposal for a Covid-19 recovery fund, specifying €750bn total, split between €500bn of grants and €250bn of loans.”(Reuters)  This amount is on the High Side of Expectations but as usual  with deals in Europe more details are needed . ….

…Japan Also Increasing Stimulus  The Nikkei 225 added 148.06 points or 0.7% to 21419.23 on Wednesday as Reuters reported that Japan will roll out another $1.1 trillion stimulus package that includes financing help for struggling companies, subsidies to help firms pay rent and several trillion yen for health care assistance and support for local economies. The stimulus, which will be funded partly by a second extra budget, will be on top of a $1.1 trillion package already launched last month, bringing the total amount of JPY 234 trillion, roughly 40% of Japan’s GDP (Trading economics)

  Dow +1.4%, Spoos +1% Nasdaq +.4% Russel +2% Stoxx 50 +1.8% Spanish Stocks +2.7 and Another country to benefit from rescue package Italy +1.78% A few relevant headlines…        NKY 3 month highs Australian Stocks 11 week highs.. Still issues with Hong Kong, Trump says “he will look very strongly at a separate bill sanctioning Beijing official “(BBG) Dollar sagging a bit for second day….  Bunds yields at 6 week highs  ,but due to news on European recovery fund Spanish and Italian Yields lower. …Treasury  yields higher by ~2bps across the curve, watching .75%  in 10s as a possible breakout  to upside ,30 year yields  already  breaking out to upside … Gold down for second day I’m watching 1666-1676 for possible support…  Oil trading down a bit of surprise  with Spoos higher possibly due to Russia hinting at curbing production cuts starting in July …SPX traded above 200 D MA but did not close above,  I will be watching again today for a close above 3000

 Virus Update: (Pantheon Macroeconomics)

• Confirmed U.S. cases rose by 1.12% yesterday, down from a 1.34% increase on the same day last week.  The number of new cases fell 8.1% to 18.6K, from 20.3K a week ago.

  • The decline in cases, though, probably is overstated by holiday effects.  The number of new tests reported yesterday dropped sharply to 302K, from 397K on the same day last week, and well below the trend.  If testing had matched last week’s pace, with the same proportion of positives, the number of new cases yesterday would have been 21.4K, more than on the same day last week.

• Deaths, which lag cases but are unaffected by the rising trend in test numbers or changes in test criteria, are falling steadily.  Again, lags in reporting over the holiday mean that the 693 deaths reported yesterday—down from 1,574 a week ago—likely overstate the true rate of decline.  We expect a much bigger increase to be reported later today, taking the cumulative total above 100K.  The underlying trend, though, clearly is falling.

 • Case growth in Minnesota, which has had severe outbreak at meat processing plants, has slowed sharply over the past couple of weeks, but we are becoming concerned by the acceleration in new case growth in Alabama and Arkansas, shown in Chart 2.  These outbreaks seem not to be due to specific factors.  Both states have increased testing in recent weeks, but if the recent spikes continue, the states will have to re-impose containment measures.

 • Cases, hospitalizations and deaths continue to fall in NYC.  But daily new cases per capita remain far higher than in most European countries when their lockdowns were first eased

. • The trend in daily new cases in continental Western Europe is likely about flat, and deaths are falling.  The data for Spain and France, however, are very noisy, and subject to revisions.  New cases in the Netherlands have picked up over the past week; meat processing plants again appear to be a big part of the problem.

• New cases and deaths are falling rapidly in the U.K., but the latest case numbers are likely to be revised over the next couple of days in order to correct errors.  The improving big picture won’t change.

• Official data show that the 7-day average number of new cases in Brazil has suddenly dipped.  We doubt this is a true reflection of the picture.  Daily cases in Russia are now reported to be falling steadily too, though a degree of skepticism here probably would be appropriate too.  • A spike in cases in South Korea appears to be centered mostly on a single e-commerce warehouse near Seoul. 

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