COVID-19 update: Second waves yet to cause market distress

• COVID-19 cases spiralling out of control, but markets braced for impact.
• Bulls continue to support risk assets, for the time being, while the US looks to another shutdown.

The US COVID-19 situation is spiralling out of control.

Yesterday the number of new infections in the US exceeded 60K- a new one-day record.

So far it has not disturbed the markets in a major way, but it is a very fragile and fluid situation.

That said, it's not just in the US where cases are rising. States and cities in Australia and Tokyo, where restrictive measures are returning, also set their daily records.

Also, coronavirus cases rose by record 13,674 in South Africa, which is a huge number.

The return of restrictions for economies could revive demand for the dollar as investors pull the plug on riskier asset classes. 

On Thursday, the US virus cases rose 2%, beating the average daily increase.

DC coronavirus statistics were in as 991 new deaths vs. 932 yesterday.

California has its biggest 1-day jump in virus deaths, reporting 149 new deaths vs the 7-day average of 73 daily deaths.

Arizona's cases climbed by 3.7% which equals its 7-day average. However, there were only 11,931 PCR tests in Arizona reported. Around 33% of those were positive though with 4057 new cases.

For the eleventh day in a row, we have seen a record high of hospitalisation in Texas. Deaths in Texas also hit a record high, for the 3rd day running, with 105 added.

New York has banned large events through until October.

Fauci says states with major outbreaks should ‘seriously look at shutting down’ again

Meanwhile, Anthony S. Fauci, the nation’s top infectious-disease official, is advising that some states seriously consider “shutting down” again if they are facing major resurgences of the virus — a warning that conflicts with President Trump’s push to reopen the country as quickly as possible, The Washington Post reported. 

Fauci added Thursday that he hopes there’s not a need for new shutdowns, saying it “would not be viewed very, very favourably,” and urged states to pause their reopening process to slow the spread of the virus so that renewed shutdowns are not necessary.

Market implications

Outside the US, many large economies are witnessing improved business activity. This could mean that investors start to rethink the playbook and pull out from the US, with patience running out for the hunt for yield.

Financial assets in improving countries are becoming more attractive and if their central banks take a pause in policy easing, then the US dollar could find itself at the mercy to flows back into opposing currencies. 

Federal Reserve officials speaking earlier this week have shown signs that they are increasingly doubtful about the sustainability of the economic recovery. 

So long that there is a willingness to further increase asset purchase programs on its balance sheet, then US stocks should find a softer landing, but that is not to say that investors will remain committed to them. 

For Thursday, there was a mix of sentiment and the NASDAQ made record highs, again. More on this here: Wall Street Close: NASDAQ outpaces its comrades again

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