A second wave of coronavirus cases is emerging in the U.S., raising alarms as new infections push the overall count past 2 million Americans, said Bloomberg in a widely circulated article last night.
The article noted that...
- 2,504 new coronavirus cases were reported in Texas on Wednesday, the highest one-day total since the start of the pandemic.
- Florida this week reported 8,553 new cases (the most of any seven-day period), one month since “reopening”.
- California’s hospitalizations are at their highest since May 13, rising in 9 of the past 10 days.
Risk assets did not like this news one bit!
Global equities were sent tumbling during the Asia Pacific session, and have continued their decline throughout the European session.
Risk sensitive G10 FX AUD, NZD, SEK, NOK and CAD are also trading well in the red today, as is the crude oil market. Meanwhile, havens USD, JPY, CHF and developed market government bonds are all bid. A typical risk off reaction, as it were.
Why are markets reacting like this?
Forget US/China trade tensions, Covid-19 remains the number one risk to the global economy and health of financial markets. Just look at what the first wave of the virus did! The global economy was absolutely crushed and the damage will likely take years to recover. A 2-year tit-for-tat US/China trade war couldn’t even send any of the major global economies into a mild recession.
As such, the flattening of Covid-19 infection curves (i.e. the slowing of the spread of the virus) in key hotspots and markets across the world has been one of the key themes (alongside coordinated global monetary and fiscal stimulus) underlying the recovery in risk assets from their March lows.
Remove one of these key pillars and risk assets are in for trouble.
Though the total number of new cases of Covid-19 in the US continues to gradually decline, the pickup in infection rates in some states is raising alarm bells; as many have predicted would happen, evidence is growing that economic reopening comes with higher spread rates.
This theme is therefore going to be of rising importance over the coming weeks. US Covid-19 infection numbers are back 100% back in the spotlight!
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