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Jumpy investors grapple with a dreaded record-high—in coronavirus cases

June 25, 2020, 9:54 AM UTC

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Good morning. So much for COVID fading out by summer. From Australia to California, spikes in new coronavirus cases pushed investors to sell, sell, sell yesterday. But the mood is lifting, as are stocks.

Let’s see where the bulls are putting their money.

Markets update


  • In afternoon trade, the Asia indexes are mixed. Tokyo was down; Shanghai was up a tick.
  • The IMF added to yesterday’s markets gloom when it slashed its global growth outlook for 2020. Again. “We are definitely not out of the woods,” said the group’s chief economist.
  • Trade tensions and geopolitics have spooked investors of late. They won’t like this then: the Pentagon has drawn up a list of Chinese companies it says have ties to the Chinese military, the FT reports. Huawei makes the list, as does China Telecom and China Mobile, both U.S.-listed.


  • The European bourses fell for a second straight day out of the gates, only to recover, and climb. Germany’s DAX led the indexes higher, up 1% two hours into the trading session.
  • Bayer took off, up 2.6% at the open after announcing a $10.9 billion plea deal (the full tab is more than $12 billion) to settle three-quarters of the Roundup weedkiller cancer claims in the states.
  • Budget airline EasyJet plans to raise £450 million in a rights issue. It needs the funds to weather the worst of the coronavirus downturn, but the move may run into turbulence from company founder and main shareholder Stelios Haji-Ioannou.


  • The Dow, S&P 500 and Nasdaq each fell by more than 2% yesterday, the worst trading session since June 11. The futures are flat, though off their lows.
  • Seven states reported new records for coronavirus cases as America’s COVID-19 crisis takes a worrying turn. The spikes are forcing companies to rethink reopenings. Apple closed seven stores in Houston and Walt Disney said it will push back the planned reopening of its California theme parks beyond July 17.
  • That Q-word again. Quarantine. Beginning just a few hours ago, New York imposed two-week quarantine orders on travelers coming in from 9 states. Fail to comply, and you get hit with a fine. New Jersey and Connecticut also have similar plans in the works.


  • Gold is down.
  • The dollar is up, slightly.
  • Crude is falling again in choppy trade. As I write, Brent is below $40/barrel, a big two-day drop.

“Not out of the woods”

As is her style, Gita Gopinath, chief economist at the International Monetary Fund, did not mince her words yesterday. “We are definitely not out of the woods. We have not escaped the great lockdown,” she said in a video conference call. “This is a crisis like no other and will have a recovery like no other.”

The IMF did something unusual yesterday, slashing its current year global growth forecast for the second time in the past two months. And it wasn’t a mere tweak. They basically tore up the old forecast, and replaced it with a far gloomier one.

Here’s what they now see for the U.S. and global economy this year and next:

Let’s start at the top. The IMF now sees the U.S. GDP contracting by 8% this year; in April, they were predicting a more mild 5.9% 2020 hit. Global GDP will now fall by 4.9% this year, and will grow by a less impressive 5.4% next year. Again, these are not mild tweaks.

The impact on the labor market is worth noting, too, a fitting theme today as the latest batch of U.S. jobless claims are due out in a few hours. According to the IMF, the lockdowns in Q2 alone created a massive global decline in work hours, the equivalent to the loss of about 300 million full-time jobs, CNBC notes.

The IMF seems to be paying more attention to jobs as a downward drag on the recovery than most other forecasters. And other forecasters are calling them out on it.

In an investors note this morning, Paul Donovan of UBS pointed out that the IMF has a track record of seeing things glass-half-empty. “The IMF has been too pessimistic on growth in 27 of the past 30 years,” he wrote. “It tends to be significantly too pessimistic when there are big structural changes.”

Even still, the IMF numbers added to investors’ gloom yesterday, which has lingered into today’s choppy trading session.


Have a nice day, everyone. I’ll see you here tomorrow.

Bernhard Warner

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