Daily Comment (August 13, 2020)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

The summer doldrums are upon us.  Equity markets are mostly steady, with the dollar weakening.  We detail the claims data below, but they are showing improvement.  We lead with market and economic news this morning, followed by China.  Foreign news is next, with updates on the situation in Belarus.  We close out today’s report with an update on the pandemic.  And, being Thursday, we have a new Weekly Energy Update.  Here are the details.

Market and Economic news:

China news:

Foreign news:

  • Despite an aggressive crackdown, protests continue in Belarus. Thousands have been arrested.  Security forces have resorted to live ammunition against protestors.  At this point, we don’t think Lukashenko will be forced from power.  Unlike in Ukraine, Belarus doesn’t have a natural division.  Ukraine has been divided between a Russia-sympathizing east and a Europe-sympathizing west.  In Belarus, there is no obvious alternative to Lukashenko.  He has greater control over the security apparatus.  However, even if he survives this threat, it is unlikely the country will thrive.  The election will likely spur the young and talented to emigrate, causing a brain drain.  It is likely Lukashenko will be forced to improve ties with Russia as Western nations will be less inclined to deal with him.  This means less flexibility in dealing with Putin.  Thus, he will survive, but in a weakened state.
  • There are reports that Iran seized an oil tanker in the Persian Gulf. The vessel was held for five hours, then released.  It is not clear why it was boarded or why it was allowed to leave.  Oil markets ignored the news.  The event is one in a series of provocative acts by both the U.S. and Iran over the past year.  They have raised tensions but not enough to trigger a war.
  • Israel claims that North Korean hackers attempted to breach one of its defense firms.

COVID-19:  The number of reported cases is 20,648,298 with 750,030 deaths and 12,849,485 recoveries.  In the U.S., there are 5,197,749 confirmed cases with 166,038 deaths and 1,755,225 recoveries.  For illustration purposes, the FT has created a nifty interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high frequency data on various factors.  The weekly Axios map shows a clear improvement in cases in the U.S.

  • We have been reporting a large backlog of testing results that has rendered testing useless. If the results of a test take more than 10 days, by that time, the patient has probably recovered.  As a result of this backlog, we are seeing a drop in testing; the good news is that the backlog will likely ease, meaning those getting tested will get their results sooner.
  • The most helpful testing is one that generates a rapid result. Although such tests exist, the machines that read the tests are in short supply.
  • Although testing and reporting protocols in the developing world are considered weaker than in the developed world, it does appear that the rate of change is slowing in the former.  However, the caseloads seem to be plateauing at a high level, which will tend to dampen growth in the emerging world.

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