Daily Comment (August 7, 2020)

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

[Posted: 9:30 AM EDT] | PDF

It’s employment Friday!  We cover the data in detail below, but the quick view is that the data came in better than forecast.  It’s a modest risk-off morning, with weaker Chinese stocks.  Our leadoff this morning is China as tensions rise further.  Policy coverage is next as Congress looks like it won’t get a deal done.  We update the market and economic news followed by our foreign update.  The pandemic “bats ninth.”  We have a new Asset Allocation Weekly, with accompanying podcast and chart book.  Let’s get to work!

China news:

Policy news: 

Market and Economic news:

Foreign news:

  • The Turkish lira has fallen to new lows. The Turkish central bank has been cutting interest rates despite elevated inflation.  Turkey’s CPI is 11.7%, while the benchmark policy rate is 8.25%, meaning the real policy rate is negative.  President Erdogan has pressed the central bank to cut rates, but it appears the financial markets are passing their judgement.
  • Over the last couple of days we have discussed the tragic explosion in Lebanon. The next issue will likely be a surge in refugee flows from the country to Europe.  It should be noted that Syrians have emigrated to Lebanon to escape the Syrian civil war.  The current collapse in Lebanon will likely lead those Syrians to try to follow the Lebanese out of the country.
  • A reminder—Belarus holds elections on Sunday.
  • Brian Hook, the U.S. special envoy to Iran, announced his resignation. Hook has been hawkish on Iran, but his presence did offer a conduit for talks.  His exit almost guarantees that there will be no diplomatic movement on Iran before November’s election.

COVID-19:  The number of reported cases is 19,127,091 with 715,555 deaths and 11,590,138 recoveries.  In the U.S., there are 4,884,406 confirmed cases with 160,111 deaths and 1,598,624 recoveries.  For those who like to keep score at home, 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 Rt data shows that just over 60% of the states are >1, suggesting increasing infection rates.  Midwestern states are experiencing a rising rate of positive tests.

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