Daily Comment (July 8, 2020)

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

[Posted: 9:30 AM EDT]

Despite rising stock markets overseas, sentiment in the U.S. markets today seems finely balanced between optimism about post-virus economic reopenings and accommodative policies on the one hand and the reality of resurgent infections and renewed lockdowns in some locales on the other hand.  We review all the key news below.

COVID-19:  Official data show confirmed cases have risen to 11,856,991 worldwide, with 544,871 deaths and 6,473,170 recoveries.  In the United States, confirmed cases rose to 2,996,333, with 131,481 deaths and 936,476 recoveries.  Here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.


Economic Impact

European Union:  ECB President Lagarde said her ongoing review of the central bank’s operations will examine how they can be made “greener.” This includes potentially shifting its massive asset purchases to sell off obligations issued by carbon-intensive companies and buying more obligations issued by less carbon-intensive firms.  Separately, she also tried to tamp down expectations that the EU’s proposed €750-billion coronavirus recovery, including common debt issuance, would be approved at a summit to be held on July 18.  According to Lagarde, approval of the plan will probably come closer to the end of July.

EU-Germany:  The German central bank will reportedly accept the positive findings of a finance ministry and parliamentary review of the ECB’s massive bond-buying program. This suggests the program won’t be tripped up by the German constitutional court’s ruling in May, stating that government officials must review the economic and financial costs of the bond purchases.

United States-China:  The U.S. is imposing visa restrictions on Chinese officials involved in Tibet policy.  This is the latest rise in tension with Beijing, as the Trump administration increasingly uses immigration measures as a tool to target China.

Mexico:  The Jalisco New Generation Cartel, which dominates the trade in fentanyl and methamphetamines, has become Mexico’s most powerful criminal organization, eclipsing the more famous Sinaloa Cartel. Perhaps most worrying, the Jalisco Cartel has made it a hallmark to attack Mexican security forces and public servants directly, making it the biggest danger to the country’s, at times, fragile stability and further complicating the country’s investment environment.

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