Bottom line: the news is mixed today. On the one hand, we see a continued strong rise in the US and a worrying increase in India and South America. On the other hand, there are tentative signs of a levelling off in new cases in Italy and also in Germany and France. We need more data to verify this, though, and there is uncertainty about test capacity.
The number of new cases outside China dropped for the first time yesterday to 30,377 from 32,764 as the growth rate has come down a bit in Europe. The total is now above 338,000.
Our model scenarios are unchanged from Friday ranging from a peak from 600,000-1,200,000.
The US saw a further jump in the number of new cases yesterday to 7,820 up from around 5,000 new cases before the weekend. It took the total to 34,717. The growth rate is still high at 29% implying a doubling in three days. The recent increase partly reflects a big scaling up of tests, which is a positive development as it helps to isolate infected people and limit contagion. The death rate is now stabilising around 1.3%.
In Italy the number of new cases dropped to 5,560 yesterday from 6,557 and the daily growth rate declined to 10.4%. This is slightly encouraging, but we need more data to verify the improvement. It would make sense, though, to see a slower contagion rate as the lockdown has been in place for around two weeks now.
The number of new cases in Germany has dropped to around 2,500 from close to 3,000 ahead of the weekend. It has led to a decline in the growth rate to around 12% the past two days from 25-30% last week. France has also seen a drop in new cases to 1,559 yesterday from above 1,800 before the weekend pushing the growth rate down to 10.8%. If we see confirmation of the improvement in Germany and France in the coming days, this would be good news. However, some caution is needed here as there is uncertainty about the level of testing. It makes sense that we start to see a levelling off in contagion at this stage, in our view, as it would mirror what we have seen in other countries 10 days after restrictions are put in place.
South Korea has had some hiccups in the number of infections lately but still sees a very low growth rate below 1%. Iran has also seen a big decline in the growth rate of infections. This has been verified by a decline in the number of new deaths as well.
On a less positive note, there are big increases in India and South America, not least Brazil. This is worrying for two reasons. First, it questions whether the virus is less contagious in warm weather. Second, a spread of the virus in especially India with 1.3bn people and a low level of healthcare in many areas could lead to a large number of deaths. It is unclear, though, how many of the infections are imported, so we should watch this closely over the coming week.
Mainland China continues to see few cases but there has been an increase in Hong Kong and Taiwan, due to imported cases.
Tomas Pueyo, who went viral last week with an article on the virus, has written another must-read article on what the next 18 months could look like.
Germany yesterday banned gatherings of more than two people. Italy banned movement within the country. Greece imposed a lockdown. UK's Boris Johnson warned of a lockdown.
Germany announced it will spend EUR150bn on economic support (FT). Angela Merkel went into quarantine after a doctor who gave her a vaccination was tested positive for COVID-19 (Politico).
Equity markets dropped again in Asia and the S&P500 future hit limit down after falling 5%. Virus concerns and US Equity markets dropped again in Asia and the S&P500 future hit limit down after falling 5%. Virus concerns and US politicians quarrelling over an USD2trn stimulus plan rattled markets (CNBC).
Comment. Overall, the development is mixed with both worrying developments as well as some possibly encouraging news. The rise in the US was to be expected but the rising amount of testing here is good news as the success in South Korea has been down to an aggressive strategy of testing and isolation of infected people. The numbers will likely continue to rise sharply in the US in the short term but within two weeks we should see some improvement. The development in Europe this week will be crucial. If we get confirmation that contagion is slowing it would be good news. However, we do not want to get carried away by two observations, so we need to see how infection and death rates develop over the coming days. The negative economic impact is becoming clearer by the day and equity markets are likely to be very volatile still in the short term. However, if we see a stabilisation in new cases in some of the big countries in Europe, it could mean some much needed positive news to the market as well.
