COVID-19: Dashboard

New infections, total infections, total deaths, fiscal stimulus and monetary policy as at 10.05.2020

Sources: Bloomberg, IMF, World Bank, Lombard Odier calculations

Public health

• Covid-19 infections are now more than 4 million globally and deaths are approaching 300,000, but growth rates continue to slow
   
• China has reported slight increases in new and asymptomatic cases back into double digits. The government has put Shulan City in Jilin province under lockdown after an increase in infections and concerns about the epidemic in surrounding countries (Russia, North Korea). In South Korea, a new cluster over a holiday weekend led to a modest rise in new daily cases. Korea’s Centre for Disease Control said the new cluster is not a ‘second wave’, it is holding emergency discussions on whether to delay schools opening this week. Figures in Hong Kong and Taiwan remain very low, with the former reporting four new cases on 10 May

• The epidemic curve in Japan continues to stabilize, likely showing the efficacy of more widespread social distancing policy since early April. In Singapore, the epidemic curve moved mostly sideways last week. Elsewhere in developed Asia, new cases were in single digits in Australia and New Zealand. The two countries are discussing re-opening traveling between them
   
• In Europe and the US, latest pandemic figures remain in line with the trend observed over the past two weeks, with most countries now reporting their lowest new cases and deaths since March
   
• In a 10 May address, UK Prime Minister Boris Johnson announced looser movement restrictions starting 13 May and encouraged a return to work if working from home was not possible, while urging people to avoid public transport. Certain primary schools and stores are set to reopen on 1 June but the hospitality industry will stay closed until July at the earliest. Mr Johnson also unveiled a new five-tier coronavirus alert system (“low” to “critical”) and indicated that the country was moving from a level 4 (‘severe’ ) to level 3 (‘substantial’)
   
• In the US, Governor Andrew Cuomo is expected to provide further details on New York reopening on 11 May, while the official lockdown ends on 15 May. Both New York and Los Angeles have reported their lowest death toll in weeks

• After a first scientific mission in China earlier in February that concluded that Covid-19 was zoonotic in origin, the World Health Organisation is considering a new mission for further epidemiologic studies.

Monetary and fiscal measures

• Last week’s Bank of England meeting produced no change in policy, holding interest rates at 0.1%. However, the Monetary Policy Report and two dissenting votes in the committee in favour of increasing asset purchases suggest that such a decision is likely in the near future. Bank of England Governor Andrew Bailey insisted the BoE is ready to take further action if the economic crisis deteriorates. He also suggested that the Bank’s QE scheme is, like the US Federal Reserve and the European Central Bank, effectively unlimited
   
• A German constitutional court ruling last week questioned the legality of the ECB’s Public Sector Purchase Programme (PSPP), raising the risk that the Bundesbank stops participating in asset purchases. The ECB governing council, the European Court of Justice (ECJ), and the European Commission all said that this matter is the ECJ’s jurisdiction and not a national court. The Commission is considering infringement measures against Germany in response.

Economic impact

• In the US, monthly job losses were 20.5 million, a rise of over 10 percentage points in the unemployment rate, which is likely less than reality since around 5% “employed but absent from work” were not classified as unemployed, as is normal practice. Such figures underline the sharp recession under way in the US labour market. The key will be the duration of the shutdowns and whether the economy’s fabric can be maintained. The fact that the large majority of job losses so far are only temporary is encouraging, along with the fact that stimulus packages have ensured that the income loss for those affected remains limited

• In its economic outlook, the Bank of England expects UK GDP to fall 14% over 2020 as a whole, driven by a 25% decline in the second quarter, and a 3% fall in the first quarter. However, the GDP fall is set to be temporary and followed by a rapid recovery. The Bank’s scenario expects unemployment to be 8% in 2020, 7% in 2021 and 4% in 2022. Consumer Price Inflation is forecast to fall further below the 2% target during the second half of this year, largely reflecting demand weakness

• Along with the easing of restrictions, Switzerland and Italy rebounded strongly in indicators such as the air quality index: Week-on-Week rate of 63% for Switzerland and 96% for Italy. A fast recovery can be expected if the momentum continues. All European countries experienced more congested cities and worse air quality.
   
• China’s production indicators declined over the 5-day national holiday. Meanwhile, indices related to mobility picked up strongly: domestic flights increased by 18% while the migration index increased by 6% nationwide, showing people’s confidence in public health
   
• Indicators for Japan deteriorated in the past week. Its normalized indicator slid below 70% for the first time since our study.

Portfolio positioning

• We maintain a relatively cautious stance. The success of confinement measures and the extraordinary central bank and government support worldwide has reduced short-term downside tail risks, but the upsides look limited from current levels, unless a major therapeutic breakthrough accelerates the opening process

• In recent months, we have increased the liquidity profile of our portfolios and strengthened portfolio shields, whilst keeping a slight underweight in equities. This also reflects the risk of low oil prices
   
• Post-pandemic, we expect to see sustained growth in IT and health care, which dominate US stock indices, and we have neutralised our US and European equities allocations.

New infections as at 10.05.2020

Public health

• The pace of growth of new infections appears to be declining for the emerging markets in our dashboard. A simple average of the daily growth in confirmed cases now stands at 4.2%
   
• However, there is much dispersion with South Africa, Mexico, Russia and Brazil showing growth in daily cases of between 6% to 8%. Thailand, Malaysia, Poland and Turkey show growth of under 2%. The daily infection rate has fallen, compared with last week, for most of the sample, with the exceptions of South Africa and Colombia
   
• Russia (199,000 cases) and now Brazil (156,000 cases) have both overtaken Turkey (137,000 cases) with more total confirmed infections. The pace of new infections, adjusted for population size, is now the highest for Russia, Chile and Brazil. For Turkey the increase has reduced considerably

• Both Russia and Turkey have far higher levels of testing (27 and 13 tests per 1,000 people) compared with India, Indonesia and Mexico (less than one test per 1,000). Hence, the higher numbers in Russia and Turkey may be a direct function of substantially higher testing compared with those reporting lower confirmed cases but a higher ratio of fatalities
   
• Countries like India, Indonesia, Mexico, Brazil, and – to a lesser extent - Colombia and South Africa may see numbers increase with low levels of testing. On the other hand, countries like Malaysia, Poland and Chile appear better placed with lower confirmed cases (5,000 to 30,000) alongside higher levels of testing (5 to 10 tests per 1,000 people)

• Five countries in our sample – Thailand, Malaysia, Poland, Turkey and Russia have already opened their economies, or are in the process of re-opening. The remaining seven countries have extended lockdowns
   
• Latin America: Mexico’s lockdown is extended until the end of May but the government will debate when to re-open the economy in the coming week. Certain sectors, such as car manufacturers, are expected to re-start on 18 May. On the other hand, in Brazil several cities are still in complete lockdown despite pressure from President Jair Bolsonaro. In Colombia, the government has extended the lockdown until 25 May, but will allow certain sectors to re-open from today
   
• Asia: on 14 May, Thailand’s government will discuss whether to begin the next stage of reopening, which may be slated for 17 May. Malaysia is set to extend its relaxed lockdown by four weeks until 9 June to contain the virus, with borders and schools closed. In India, where the national lockdown has been extended to 18 May, several states are abandoning parts of labour laws to allow companies to hire and fire staff or extend working hours. Indonesian government officials have begun discussions to begin reopening the economy in five phases starting from June, with the economy completely reopened by late July or early August

• CEEMEA: In Turkey, starting today, shopping malls, barbershops and beauty salons will open after weeks of closure. Inter-city travel restrictions in seven provinces are expected to be lifted and a curfew imposed on senior citizens and youths eased. Measures will gradually continue to ease until July
   
• Russia’s self-isolation measures are set to end today, but President Vladimir Putin told regional governors – with responsibility for deciding when to easing lockdowns - not to rush
   
• South Africa remains under lockdown though restrictions have been marginally eased from 1 May with some industries like mining running at partial capacity.

Emerging Markets: new infections, total infections, total deaths, fiscal stimulus and monetary 
policy as at 10.05.2020

Sources: Bloomberg, WHO, IMF, World Bank, Lombard Odier calculations

• Last week, Malaysia’s central bank Bank Negara Malaysia (BNM) cut interest rates by 50 basis points to 2%, in line with expectations. The central bank also eased requirements in fulfilling the statutory reserve requirement, which it said would release about 16 billion ringgit into the banking system
   
• In LatAm, Mexico’s central bank is likely to cut the monetary policy interest rate by 50 basis points to 5.50%, though policy makers may consider a bigger cut. However, policy makers have been cautious on the risks of MXN depreciation, compared with other LatAm policy makers
   
• In Colombia, first-quarter GDP growth would confirm the sharp slowdown, supporting expectations for a deeper contraction in the second quarter and concerns about the outlook in 2020. Lower inflation and inflation expectations and relatively tighter fiscal policy (compared with other countries) support the case for larger rate cuts
   
• Last week, Brazil’s central bank surprised markets by cutting the policy rate by 75 bps to 3%, the post-meeting statement brought the reasoning and forward guidance. The “war budget” was finalized in the lower house, allowing Brazil’s Central Bank to buy private company debt in the secondary market
   
• Last week, central banks of Chile and Peru left interest rates unchanged at record lows of 0.50% and 0.25% and signaled that policy will remain in expansive mode. Chile’s central bank forecasts growth shrinking up to 2.5% in 2020, more modest than the International Monetary Fund’s expectation for a 4.5% contraction. Chile’s policy makers have cut the benchmark interest rate by 1.25 percentage points over the last two months, are buying local bank bonds to boost liquidity and lower borrowing costs, while also intervening in the foreign exchange market
   
• In CEEMEA, last week the Czech Republic’s central bank cut rates by a larger-than-expected 75 bps to 0.25%. The bank is also debating potential steps if rates decline to zero, but saw “no extreme pressure” to ease further now.

Economic impact

• Using a weighted average of growth for BRIICS ex-China group (Brazil, Russia, India, Indonesia and South Africa), growth was 3.50% at the end of 2019. Using the IMF’s latest forecasts, growth is expected to contract 2% in 2020 before expanding 5.5% in 2021. An average of some sell side research forecasts results in a 2% contraction in 2020 followed by a 5% expansion in 2021

• This week in Asia, a slew of April activity data from China will be in focus, including credit, production, investment, retail sales, and inflation. The April aggregate social financing data will be monitored for the strength of policy support being provided. April tends to show a seasonal pullback.

Emerging markets - new infections as at 10.05.2020

Sources: Bloomberg, WHO, IMF, Lombard Odier calculations

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