Lockdown 2.0 in California, weak data and central banks

15 июл. 2020 г.

The main news of yesterday can be considered the introduction of lockdown №2 in California. Yes, this is a milder version of restrictions (food in take-away restaurants, banning bars and public events), but California is still the main generator of US GDP, and indeed the world as a whole (6th place among all countries in the world level of GDP). So, everything is serious, very serious, especially considering that the situation with the pandemic in the US is getting worse. And not only in the USA: Hong Kong tightens restrictions, Tokyo is a step away from introducing a new state of emergency, Iran is closing schools, etc.

In general, yesterday can be safely written in the liabilities of the global economy. In addition to the lockdown in California, there were many depressing macroeconomic data. For example, industrial production in Japan (-26.3% in May compared with the same period last year) and the UK (6%, which is actually equivalent to a strong drop, since these data are relative to the previous month, manufacturing production in the metric year / year decreased by 22.8%), Singapore's GDP in the second quarter fell into the abyss (-41.2%), and in the UK the situation is slightly better (1.8% compared to the previous month is all almost a 20% drop compared to the same period last year).

The data from the Eurozone was not very pleased either (economic sentiments, according to ZEW data, was much lower than forecasts), which, however, did not prevent the euro from growing (expectations of EU summit on Friday).

Yesterday, the earnings season began in the United States. Banks started with their financial reports. The overall results can be summarized as follows: those who had large trading departments were able to relatively withstand the lockdown (JPMorgan), but those who were totally dependent on the traditional banking business suffered more than noticeably (Wells Fargo). In general, the losses of banks from traditional business are enormous - almost each of the banks wrote off about $ 8 billion for possible loan losses. These are the highest marks since the global financial crisis.

Today promises to be no less eventful. The Bank of Japan has already announced the results of its meeting: the rate was left unchanged. The Bank of Canada will announce its decision later. In addition, we are waiting for data on inflation in the UK, as well as industrial production in the United States.

From the conditional positive of yesterday, at least for the oil market, we can consider the OPEC report, in which the cartel was relatively optimistic about the market prospects in the foreseeable future. But this positive can be dispelled today by the decision of OPEC + to increase production by 2 million bpd.

Yes, and the markets traditionally took the opportunity to increase optimism - the news about the next round of vaccine trials from Moderna.