Global equity markets surged again overnight, boosted by news of breakthrough in the search for the coronavirus, with President Putin announcing the Russian success. The news boosted markets, despite some revelations of a second wave in NZ and Europe, resulting in NZ joining Victoria in another lockdown. The resurgence in the virus is worrying, as it adds further devastation, to an already crippled economy. Government reaction to the pandemic is to shut down the economy, but unless the vaccine is effective, the economy and society must learn to operate with the virus.
The Chinese have announced retaliatory sanctions on some leading US China critics, in response to recent US actions. Included are leading Senators Cruz, Cotton, Rubio. This deteriorating relationship has the potential of damaging the existing global supply chain, with destructive consequences. NZ has discovered ‘community transfer’ of the virus and shut down the economy again. This will have political consequences, in the lead up to the September election and was widely forecast. The impact on the economy will be huge and not realised until after the election. This has surprisingly little impact on the currency, which traded just below 0.6600, while the AUD drifted below 0.7150 after a big contraction in Business Confidence.
The GBP fell back to 1.3050, after June Quarter employment numbers revealed the loss of 220,000 jobs, while the EUR traded 1.1750. German ZEW Economic Sentiment spiked up, but any surge in confidence has been off-set by the resurgent virus, with the Dutch re-imposing lockdown restrictions. The second wave of the virus and the economic consequences, plus the deteriorating US/China relations, remain serious threats to the economic recovery.