• President Donald Trump rebooted his coronavirus briefings with a warning about a surge in U.S. cases even as he sought to reassure Americans that his administration has the crisis under control. He took a notably more reserved tone than in earlier briefings, encouraging Americans to wear masks and avoid risky behavior. “It will probably, unfortunately, get worse before it gets better — something I don’t like saying about things, but that’s the way it is. It’s the way — it’s what we have. If you look over the world, it’s all over the world, and it tends to do that.”
• Far more people were infected with the novel coronavirus than previously reported in several corners of the U.S., according to data released by the Centers for Disease Control and Prevention. The agency conducted a survey looking at antibodies to the virus in 10 U.S. regions. It found prevalence was highly variable from one region to the next, but far higher than the reported number of cases across the board. In the New York City metropolitan area, for example, the CDC estimated based on samples collected in March and April that 6.9% of the population had contracted the virus, a level that would be equivalent to at least 12 times the number of reported cases.
• Covid antibodies in patients with mild symptoms fade quickly, raising concerns that their immunity from a future infection may not last very long, researchers said in the New England Journal of Medicine. The first analysis was done on antibodies taken an average of 37 days after symptoms began, with a second after about 86 days, or less than three months. The researchers determined that antibody levels had fallen precipitously, with a half-life of about 73 days between the two time frames. That raises concern that immunity may not last long in people who develop a mild infection, which accounts for the majority of cases.
• Ten states were added to New York’s quarantine list and one was removed, for a new total of 31, Governor Andrew Cuomo said. The advisory is based on a seven-day rolling average of the number of positive tests in excess of 10%, or the number of positive cases exceeding 10 per 100,000 residents.
• Reopening is on hold in most of the US, as states containing about 80% of the population have explicitly paused or taken targeted steps to reverse reopening. The number of new virus cases per day is either increasing or at very high levels in almost every state. While the acceleration of virus spread (Rt) has been less sharp than in the spring, it is still occurring at a rate that appears to be preventing state governments from pushing forward with economic reopening plans. (GS)
• Almost 1,000 new infections were reported in the Netherlands last week, according to the health agency RIVM. The total of 987 positive tests was almost double the amount from a week earlier. The percentage of tests coming back positive has increased, a further sign of a resurgence, RIVM said. The reproduction factor — or R value — rose to 1.29.
• Austria is tightening measures against the spread of the novel coronavirus again, dialing back part of its easing in the past few weeks as new infections have surged in various clusters.
• Tokyo has now seen more than 1,600 infections in the past week, while hospitalizations have risen almost fivefold in the past month.

PANDENOMICS

U.S. Sales Managers Report Continuing Decline in Business Confidence, Profits, Sales and Jobs in July

The Business Confidence Index moved up significantly closer to the 50 “no growth” level in July, but nevertheless remained  in negative territory signalling a continuation of falling optimism about the course of economic activity over the next few months.

UNITED STATES: HEADLINE SALES MANAGERS INDEX

The Profits Index also moved up closer to the 50 line, but remains firmly below it, mirroring falling sales levels. (…) the Staffing Index remains deep in negative territory, with few respondents appearing to have need of more people, and most making do with fewer employees than a year ago.

CHINA SALES MANAGERS REPORT A CONTINUING FALL IN ACTIVITY IN JUNE

• The China Sales Managers Headline Index remains well below the 50 “no growth ” level for the 5th consecutive month.
• The Market Growth Index remains well below 50 and fell further in June.
• The Staffing Index remains embedded in negative territory for 5th consecutive month.
• The Services sector Indexes are reflecting a greater decline than Manufacturing.

(…) The question relating to the markets in which panelists are working , asks simply if markets served are growing, stable or in decline (note: no time period is specified). This question produced the most negative answer of all the questions asked in June. Furthermore the number of respondents reporting worsening conditions rose, after several months of negative replies. This is not an optimistic result. Few respondents see their markets as buoyant, indicating that Covid-19 related problems are far from over. (…)

Like the Market Index, Staffing remains deep in negative territory, with few respondents appearing to have need of more people as of June. Again this suggests that the poor months immediately following the outbreak of the Coronavirus have not been followed by resurgent demand, but by the cautious reopening of existing plants and offices.

In general panelists report an economy largely re-opened and ready to produce, but still waiting for the foreign orders that previously made up a sizeable section of overall economic activity. Conditions do appear to be getting better, but very slowly

CHINA: STAFFING LEVELS INDEX

We will get the flash Purchasing Managers Surveys on Thursday. Here’s the NY Fed WEI as of July 18:

Employment recovery going backward in states hit hard by virus, small business data shows

(…) CNBC looked at the trailing seven-day average of employees working from July 19 compared with June 14, which captured much of the time represented the official June jobs report from the Labor Department. The data showed that six states, including Florida, Arizona and Texas, saw the number of employees going to work decline by at least 5% over that period.

Those three states have seen some of the biggest increases in coronavirus cases since they began to reopen their economies. California, which has also seen a surge in cases, has seen employment stay roughly flat over the past five weeks, according to Homebase. (…)

Nationally, employees going to work at small and medium-sized businesses was down more than 23% compared with its pre-crisis levels for the seven-day period ending July 19, according to Homebase. (The Homebase data measures employment at certain small- and medium-sized businesses and is not representative of the entire economy, giving a heavier weight toward the service sector.) (…)

• TSA data showed the first weekly decline in people passing through checkpoints since April. “Economic data over the next few weeks will likely underscore the depth of the recession and provide a warning that a full recovery is still far from being achieved,” David Kelly, chief global strategist at JPMorgan Asset Management, says in a note to clients. (Axios)
• A meeting of Treasury Secretary Steven Mnuchin, White House Chief of Staff Mark Meadows and Senate Republicans descended into chaos, several GOP lawmakers said, revealing how far apart the two groups are on key priorities for the next economic package. (Axios)

Retail Sales in Canada Recover to Pre-Pandemic Levels

Receipts rose 19% in May, the agency said in its first full release for the month. June looks to have recorded another strong gain, with a flash estimate predicting another 25% increase. That would bring sales last month to about 100% of February levels, according to Bloomberg calculations. (…) Auto sales led gains, jumping 66%. Excluding this sector, retail sales were up 10.6% on the month. (…) Based on the June flash estimate, quarterly sales were down 15% in the three months from the prior period, according to Bloomberg calculations. (…)

The report confirms Canadian consumers are emerging from nationwide lockdowns with pent up demand and keen to spend. At issue is whether the sharp rebound will be sustained in coming months. (…)

“At the moment, sales are still being buoyed by the enormous government income-support programs and consumers satisfying pent-up demand, both of which could fade in the second half of the year,” Royce Mendes, an economist at CIBC World Markets, said in a report to investors. (…)

According to a report Tuesday by Toronto-Dominion Bank, consumer spending growth moved into positive territory in early July on an annual basis for the first time since the pandemic started. Three provinces — British Columbia, Alberta, and Ontario — have been driving the national improvement in consumption, the bank said.

Bank of Canada to reduce purchases of federal, provincial debt as market stabilizes

Falling Rents Point to Economic Pain in China Rents in the country’s biggest cities fell about 2% in June, a sign of weakness as the coronavirus hit the economy

Nationwide, average residential rent levels in large and midsize Chinese cities fell more than 2% in June from a year earlier, for a third consecutive month of declines, according to real-estate data company Beijing Zhuge House Hunter Information Technology Co. (…)

“Landlords have been forced to lower their rents, and there still aren’t that many tenants,” says Zhang Chaofeng, an agent at a Beijing branch of Lianjia, a brokerage company with thousands of offices across the country. Mr. Zhang estimates vacancy rates in central Beijing are now roughly three times as high as a year ago.

A long-running trade war with the U.S. and now the coronavirus have weighed on rental prices.

(…) “for those tenants who changed houses, most of them moved to a worse one, with lower rents,” (…).

EARNINGS WATCH

We have 58 reports in, a 78% beat rate and a +11.6% surprise factor. Those 58 reporters have shown aggregate earnings down 35.0% on a -3.3% revenue drop. Q2 earnings are now seen down 41.8%, a small improvement from -43.0% on July 1.

A $1 Trillion Glut of Bonds Is Dwarfing Central-Bank Demand

Half the stocks in the S&P 500 are lagging the index by over 10%. Only 22% of the members are outperforming by more than 10%. Such divergence is highly unusual. (Scotia Capital)

Because the large stocks are dominating the index so much right now, the index itself can show a gain even when most of its stocks are declining. That’s what happened on Monday, and to a historic degree. Never before in 30 years has the S&P risen so much on a day when so many more of its component stocks declined rather than advanced.

From SentimenTrader:

This has been an absolutely horrid sign for forward returns. (…) The risk/reward ratios over all time frames were heavily skewed to the downside. Even if we look for smaller gains in the index but with worse breadth, returns were poor. It wasn’t just the S&P. Across the entire NYSE, more securities declined than advanced, and more volume flowed into those declining issues. We tend to not put a lot of weight on single-day breadth readings. Sometimes a single stock can heavily skew volume figures, or some weird news event can trigger an odd reading. It’s more worrying when these oddities pile up. We’re seeing some evidence of that in recent weeks, and when combined with extremely high optimism, it’s a concern.

Entering seasonally more dangerous period:

PANDEMONIUM

Xi Pledges Stronger Domestic Market, Global Ties as Strife With West Brews President Xi Jinping said China was ‘on the right side of history’ in its commitment to globalization

Xi Jinping’s remarks come as confrontation has been increasing between Beijing and the West, as more countries follow the U.S. lead in limiting Chinese companies’ presence in their markets. (…) Mr. Xi (…) urged Chinese firms to boost their overseas expansion, according to the state-run Xinhua News Agency. (…)

Secretary of State Mike Pompeo (…) urged countries to work together to counter China’s strategic ambitions. (…) Pompeo said he wants “every nation who understands freedom and democracy” to recognize “this threat that the Chinese Communist Party is posing” and to work together to counter it. (…)

Mr. Xi said China won’t close its doors to the world in the face of rising protectionism, a cooling global economy and weakening demand. Instead, China will take full advantage of its huge domestic market and better connect it with the global market to achieve robust and sustainable economic growth, he said.

Senate report says US may lose ‘cyber domain’ to China

A new US Senate report warned that the US has not done nearly enough to challenge Beijing’s position as a leading tech superpower.

“Three and a half years into the Trump administration, the United States is now on the precipice of losing the future of the cyber domain to China,” said the report, published on Tuesday.

“If China continues to perfect the tools of digital authoritarianism and is able to effectively implement them both domestically and abroad, then China, not the United States and its allies, will shape the digital environment in which most of the world operates.”

The 58-page report, written by the Democratic Party staff on the Senate Foreign Relations Committee, is the latest glaring sign of the distrust toward China that now runs rampant in Washington, across the entire political spectrum. (…)

Senior US senator pushes for new tools to rein in China Chairman of foreign relations committee says Washington lacks ‘long-term’ strategy

U.S. Orders China to Close Its Consulate in Houston The U.S. ordered the closure of China’s consulate in Houston “in order to protect American intellectual property” and private information of U.S. citizens, the State Department said.

Washington’s demand, issued Tuesday, marked “a political provocation unilaterally launched by the U.S.,” Chinese Foreign Ministry spokesman Wang Wenbin said Wednesday at a routine briefing in Beijing. “China urges the U.S. to immediately rescind its erroneous decision, otherwise China will undertake legitimate and necessary responses.” (…)

• U.S. Accuses Two Hackers of Stealing Secrets From American Firms for China Alleged hackers tested defenses at four U.S. companies working on coronavirus treatment

U.S. Moving Military Assets Around Asia to Counter China, Esper Says The U.S. is positioning forces across Asia for a possible confrontation with China, Defense Secretary Mark Esper said in remarks outlining the military component of the Trump administration’s hardening stance toward Beijing.

(…) In his speech, Defense Secretary Esper said China had bullied regional allies and partners out of as much as $2.6 trillion in potential offshore oil and gas revenue, despite an increasingly aggressive U.S. military posture in the region. (…) “This policy champions a free and open Indo-Pacific in which all the region’s diverse nations can live and prosper in peace, and makes clear that the [People’s Republic of China] has no right to turn international waters into a zone of exclusion or its own maritime empire,” Mr. Esper said. (…)