Coronavirus cases in the U.S. increased 2.1% as compared with the same time Wednesday to 3.54 million, according to data collected by Johns Hopkins University and Bloomberg News. The percentage gain was in line with the past’s week’s average of 2%. Deaths rose 0.7% to 137,897.

• Florida posted a record 156 new deaths, pushing the total to 4,677. Cases rose 4.6% to 315,775, compared with an average increase of 4.4% in the previous seven days.
  
• Arizona reported 3,259 new cases, a 2.5% increase to 134,613 that was below the prior seven-day average of 2.8%. The state reported 58 new virus deaths, bringing the total to 2,492.
  
• Oklahoma cases rose 7.9% to 23,446, according to the data from Johns Hopkins and Bloomberg News. Could this be related to that? Republicans scale back convention as Florida outbreak worsens Party curbs Jacksonville event as state suffers record coronavirus deaths’.
• Texas posted its worst day of Covid-19 fatalities and recorded more than 10,000 new cases for a third straight day. The death toll rose by 129, breaking the record of 110 set on Wednesday, according to state health department data. The tally of new cases is closing in on the 300,000 mark. Governor Greg Abbott warned delegates at the state Republican convention that the worsening outbreak is leaving him with few options aside from shutting down the second-most populous U.S. state.
• Cases have increased by 40% over the last week, the Denver Post reported, and hospitalizations are also rising. The newspaper reports that Colorado has 38,155 cases and 1,601 deaths attributed to the virus.
• Although hospital resource usage remains within recommended territory in most states, without symptom prevalence and new confirmed cases on the decline, states may continue to extend their pauses on reopening or even revert to earlier, more restrictive phases of their reopening plans. (Goldman Sachs)
• The majority of Americans in the largest metro areas felt down, depressed or hopeless last week, according to Bloomberg calculations from a new U.S. Census Household Pulse Survey, which collects data on how people’s lives have been impacted by the Covid-19 pandemic.

Latin America’s biggest economy reported 45,403 new cases of Covid-19 in a 24-hour period, pushing the number of infections to more than 2 million. The death toll rose by 1,322 to 76,688. Brazil trails only the U.S. on both counts. Brazil has added 1 million cases in less than a month in a rapidly shifting outbreak. Wile official numbers have stabilized in places such as Sao Paulo, the richest state, the disease is spreading fast elsewhere. The World Health Organization has said that Brazil’s outbreak may not peak until August.

Coronavirus cases in the Philippines have more than tripled since stay-home orders in the capital were lifted and most businesses were allowed to reopen starting June. The Philippines has the second-highest number of infections in Southeast Asia, next to Indonesia.

One of our sons lives 70km south of Manilla. Tagaytay (70k population) just found one new Covid-19 case and ordered an immediate 2-week lockdown.

• Capital of China’s Xinjiang region shuts down as coronavirus returns Travellers were left stranded and residents scrambled to buy groceries as Urumqi – capital of China’s Xinjiang region – went into sudden lockdown on Thursday after confirming one new local Covid-19 patient and three asymptomatic cases.

“[We] will resolutely cut off the channel of transmission … strengthen the control of crowded places, the grid management of communities and villages, and carry out stringent screening in the fever clinics of hospitals,” Xinjiang’s Communist Party committee said on Friday. (…)

Kazakhstan, which shares a border with Xinjiang, is also dealing with a resurgence in coronavirus and pneumonia cases. A second nationwide quarantine will be extended in the Central Asian country for another two weeks to the beginning of August, according to a July 13 post on Twitter by President Kassym-Jomart Tokayev. (…)

PANDENOMICS

U.S. Jobless Claims Held Nearly Steady at 1.3 Million in July 11 Week Increase in Covid-19 cases and business restrictions continues to weigh on labor market

(…) The modest easing of the number of unemployment rolls suggests new layoffs are being offset by hiring and recalling of workers. Employers added a combined 7.5 million jobs in May and June after shedding 21 million jobs in March and April, separate Labor Department data showed. (…)

The following graph from CalculatedRisk shows regular initial unemployment claims (blue) and PUA claims (red) since early February. Total claims have not declined since the end of May. Understand that this is not a level, it is a flow, measuring new claims each week.

Axios has the chart on continuing claims. The total number of people on UI troughed at the end of May. Axios says “a significant increase in claims is coming as more municipalities lock down to prevent further spread of the virus. (…) The risk of a surprise drop in employment in July is rising, pointing to a rollercoaster recovery as the labor market starts to turn down again,” Glassdoor senior economist Daniel Zhao told Yahoo Finance.”

But there is more as the Economic Policy Institute reveals: DOL reports that 36.4 million workers are either on unemployment benefits or have applied and are waiting to see if they will get benefits.

It is possible that we are starting to see some layoffs associated with the end of some early Payroll Protection Plan (PPP) participants. We should start seeing layoffs associated with the rising COVID cases and hospitalization in some states (like Arizona, California, Florida and Texas).  With bar and restaurant closings in some areas, we will probably see more initial claims in those states this week, and that will show up in the report in the coming weeks. (CR)

U.S. Retail Sales Rose 7.5% in June as Stores Reopened Consumers bought big-ticket items and resumed clothing purchases as stores and restaurants reopened, but a recent surge in infections could again damp spending. Jobless claims held nearly steady in the latest week.

(…) Retail sales totaled $524.3 billion in June, up from $487.7 billion in May and nearly back to pre-pandemic levels. June’s increase in retail sales was driven by a pickup in sales of autos, furniture, clothing and electronics as consumers visited stores following reopenings. (…)

Thursday’s retail-sales report didn’t track spending on most services, such as health care and hospitality, which make up most of U.S. consumer spending. (…)

Private-sector real-time data points to weaker momentum in July. (…) Data from the restaurant-reservation website OpenTable showed that growth nationally in the number of seated diners recently stalled, after rising steadily in May and June. (…)

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending.

• Retailers are on track to close as many as 25,000 stores this year, up from 9,832 last year, as the pandemic pushes more shopping online. (WSJ)
• More than 82% of U.S. food banks have seen demand increase with an average increase of 50%. (WSJ)

Looking further ahead, pent-up demand after weeks of lockdowns have clearly contributed to this strong turnaround and we suspect momentum will likely fade, together with the fact that renewed lockdowns are reducing the opportunities to spend money on recreation, eating out, hospitality, etc. Unfortunately the credit and debit card transaction data mentioned earlier suggests that spending fell by around five percentage points in the second half of June, which clearly relates to the new containment measures. However, it also may reflect renewed virus fears as cases surge above 60,000 per day nationally with potential shoppers staying at home. (ING)

CDC Extends Cruise Ship Sailing Ban to End of September Cruise lines won’t be able to sail in U.S. waters until as late as October, the Centers for Disease Control and Prevention said as it extended its no-sail order amid a resurgence in Covid-19 cases in several states.

U.S. Home Builder Sentiment Continues to Strengthen in July

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo moved up to 72 during July and added to its June strengthening to 58. Despite the increase, the index remained below the peak of 76 in December of last year. A reading of 60 had been expected in the INFORMA Global Markets survey. The NAHB figures are seasonally adjusted. Over the past 15 years, there has been a 71% correlation between the y/y change in the home builders index and the y/y change in new plus existing home sales.

The index measuring traffic of prospective buyers jumped m/m to 58, equaling January 2020, December 2017 and late-1990’s highs. The index of present sales conditions improved to 79 in July after rising to 63 in June. The index of expected conditions in the next six months rose to 75 from 68.

Regional readings all improved. The index for the Northeast surged to 70 and and equaled the August 2005 high. The index for the Midwest rose to 88, a seven month high, while the West rose to 80 and nearly reached the February high. The index for the South improved to 73, the highest level since March. (..)

  

• 30-Year Mortgage Rate Reaches Lowest Level Ever: 2.98%

Moody’s Analytics (via The Daily Shot)

The $52 Trillion Bubble: China Grapples With Epic Property Boom Real-estate surge eclipses the one in U.S. housing in the 2000s; desperate buyers undeterred by Covid

(…) In March, 288 apartments in a new Shenzhen property development sold out online in less than eight minutes. A few days later, buyers snapped up more than 400 units in a new housing complex in Suzhou. In Shanghai, apartment resales neared a record high in April, by one estimate. One Saturday last month, nearly 9,000 people each put down a deposit of one million yuan ($141,300) to qualify to buy apartments in a Shenzhen development. (…)

Many clients worry China’s currency will depreciate in the global economic slowdown, he said, driving even more money into housing as a haven. (…)

The total value of Chinese homes and developers’ inventory hit $52 trillion in 2019, according to Goldman Sachs Group Inc., twice the size of the U.S. residential market and outstripping even the entire U.S. bond market. (…)

China’s household leverage ratio hit a record high of 57.7% in the first quarter. It was the biggest quarterly jump in the ratio, which measures families’ mortgage, consumer and other debts relative to gross domestic product, since the first quarter of 2010.

The central problem in China is that buyers have figured out the government doesn’t appear to be willing to let the market fall. If home prices did drop significantly, it would wipe out most citizens’ primary source of wealth and potentially trigger unrest.

That gives Chinese citizens who have enough money an incentive to keep buying because they believe property in large cities will remain the safest investment in China, regardless of the health of the broader economy. (…)

“Whenever governments start printing money, asset prices will go up. In the U.S., you have a bull stock market, but in China, only housing prices will keep surging.” (…)

“Speculative demand is on the rise because [people] view housing as a safer asset than the stock market or overseas assets,” he said. “They think it’s guaranteed. Because of the pandemic they’re actually consuming less, and saving more. So they’ll actually have more money available to invest. That will create an even larger housing problem.” (…)

“You have to invest the money somewhere, or it will only depreciate,” she said. (…)

By late last year, about 96% of China’s urban households owned at least one home, according to a Chinese central bank survey released in April, far exceeding the 65% homeownership rate in the U.S. (…)

Globally, China accounted for around 57% of the $11.6 trillion increase in household borrowing over the decade through 2019, according to Bank for International Settlements data. The U.S. accounted for about 19%. (…)

Average home prices across China reached 9.3 times average income in 2018, according to the Chinese Academy of Social Sciences, compared with 8.4 in San Francisco. (…)

In essence, urban Chinese have bet everything on their homes. They now have nearly 78% of their wealth tied up in residential property, versus 35% in the U.S., where more people invest in stocks and pensions, according to a report by China Guangfa Bank and Southwestern University of Finance and Economics. (…)

Income from land sales and related taxes on developers accounted for 52.9% of local governments’ revenue in 2019, a record high, according to Shanghai Yiju Real Estate Research Institute. (…)

China Evergrande, whose enormous debts give it the largest interest bill in the world among listed nonfinancial stocks, according to Capital IQ data, offered discounts of 25% in February and 22% in March. Country Garden Holdings, another major developer, offered more than 17,000 new homes across China via social media with discounts of up to 50%. (…)

Here’s the transcript of an interview of Ben Bernanke in July 2005:

INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, “Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.” Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?

BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.

INTERVIEWER: So would you agree with Alan Greenspan’s comments recently that we’ve got some areas of that country that are seeing froth, not necessarily a national situation, but certainly froth in some areas?

BERNANKE: You can see some types of speculation: investors turning over condos quickly. Those sorts of things you see in some local areas. I’m hopeful — I’m confident, in fact, that the bank regulators will pay close attention to the kinds of loans that are being made, and make sure that underwriting is done right. But I do think this is mostly a localized problem, and not something that’s going to affect the national economy.

FYI: Who Saw The Housing Bubble Coming?

Merkel warns of large obstacles to EU summit deal Deep differences between leaders remain over management of post-pandemic recovery fund

EARNINGS WATCH

Did you miss The Rule of 20 Strategy Goes All Cash Again?

We now have 39 reports in, a 77% beat rate and a -12.1% surprise factor coming mainly from the 13 Financials having reported so far (+16.2% surprise even though the group is still expected to show Q2 earnings crater -51.9%). The 39 companies having reported boast an aggregate earnings decline of -45.4%.

Trailing EPS are now $140.57.

IPO Frenzy Grips China’s Nasdaq-Style STAR Market Experiment in easing restrictions on stock offerings provides tens of billions of dollars for emerging technologies, frantic trading

When China’s leading chip maker, Semiconductor Manufacturing International Corp., SMICY -24.75% made its STAR debut Thursday after raising more than $6.5 billion—the board’s biggest offering to date—the stock promptly rose more than threefold.

But many other STAR board stocks tumbled, some by double-digit percentages, as investors cashed in to invest in SMIC shares. A broader downdraft in Chinese markets also contributed.

“A lot of early-stage companies going public on the STAR board are raising funds easily, as investors chase them with great passion,” said JP Gan, founding partner of INCE Capital, a venture-capital firm based in Shanghai. Money has flowed into sectors that Beijing wants to support such as semiconductors and advanced manufacturing, he said, and while some of the stocks could prove to be worthless, others could be big hits. (…)

Orders for some share sales have been thousands of times the stock on offer, and some stocks have surged as much as 10-fold on their first day. In another sign of exuberance, some prices are far removed from those of shares with similar economic rights listed elsewhere. SMIC’s Shanghai stock price is roughly three times its Hong Kong stock price, and the same is true for drugmaker Shanghai Junshi Biosciences Co. (…)

Mark Dong, co-founder of Minority Asset Management, a Shanghai-based hedge-fund manager, said his firm had a simple strategy for trading STAR-listed stocks: Subscribe at the offer price and sell out on the first day, locking in a profit while saving the effort of research. (…)

Semiconductor-wafer maker National Silicon Industry Group Co. is up nearly 11-fold from its listing and had a market value at Thursday’s close of about 104.9 billion yuan ($15.01 billion), according to Wind. Analysts reckon it will eke out 35 million yuan ($5 million) of net income next year, FactSet data shows. (…)

Global copper inventories have been declining. That was my point yesterday discussing rising copper prices. Mainly a supply issue.

PANDEMONIUM

Trump Administration Turns Up Pressure on China on Several Fronts U.S. rhetoric escalates and officials weigh new restrictions with ties already fraying

Attorney General William Barr, in a speech Thursday, warned U.S. businesses that they are at risk of collaborating with a Chinese government that ultimately seeks to supplant them in its expanding state-run economy. Administration officials are also discussing banning travel by China’s Communist Party members and their families to the U.S., people familiar with the matter said.

Discussions are in early stages, with no timeline for being put into effect, the people said. If put into policy, advisers and policy analysts said the ban would strike at the legitimacy of the increasingly powerful party. (…)

Mr. Trump’s political advisers said that displaying toughness on China resonates with voters ahead of the November election and that portraying his presumptive Democratic rival, Joe Biden, as weak on China is a potent campaign pitch. (…)

“The degree of hostility is spiraling out of control,” Mr. Zoellick said Thursday at the Aspen Security Forum, a nonpartisan conference series on national security. “We kind of have to steady ourselves.” (…)

“The ultimate ambition of China’s rulers isn’t to trade with the United States. It is to raid the United States,” Mr. Barr said. He added: “If you are an American business leader, appeasing the PRC may bring short-term rewards. But in the end, the PRC’s goal is to replace you,” referring to the People’s Republic of China. (…)

Last week, the director of the Federal Bureau of Investigation, Christopher Wray, called the scale of China’s theft of intellectual property “so massive that it represents one of the largest transfers of wealth in human history.” He said the FBI opens a new China-related counterintelligence case every 10 hours, with nearly 2,500 such cases under way. (…)

• US attorney-general suggests executives advocating for Beijing may be deemed foreign agents
• US weighs ban on TikTok as friction with China rises Options include putting video app’s parent ByteDance on blacklist or pushing for break-up
• Foreign students coming from Europe, but not China, will be exempt from a travel ban the United States imposed because of the coronavirus pandemic.

Russia Blamed for Hacks on Vaccine-Related Targets A prominent state-backed Russian hacking group was blamed by U.S., U.K. and Canadian government officials for ongoing cyber espionage against organizations involved in the development of coronavirus vaccines and other health-care-related work.