“We’re turning the corner,” Trump said Tuesday night in West Salem, Wis. “We’re rounding — like this racetrack. Look at this, it’s perfect. We’re rounding the curve. We will vanquish the virus.” (Axios)
France, Germany Set New Lockdowns to Combat Covid-19 Resurgence Coronavirus is spreading faster ‘than even the most pessimistic forecasts,’ French president says
In a national TV address, French President Emmanuel Macron announced tough restrictions. A national lockdown, which will begin Friday and last at least one month, will require people to remain inside their homes while restaurants, bars and shops deemed nonessential will close, he said.
German Chancellor Angela Merkel said the country’s federal and state governments had agreed to a one-month shutdown of restaurants, bars, fitness studios, concert halls and theaters, starting Nov. 2. Hotels are barred from hosting tourists until the end of the month, she said, and public gatherings will be limited to 10 people from two households.
Both leaders aimed to cushion the economic impact of the restrictions, saying factories and schools would remain open. (…) The restrictions from Europe’s two biggest economies are likely to pile pressure on other countries to follow suit. (…)
A rise in the rate of tests coming back with positive results also indicates the virus is outpacing authorities’ ability to detect it. On Tuesday, France reported a positivity rate of more than 18%, compared with 13.6% a week earlier. (…) [The positivity rate in the U.S. was 9.0% yesterday, up from 5% earlier this month].
French Budget Secretary Olivier Dussopt said on Wednesday that a new monthlong lockdown could cost France up to 2 to 2.5 percentage points of economic output. France already suffered a second-quarter contraction of 13.8% of gross domestic product, a post-World War II record. (…)
German Chancellor Angela Merkel said Germany’s government would cover up to 75% of the lost sales of affected businesses with fewer than 50 employees. Bigger businesses will also receive aid within the constraints set by European Union state aid law, Ms. Merkel said. Total aid will be up to 10 billion euros. (..)
Researchers in the U.K. estimated the virus is spreading far more rapidly in England than daily testing data suggest. In a study published Thursday, Imperial College London and polling company Ipsos Mori estimated the number of new daily infections in England was running at 96,000 over the 10 days through Oct. 25, almost six times higher than the average official daily case count for the same period. (…)
The virus is also surging in parts of Europe that were relatively unscathed during the first wave, straining hospital systems that aren’t battle-tested. (…)
Scientists warn of new coronavirus variant spreading across Europe Genetic mutation that originated in Spain transmitted by returning holidaymakers, researchers find
Already slowing eurozone growth now points to double-dip recession
Germany: From smart lockdown to lockdown 2.0
Latest German labour market data confirms the continued strengthening of the economy but the new lockdown announcement is likely to bring the improvement to an abrupt halt. A double-dip now looks unavoidable. (…)
Even though it is called a light lockdown, it is not so much different from the Spring lockdown. Remember that back then, production facilities voluntarily reduced working hours, it was not part of the lockdown. The biggest difference between now and then is that retail stores and hairdressers will remain open.
The sharp fall in economic activity in the second quarter was not only driven by the lockdowns but also by supply chain disruptions and fading external demand. While the former doesn’t seem to be the case, the risk that at least the rest of Europe will follow Germany, France and Ireland is high. Even if the German government announced to pay companies hit by the second lockdown a grant of 75% of their November 2019 turnover (around 10bn euro in total), renewed uncertainty, lockdown-fatigue, job losses and bankruptcy fears will dent confidence, spending and investment.
Record 200 Days With No Local Case Makes Taiwan World’s Envy (23 million citizens)
States Face Biggest Cash Crisis Since the Great Depression The drop in tax revenue has led to a total shortfall expected in the hundreds of billions of dollars—greater than 2019’s K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure
(…) Nationwide, the U.S. state budget shortfall from 2020 through 2022 could amount to about $434 billion, according to data from Moody’s Analytics, the economic analysis arm of Moody’s Corp. The estimates assume no additional fiscal stimulus from Washington, further coronavirus-fueled restrictions on business and travel, and extra costs for Medicaid amid high unemployment. (…)
Deficits have already prompted tax hikes and cuts to education, corrections and parks. State workers are being laid off and are taking pay cuts, and the retirement benefits for police, firefighters, teachers and other government workers are under more pressure.
Even after rainy day funds are used, Moody’s Analytics projects 46 states coming up short, with Nevada, Louisiana and Florida having the greatest gaps as a percentage of their 2019 budgets. Louisiana said it didn’t expect its shortfall to be as large as Moody’s projected. (…)
Annual state revenue fell following the Sept. 11 attacks and the bursting of the dot-com bubble around that time, but recovered within a year. During the recession that followed the 2008 crisis, state government revenue fell 9% over two years, according to Census Bureau data.
This time the shortfall could reach 13% over two years, according to Moody’s Analytics projections.
An uptick in Covid-19 cases to new daily records in recent days makes that scenario increasingly likely. (…)
State government workforces shrank 5% across the country from February to September to 4.9 million, fewer people than at any point during or after the 2008 recession, according to the Bureau of Labor Statistics. Local government workforces cut 6%, or nearly a million people, and local revenue shortfalls are adding pressure to states’ budgets. (…)
TECHNICALS WATCH
Nowhere to hide. Gold fell again Wednesday. Oil dropped more than 5%. Small stocks sold off roughly as much as mega-caps; value and growth did equally badly. There has been little move in bonds.
Many indices yesterday stopped and rested at or near their 100-day moving average. This was true for the SLY, the Russell 2000, the all-cap Wilshire 5000 and Nasdaq. But the S&P 500, the NYSE and the MSCI ex-US all went trough their 100dma. The NY volume was very strong.
13/34–Week EMA Trend Chart (CMG Wealth):
EARNINGS WATCH
We are up to 206 reports, an 83% beat rate and a +17.3% surprise factor. Q3 earnings are now seen down 14.8% (-16.8% last Friday).
Trailing EPS are $138.09, on their way to $132.76 for the full year 2020 and $166.81 for 2021.
The Rule of 20 Fair Value is 2518, still declining along with earnings. If I “normalize” using 2021 estimates, FV rises to 3050.