June 25, 2020

Fathom Recovery Watch – 24.06.2020

by Fathom Consulting.

Subscribe to Fathom’s regular Recovery Watch newsletters and Forums for the latest insights into the impacts of COVID-19.

Next forum date: Monday 29 June 2020

Headlines

  • UK Prime Minister Johnson announces substantial reopening of the economy from Saturday 4 July
  • Google mobility data confirm that the global economy remains on course for a V-shaped recovery
  • Investors continue to discriminate by sector, but not by country

Yesterday saw the release of flash PMIs for the month of June. In most cases, and particularly in Europe, these came in above expectations and yet, on a literal interpretation of the survey question, suggest that economic activity has continued to contract. Diffusion indices that ask firms whether they are doing more or less business than in the previous month are unable to capture the scale of the collapse in economic activity in the first few months of this year. It is unlikely that they will be able to track the rebound either. For that reason, we prefer to focus on measures of mobility obtained from smartphone data. Our first chart shows that usage of public transport continues to rise, slowly but surely. For now, the global economy remains on course for a V-shaped recovery.

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Globally, cases of COVID-19 have been rising for the past week or two. But as our second chart shows, the course of the disease continues to vary markedly across continents. Adjusted for population size, Europe suffered a severe outbreak through February and March, but cases there are now declining even as lockdown measures are eased, albeit slowly. In South America, the number of new diagnoses continues to rise, particularly in Brazil and Chile, with the latter country adding a large number of previously omitted cases last week. Cases are clearly rising in North America too, though mainly in parts of the United States that suffered relatively few cases earlier in the year.

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In large part, the shape of the economic recovery from COVID-19 is likely to be a global phenomenon. Most countries are likely either to enjoy a fairly steady return to pre-crisis levels of activity, or to suffer a more prolonged economic slump together. But there will be differences, with poorer countries more likely to suffer financial crises. In that context, although equity investors began to discriminate between economic sectors around mid-March as the major benchmarks turned a corner, there is still relatively little discrimination between countries, and between EMs and DMs in particular. This is as true of fixed income as it is of equities.

Refresh this chart in your browser | Edit the chart in Datastream

Refresh this chart in your browser | Edit the chart in Datastream

Refresh this chart in your browser | Edit the chart in Datastream

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