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July 22, 2020

Fathom’s Recovery Watch – 22.07.2020

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 27 July 2020

Headlines

  • Our central case for the economy remains a V (back to pre-crisis level of global GDP by the middle of 2021)
  • That view is encouraged by news of an EU recovery fund which will support the countries hardest hit by the virus, as well as promising results from several clinical trials earlier this week
  • Shares in respiratory drug developer Synairgen gained more than 400% following news that its drug SNG001 reduces the likelihood of developing severe symptoms by almost 80%
  • The number of new COVID-19 cases continues to rise, topping more than 230,000 a day, with the US accounting for almost a quarter of those
  • Global lockdown restrictions have continued to ease, helping foster a recovery in commercial flight activity

The number of new global COVID-19 cases continues to rise, driven by the countries highlighted in the second chart below. Combined, these ten countries account for almost 80% of new daily infections, which were up by 231,000 per day on average over the last week. The US continues to account for the bulk of these, with Florida, Texas and California all reporting over 9000 new infections yesterday, prompting Donald Trump to state that it will “get worse before it gets better”.

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As we explained in a recent note, this looks to be driven by a rippling out of the disease to areas less affected in the initial months of the outbreak, rather than a second wave. That finding holds for the US states now suffering the largest increases in the number of cases, as highlighted below. Although it is unclear precisely why this is the case, it bodes well for the continued easing of lockdown measures around the world. Notably, the rate of increase in new cases has slowed in hard hit Florida and Arizona in recent days.

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In anticipation of a return to more ‘normal’ times, and supported by extraordinary policy stimulus, global stock markets have clawed back virtually all of their losses, with the MSCI World equity index now down just 6% from its all-time high in mid-February. This week, stock markets have also been buoyed by promising results from several clinical trials.

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Indeed, a study published in The Lancet on Monday revealed that a vaccine, jointly developed by Oxford University and AstraZeneca, had performed well in the first phase of testing, producing a dual immune response in its patients (T-cells within 14 days of vaccination and antibodies after 28 days).[1]

Respiratory drug developer, Synairgen, also reported positive results from its clinical trial on Monday. Despite a small sample size of just 101, reports that those receiving its treatment were almost 80% less likely to develop severe COVID-19 symptoms than those given a placebo, saw its share price soar by more than 400%.

Although these results bode well for the next stages of development, additional work is needed before the treatments are likely to get the green light. The use of remdesivir, which like the Synairgen drug is believed to reduce the symptoms and facilitate the recovery from COVID-19 (as opposed to preventing infection), has already been approved in some countries.

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Despite being someway off a preventative vaccine or outright cure, policymakers remain eager to get things back to ‘normal’ as they prioritise economic growth, as evidenced by the continued easing of lockdown restrictions across all income groups. Advanced economies, particularly Europe, have led the charge, and economic data for May and June show tentative signs of a pickup in economic activity.

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Even travel — one of the hardest hit sectors — appears to be regaining popularity, with the number of commercial flights tracked by Flightradar24 creeping back up since its mid-April low, and now just 40% below that recorded in late January, before COVID-19 took its toll. Notably, that improvement in activity is yet to be reflected in airline equity indices, which, after a brief reprieve in late May, have struggled to reach take-off.

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Interesting reading

[1]. Another study, based in China and also covered by the Lancet article, had similar results.

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Datastream

Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Refinitiv offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.

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