ON DECK FOR MONDAY, OCTOBER 26
KEY POINTS:
- Cautious mood driven by covid-19
- Global covid curves continue to escalate
- The evidence on blue versus red US states & covid-19
- US new home sales expected to gain
- German business confidence caps off a weak round of sentiment gauges
- The Global Week Ahead
Please see the Global Week Ahead — Prelude to the US Election here. Key risks this week will include:
- CBs: BoC, ECB, BoJ, Brazil, BanRep
- GDP: Canada, US, Eurozone, Mexico, HK, SK
- Inflation: US, Eurozone, Australia, Tokyo
- Consumers: US, Germany, Japan
- China PMIs
- Brexit negotiations
- Other US, German, Japanese macro
- Earnings
INTERNATIONAL
It’s a cautious start to a new trading week with little by way of calendar-based risk. I think escalating covid-19 cases and increased restrictions are driving sentiment. Some examples include Spain imposing a national curfew, Italy restricting hours at restaurants and bars while closing gyms and entertainment venues, Germany may take additional measures as soon as today, France is registering record daily case counts and Ontario hit a daily record for new cases.
Stocks are down by about 1% in US and Canadian futures and between about ¼% (London) and 2½% (Dax) in Europe. Sovereign curves are bull flattening especially in the US, Italy and European periphery. The USD is rallying particularly against the peso, CAD and Euro while sterling holds its own. Oil is off by over 2% and gold is flat.
German IFO business confidence was little changed in October’s set of readings. Headline slipped a half point because the forward-looking expectations component fell by 2.4 points while the current conditions reading increased by 1.1 points. It’s the final release out of four monthly sentiment readings after the composite PMI was little changed, the ZEW investor/forecaster reading fell sharply and consumer confidence edged lower.
UNITED STATES
US new home sales are due out for September this morning (10amET). Consensus is expecting a rise of +1.3% m/m and I went with relatively little change.
What’s the evidence on whether blue or red states are doing a better job at handling the pandemic?
Charts 1 and 2 show cases summed up within states that have Republican Governors versus Democratic Governors. The first one shows raw figures and the second chart expresses it in per capita terms for every 100,000 folks.
In raw terms, they’re tied. But that provides an incomplete picture. Controlling for population size is important on the simple logic that bigger states would have more cases all else equal and the party affiliation of the Governors is not evenly distributed across state populations.
In per capita terms, Republican-run states have a somewhat higher incidence rate now. Republican-run states had a much higher incidence rate over the summer, but a lot of that earlier gap has now narrowed. Both GOP-led and Democrat-led states are on an upswing. If bygones be bygones in favour of present evidence, then it would seem that both parties should check any tendency to boast too loudly about their relative performances.
Furthermore, there are likely many other factors to control when doing such a comparison, like relative age structures of the population, mobility rates, types of industries, population densities and socioeconomic characteristics. Overall, only one thing ends of being clear: that efforts should be oriented toward seeking joint solutions and unity for the sake of all Americans.
Every Monday this note offers a pictorial round-up of global covid-19 cases. Please see the accompanying collection of cases by major world region, US census region and Canadian province plus the positive testing rate by Canadian province. The same cautions apply to the last set in that the sample bias changes over time make it pretty much impossible to conclude that higher positive results are just a function of more frequent testing. The charts bring major new developments particularly in Europe where curves have exploded across multiple countries, but they are also rising in the US and Canada.
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