The milestones of 10 million people infected, and 500,000 deaths, were both passed over the weekend. The strength of the virus is of concern, particularly in the United States.
As the half-year is drawing to a close, two warning shots have reminded financial markets that they are moving a little too far away from economic and health realities. Last Wednesday and Friday, global indices fell by more than 2% due to the acceleration of infections in several American states. This comes as we see the first increases in analysts' forecasts for corporate earnings this year. We can't really blame them: after all, companies had issued apocalyptic forecasts for the second quarter, and the reality is a little less gloomy than expected.
Meanwhile, China released figures on Sunday regarding the evolution of industrial profits. In the first five months, it reached CNY1,843bn, down 19.3% year-on-year. However, if we look in detail, they were up 6% YoY in May, reflecting a strong post-pandemic rebound.
V Shape? The BEA published on Friday its estimates of US household income and spending. Revenues fell by -4.2% in May, against a rise of 10.8% in April. According to the statistical institute, this large variation is mainly related to the decrease in government social benefits. On the expenditure side, on the other hand, easing lockdown restrictions seem to have had a small effect. In May, household current expenditure exploded to +8.2%, against -12.6% in April. New restrictions in some states could weigh on these statistics in the coming months.
Post-Covid labor market developments appear to be diametrically opposed on either side of the Atlantic. Indeed, while unemployment registrations have exploded in the USA, European countries have tried to keep jobs, notably through short-time working measures. The Economist newspaper, thanks to a study by Allianz, highlighted on Friday that these short-time working measures were only a way of postponing the problem, while interfering with a possible reallocation of human resources. According to the Allianz study, the proportion of these zombie jobs would be around 20% for the five largest European countries (including the UK).
Today on the agenda, we have the first estimate of German inflation in June and Old Home Sales in the US.