Taking a look at the global picture, there are a few things people are focusing on as we enter the last week of July 2020. Starting on the Chinese front, China reports its most domestic cases since mid-March amid flare-ups in the west and north-east of the country. One thing to note overnight in Asia is, profits of China’s industrial firms rose for a second straight month, and at the fastest pace in over a year. So, despite them still monitoring the isolated outbreaks in parts of the region, generally speaking, their economic data has been relatively robust.

Elsewhere, India is now growing as the fastest in the world in regard to cases, increasing by 20% plus over the last week, while in Europe, Spain is taking significant hold of the headlines once again. Spain has reportedly seen quite an aggressive increase in cases over the past couple of weeks which led to the UK’s decision on Saturday to order a two-week quarantine for all travelers from Spain following a spike in infections in three Spanish regions. This came after France “strongly” urged against non-essential travel of its citizens to the region of Catalonia in Spain. With Belgium, Ireland and Poland following the same route and similar warnings for travel. 

The UK’s decision was met by a strong response from Spain, as Britain is particularly important for the tourist industry and counts for approx. 20% of Spain’s overall visitors. The decision is undoubtedly going to affect British holiday-makers future holidaying in Spain and will deliver another blow to the already battered tourism industry for both sides. 

For economics and the FED - This week the FOMC meeting takes place, and we are soon to get the first advanced Q2 GDP reading. The consensus estimate for that is a minus 34% reading. But before you get blown away by the dramatic headlines that we are likely to see in the tabloids, and even though that is a historic number, the feeling is that there will not be much in the way of implications of how markets are going to react later this week and of course when that data is released on Thursday. And that’s because it has already been priced in. It’s mostly going to be about what the FED says and where their heads are at with regards to the current situation and their forward-looking guidance than anything else at this point.

The other key thing that everyone is watching at the moment and perhaps is even more important is what’s happening with the US stimulus programs that have been put into place. The enhanced jobless benefits that have been received by approx. 20 million Americans, are going to expire on the 31st of this month along with the 12 million renters whose eviction moratorium also comes to an end this week. A huge and pivotal point in time for America. Overnight, Steve Mnuchin stated that he wanted to act quickly, and a new Covid relief package will be introduced on Monday, August 3rd - otherwise we will likely witness massive implications for the economic recovery in America. 

Over in Portugal, which was initially praised for its management of the pandemic, they are now finding themselves in a similar situation to Spain, with the cumulative incidence of the virus at 39 cases per 100,000 inhabitants – compared to 39.4 in Spain. And with Spain to receive €140 Billion from the EU coronavirus recovery fund over the next six years, €72.2 billion of which is a grant and does not have to be paid back – they are going to need it. However, questions still remain regarding the likely conditions that look set to come along with the release of funds. Especially when it comes to sensitive areas such as labor reforms and the pension system. 

Spain’s Prime Minister, Pedro Sánchez insisted that, “the agenda of the Spanish government is aligned with that of the European Commission.”

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