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Surging Virus Cases in US Also Driving Investor Fear Higher

Surging Virus Cases in US Also Driving Investor Fear Higher

Alberto Jorrin Rodriguez| Dreamstime.com

By Monday, 20 July 2020 10:12 AM Current | Bio | Archive

The leaders of the European Union have failed to agree on the terms of a coronavirus crisis related common bailout fund and talks are still ongoing today for the fourth day in a row.

Some seemed to be surprised by this, but they shouldn’t because this is the European Union (EU).

In fact, when has the EU ever agreed anything on schedule? Every summit of any importance has always dragged on beyond the deadline. European leaders only ever seem capable of agreeing anything when they are so sleep deprived as to give the appearance of zombies. Please take care, we aren't yet at the zombie stage, but if it would come, in all probability there would be some kind of deal.

The positive news so far is that the so-called frugal states, which are the Netherlands, Austria, Denmark, Sweden and now also Finland have agreed in principle to grants as part of a proposed spending package that is aimed to lift Europe’s economy out of the coronavirus-sparked slump.

The package under negotiation is composed of:

  • A proposed 1 trillion euros ($1.1 trillion) seven-year budget for the EU.
  • An ambitious 750 billion euros ($826.5 billion) economic rescue plan for the by the coronavirus hardest-hit EU countries like Italy, Spain and Greece, without sending their already high debt levels soaring further, which should allow them to increase their coronavirus crisis spending.

Investors shouldn't underestimate that a failure to reach a deal could spark a serious negative financial markets response.

This so-called EU recovery package is aimed at managing the biggest economic shock the European Union has ever had to confront in its history.

EU budget commissioner Johannes Hahn tweeted on Saturday a “solemn reminder” that the pandemic was “not over” and saying “High time to reach an agreement which allows us to provide the urgently needed support for our citizens and economies,” the BBC reported.

Besides that, over in the United States, fiscal policy is also on the agenda today, with Congressional Republicans apparently due to meet with President Donald Trump to discuss another fiscal stimulus package.

There is some urgency about this. The additional unemployment benefits that have done so much to support the incomes of Americans and have generated higher domestic savings are due to expire at the end of this month and the U.S. economy is probably not ready for an abrupt withdrawal of the money that implies.

However, Trump has also been very focused on getting a payroll tax cut, which would possibly be a stimulus, but only if enough people have jobs.

Anyway, in an interview with “Fox News Sunday” host Chris Wallace, Trump said that he may not sign another coronavirus stimulus bill if it doesn't include a payroll tax cut.

As this is opposed by the Democrats in Congress, some compromise is going to have to be found.

In the meantime, we also see some nervousness in financial markets about the increase in virus cases in the U.S.

Fear of the virus is the main concern economically, and there has been an increase in fear.

However, the increase in fear is less than it was earlier in the year and it has to be weighed against the prospect for additional fiscal stimulus to get a sense of how financial markets are likely to react overall.

Investors seem to be holding those things in balance, for the moment at least, and there is still not a strong reaction (yet) to the rising infection rate in the U.S.

Besides that, the BBC just reported interesting positive news that the UK government has now secured access to vaccines that use three completely different approaches:

  • 100 million doses of the Oxford vaccine made from a genetically engineered virus.
  • 30 million doses of the BioNtech/Pfizer vaccine, which injects part of the coronavirus' genetic code.
  • 60 million doses of the Valneva, which uses an inactive version of the coronavirus.

Using different styles of vaccines could maximize the chances that one of them will work.

That said, Kate Bingham, the chair of the UK government's Vaccine Taskforce urged against being complacent or over optimistic, the BBC reported.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

© 2020 Newsmax Finance. All rights reserved.


   
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Fear of the virus is the main concern economically, and there has been an increase in fear.
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2020-12-20
Monday, 20 July 2020 10:12 AM
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