The number of new cases rose further yesterday to 13,076 taking the total outside
China above 100,000. The daily growth rate was a bit lower though, falling to 15%
from around 20% a week ago.
The numbers are still on track for the modelled scenario peak of 250,000 cases outside
China. If this holds, we should see a peak in the number of new cases within the next week.
The US is still in the early phase, with an exponential increase, registering 936 new
cases yesterday, taking the total to 4,718. This is a daily growth rate of 25%, which
implies a doubling in around three days. The US is still following the same path as Italy,
with a 10-day lag.
Italy saw a decline in the number of new cases to 3,233, from around 3,500 in the days
before. The daily growth rate is down to 13%. However, we do not know whether this
is due to capacity issues on the testing side. The number of deaths continues to rise and
the death rate is still very high, at close to 8%, which could suggest there are many
undetected cases. It makes sense that the rate of contagion is slowing down in Italy, as
we would expect this when there is a significant reduction in human contact and
mobility. Italy is still following the path of the Chinese Hubei province (which has a
similar sized population).
Germany and France continue to see big increases and new highs in the number
of new cases. The growth rate has edged lower in recent days but is still high, around
20-25%, implying a doubling in three to four days. France yesterday declared war on
the virus and announced a range of strong measures and punishments for not following
regulations. It has banned all non-essential movement and residents must stay at home.
Germany also tightened measures to stop contagion, closing most shops and public
venues. Spain has the second highest number of infections in Europe after Italy and
continues to see growth around 25%.
Scandi countries have seen a clear slowdown in recent days but, in our view, it is
likely this is due to a change in testing criteria and not a real improvement. Denmark
yesterday said it would increase testing again on the advice of the WHO, which
yesterday recommended to ‘test, test, test’.
Equity markets plunged again yesterday, despite a wide range of policy measures
being taken. S&P 500 finished down 12%. Markets have stabilised a bit overnight
and the S&P future is up 3.9%.
Yesterday, we published an updated outlook for the global economy and we now
look for a technical global recession lasting a couple of quarters.
Still big increases in US and Europe, more lockdowns, markets plunged yesterday but stabilised overnight
We believe it is likely we are moving towards a situation where we will have complete
lockdowns throughout Europe and the US. The contagion will not slow enough unless
people stay inside and movement is limited to a minimum. More and more European
countries have implemented this and, in our view, others are likely to follow, including
eventually the US.
However, this implies that within a week we will see an improvement
in the numbers in Italy, followed by other European countries and, eventually, the US. The
examples from South Korea and China show that halting contagion is very effective once
movement and human contact are limited and infected cases are isolated. This is why
testing is important.
However, it seems that the situation has to be quite bad before governments implement the necessary measures and the subsequent improvement sets in. Hence, in the short term, we believe it is likely numbers will continue to get worse – not least in the US – before we see lockdown and then a slowing of the contagion. We believe the economic hit will be very big in the short term but we still look for it to be relatively short-lived and expect recovery to set in in H2. The risk is we are in for a longer recession.