Week in a Glance: second wave in the USA, IMF and new trade wars

Last week began with an outbreak of short-term panic after a White House adviser said in an interview that the US-China trade deal is over. Trump made a rebuttal rather quickly and the markets quickly compensated for the losses.

Nevertheless, the problem of trade wars did not end there: Trump administration said that the United States was going to set new tariffs of $ 3.1 billion on export from France, Germany, Spain and the UK. In response to this, the EU will have no choice but to impose its own sanctions in response. That is, trade wars will expand geography and scope.

The main event of the week and the main newsmaker again became a pandemic. The situation in the world continued to deteriorate rapidly: the number of new cases in the USA at the end of the week reached 50K, in Brazil about the same number, and India approached the mark of 20K.

And if for Brazil and India this is the first wave, then the United States is faced with a full second wave. Unreasonable removal of quarantine restrictions and exit from the lockdown say their words. Judging by the current dynamics, the second wave promises to be even worse than the first one. At least the current highs are already higher than the highs of late April.

A week of such growth and the US should prepare for a new lockdown. Actually, some states have already suspended the lifting of restrictions.

In general, our recommendation to sell in the US stock market is finding more and more reasons.

Speaking of reasons. The IMF last week released updated forecasts on the global economy in 2020. Global growth is projected at –4.9 percent in 2020, 1.9 percentage points below the April forecast. The COVID-19 pandemic had a more negative impact on activity in the first half of 2020 than anticipated, and recovery is projected to be more gradual than previously projected.

At the same time, the IMF notes the fact that there is a large gap in prices on financial markets from reality and warns about a correction in financial markets.

This week, markets will continue to monitor the situation with the pandemic and their sentiment will be directly determined by the numbers for new cases of disease. In addition, we are waiting for the publication of official statistics on the US labor market: NFP and unemployment on Thursday will be the focus of markets.