June 22, 2020 / 8:10 AM / 10 days ago

Daily Briefing: Hopes and fears

LONDON (Reuters) - The week is off to a mixed start with markets torn between hopes over easing lockdowns and fears over a resurgence in infections.

People enjoy the weather in Central Park, the day before the city starts phase two of reopening after the lockdown due to the coronavirus disease), in the Manhattan borough of New York City, June 21, 2020. REUTERS/Jeenah Moon

Global new coronavirus cases have reached a record of more than 183,000 and infection numbers are rising in the United States, prompting Apple to shut some stores again.

Germany’s reproduction rate jumped to 2.88 – well above containment levels – driven by outbreaks in meat processing plants and spurring a reintroduction of some regional lockdowns.

Yet there is some optimism over efforts to contain the outbreak in Beijing and easing of lockdown measures is going ahead in many economies.

Asian markets slipped and London, Paris and Milan fell 1% at the open, with Germany’s DAX nursing even heftier losses amid questions over the Lufthansa bailout and the Wirecard saga. Oil prices also fell.

Yields on U.S. Treasuries and some German bonds were around one-week lows and the dollar index snapped a four-day winning streak. U.S. futures pointed to 0.4% gains on Wall Street later in the day.

Markets will get some more data to digest later in the day, with June’s consumer confidence reading for the euro zone set to provide more evidence on how quickly sentiment can change (or not) as lockdown restrictions are eased with consumers a key piece of the recover puzzle.

Confidence is expected to further recover from its April trough, though the reading is seen deep in negative territory.

Those numbers are just a prelude to June PMIs due on Tuesday and expected to show a recovery in total levels, although remaining in contraction territory below 50.

Data out this morning from South Korea showed exports extended their contraction in the first 20 days of June, though at a slower pace of just over 20%. The country breakdown showed shipments to China rose 14.5%.

In corporate news, Germany is in focus with shares in Wirecard dropping 40% in early trade, after the scandal-hit payments firm said auditor EY has been unable to account for a quarter of its assets, totalling 1.9 billion euros ($2.13 billion) - or maybe they did not even exist in the first place. That makes Lufthansa’s 11% drop in early trade not look quite so bad.

The German flagship carrier’s chief executive, Carsten Spohr, said on Sunday he would seek to avoid a grounding and insolvency before a showdown between the airline’s biggest shareholder and the German government over the terms of a 9 billion-euro bailout.

Italy is close to disclosing the approval of guarantees for a 6.3 billion-euro financing of Fiat Chrysler, two sources familiar with the matter said, paving the way for the largest crisis loan for a European carmaker.

Telefonica CEO Jose Maria Alvarez Pallete said his company will participate in the consolidation of the sector while GlaxoSmithKline is out of the race to test experimental immunisations against the coronavirus, preferring to focus on an established technology.

In emerging markets, the stocks index fell after four days of gains. An emerging-markets FX index weakened, down for third day in the past four. China left its benchmark lending rate unchanged for the second straight month at its June fixing.

— A look at the day ahead from chief emerging markets correspondent Karin Strohecker. The views expressed are her own —

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