[Good Morning Stock Market] Trump Says "Economy Has Revived"... Market Concerns Rise Over COVID Resurgence

US Reports 53,000 New COVID-19 Cases in One Day, Total Surpasses 2.68 Million
Questions on Sustainability Amid COVID-19 Resurgence Despite Strong Employment Data
Global Trade Recovery May Mitigate Impact Compared to First Wave

[Asia Economy Reporter Minji Lee] The number of new COVID-19 cases in the United States surged to a record high of 53,000 in a single day. The cumulative number of confirmed cases has grown to 2.68 million, prompting calls in some states to halt the reopening of economic activities. Employment data released the previous day showed an increase for the second consecutive month. President Trump described it as "historic figures, our economy has come back to life," but concerns over a second wave of COVID-19 have grown in the market, leading to a significant increase in profit-taking sales.

[Image source=Reuters Yonhap News]

◆ Sangyoung Seo, Kiwoom Securities Researcher = The U.S. stock market was influenced by the U.S. labor market, COVID-19 concerns, and individual corporate issues. Nonfarm payrolls in June increased by 4.8 million, surpassing the market expectation of 3 million. The unemployment rate was estimated at 11.1%, an improvement from 13.3%. The significant increase was largely due to the rise in the service sector from 2.548 million to 4.263 million.

However, the market focused on the fact that these results reflected the second week of June when the number of confirmed cases was maintained below 20,000. The period of economic reopening contraction due to the surge in cases was not included, raising concerns about the July employment report. The number of permanent layoffs also reached 7.2 million cumulatively, with 288,000 newly reported, indicating that employment improvement may not be easy.

Large technology stocks, which have high expectations for earnings improvement, showed strength in the market. Alphabet rose 2% on expectations of benefiting from advertisers boycotting Facebook, and eBay increased 2.6% following news of a sale bid process and a surge in online sales orders.

◆ Wonil Jeong, Yuanta Securities Researcher = The COVID-19 situation is at a crossroads between stagnation, stabilization, or resurgence, and so far, the outlook is positive. The global economic surprise index is clearly rising and has already recovered to pre-COVID-19 (January) levels.

Market outlook on the economic situation can be inferred from the movements of key indicators. Although concerns about the spread of COVID-19 have increased, leading to a negative view of the economic situation, the actual economic flow is evaluated to be stronger than expected. Recently released consumer sentiment indices and ISM manufacturing indices have maintained higher-than-expected levels.

Some believe that continuous surprises in these indices may be difficult to sustain due to concerns about a resurgence of COVID-19 and a second pandemic wave. Even if such a situation occurs, the economic shock is expected to be less severe than the first wave. This is because COVID-19 was an external economic event and an unprecedented situation, so it was considered a temporary shock.

It is also necessary to consider that the U.S. ISM new orders and China’s export order indices, which can predict global trade volume, are showing an upward trend. Trade accounts for a high proportion of real economic indicators. In Korea’s case, although exports in June were sluggish, the growth rate suggests that the bottom has been confirmed.