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An uncomfortable experiment

Good morning! The ongoing Delta outbreak spread to the Northern Territory yesterday after a man in his 30s – who had been in hotel quarantine in Sydney before flying north – tested positive for the coronavirus. Consequently, Darwin, Palmerston and Katherine were placed into an immediate lockdown until at least Thursday.

Moving to the south east the situation deteriorated even further on Monday, after:

  • Canberra's lockdown was extended for another two weeks to 2 September;
  • New South Wales registered a record 478 new local cases, 7 deaths and tightened restrictions even further; and
  • Melbourne's lockdown was extended by two weeks, playgrounds were closed and a curfew was imposed between 9pm and 5am.

Oof. It's looking less and less likely that case numbers will ever approach zero before we hit a vaccination rate of 70-80% of eligible adults, which will hopefully be sometime in the next couple of months.

Markets

Daily % change

 

AUD/USD

73.4

0.0%

 

 

10Y Bond

1.18

-0.8%

 

 

ASX200

7,583

-0.6%

 

 

Brent (bbl)

69.6

-0.9%

 

 

Gold (oz)

1,789

+0.4%

 

 

Iron ore (t)

160.6

+0.9%

 

 

Bitcoin

45,843

-1.8%

 

Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

Following a weak lead in Asia the US S&P500 opened down as much as -0.65%, before recovering steadily through the day to finish up 0.26% at a fresh record high. Locally, the ASX200 fell 0.61% following increasingly harsh lockdown measures in the south east of Australia, weak China data and disappointing earnings results from Beach Energy, Lendlease, Bendigo and Adelaide Bank and Seven West Media.

Under pressure: China's monthly data dump revealed slowing industrial output (6.4% vs 7.8% expected), retail sales (8.5% vs 11.5% expected) and fixed asset investment (10.3% vs 11.3% expected) in July due to a fading credit impulse, regional flooding and lockdowns in response to new Delta variant outbreaks in half the country. Perhaps worried, China's central bank yesterday injected a greater than usual amount of medium-term loans into the financial system, to keep funding conditions "reasonably ample".

Japan rebounds: Preliminary data showed Japan's economy grew an annualised 1.3% in the June quarter (+0.3% on the previous quarter), following a 3.7% decline in the March quarter.

Crypto climbing: The market capitalisation of all cryptocurrencies surpassed $US2 trillion for the first time since mid-May.


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Feature

An uncomfortable experiment

The latest data from the US Centers for Disease Control and Prevention (CDC) show that 83.6% of US counties now have a "high" level of community transmission, up from around 20% a month ago.

Map showing the Delta variant taking over the United States over the past month.
A "high" transmission level is defined as an area with 100 or more cases per 100,000 people and a positivity rate of 10% or higher. CDC

Why this matters: The US has decided to let 'er rip. It's essentially conducting an uncomfortable experiment from which the rest of the world will be able to learn a thing or two. For instance, if transmission and case numbers continue to soar but hospitalisations and deaths are concentrated almost entirely among the unvaccinated, then the argument for restrictions becomes fairly weak.

So far, so good: Based on data from the 24 states tracking breakthrough cases, as at the end of July just 1.7% of cases were in fully vaccinated people. Over 95% of hospitalisations were in people unvaccinated or not fully vaccinated. In terms of deaths, 96.7% were unvaccinated.

However,  it can be misleading to lump the US together, given vast disparities between states. For example, in Vermont over 70% of the population has been fully vaccinated since the start of July, while Mississippi is still sitting below 40%.

Chart showing US hospitalisations by vaccination status.
US hospitalisations in reporting states by vaccination status between 1 Jan and 30 Jul. Bloomberg

Looking forward: US case numbers are doubling every couple of weeks and there are lags between new cases, hospitalisations and deaths. So the situation can turn quickly – and that's assuming the virus doesn't mutate again to become better suited at bypassing the protection offered by vaccines.

Chart showing US cases, hospitalisations and deaths.
US case numbers are rapidly increasing but deaths remain low, for now. OurWorldInData

Think of the children: Unvaccinated children are not just spreading the Delta variant but are also ending up in hospital – children now make up 2.4% of US COVID-19 hospitalisations. That's an important consideration for Australia, as the aged 16+ eligibility may need to be extended to children, adding an extra couple of months to the rollout (given the gap required between doses).


The Wrap Up

  • 💉 Anyone aged over 16 in South Australia can now book a COVID-19 vaccine appointment, with Pfizer available for everyone aged 16 to 59. Book at sahealth.sa.gov.au/covidvaccine
  • 💪 For the next two weeks anyone in Western Australia aged 16 to 59 can book in for a Pfizer appointment. Book at rollup.wa.gov.au
  • 🤨 NSW Premier Gladys Berejiklian revealed that "the extent of your freedom depends on case numbers", even after Australia reaches an 80% vaccination rate.
  • ✈️ More than 250 Australian troops will be sent to the Middle East as part of a mission to evacuate Australians in Afghanistan, as well as Afghans who once served with the Australian Defence Force.
  • 💲 Telstra will pay its workers $A200 to get vaccinated against COVID-19.
  • 🍻 According to a survey from consumer finance website MagnifyMoney, 32% of US investors have traded while drunk. This includes 59% of Gen Z investors – more than any other age group.
  • 😲 60-test former Wallaby Toutai Kefu was seriously wounded in stabbing attack in his Brisbane home after four intruders broke in at about 3.20am on Sunday night.
  • 🙏 Cronulla Sharks forward Andrew Fifita is in an induced coma following a hit to the throat during the team's loss to Newcastle on Sunday.
  • 🐱‍💻 Voice and video calls on Facebook Messenger will soon be end-to-end encrypted. But the source code will remain closed, so we just have to trust them... 🙄
  • 😵 Bank of America, Morgan Stanley and Goldman Sachs now offer junior bankers starting salaries of at least $100,000. The catch – "they worked 98 hours per week, on average, and they slept five hours per night".
  • 🦗 India defeated England by 151 runs in the second test after skittling the poms for 120 in the final hour, taking a 1-0 lead in the five-test series.

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