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Managing the virus

Good morning! A united Australia could soon be a thing of the past, after WA Premier Mark McGowan said if NSW fails to "crush and kill" COVID-19, he would consider erecting an indefinite hard border with the state. According to McGowan, "When a state goes rogue in effect... well other states would have to have precautions in place."

Asked for her response, NSW Premier Gladys Berejiklian replied: "At least he's consistent."

Let's just hope the promised Pfizer doses arrive soon so that we can put all this nonsense behind us. 😤

Markets

Daily % change

AUD/USD

74.3

-0.7%

10Y Bond

1.32

-4.3%

ASX200

7,341

+0.2%

Brent (bbl)

74.3

+1.2%

Gold (oz)

1,803

-0.1%

Iron ore (t)

204.8

-2.4%

Bitcoin

32,856

-5.0%

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

The US S&P500 stuttered last night, falling 0.86% after the latest weekly jobless claims were unexpectedly higher at 373,000, sowing the seeds of doubt about the economic recovery. Local markets inched higher, led by tech stocks such as buy now, pay later Zip Co (+13.7%), with plummeting bond yields – US 10-years reached a 5-month low of 1.25% on Thursday – supporting lofty valuations.

Data, not dates: RBA Governor Philip Lowe gave a doveish speech yesterday on the labour market, reiterating that any increase in the cash rate will be "based on inflation outcomes, not the calendar". He added that by mid-November, the RBA will own "a little more than 30 per cent of Australian government bonds on issue and 15 per cent of state and territory bonds... a substantial and ongoing degree of support to the Australian economy".

Follow the leader: The European Central Bank will no longer target a rate of inflation "below, but close to, 2%", and will instead follow the lead of the US Fed and start "aiming for a 2% inflation target over the medium term. This target is symmetric, meaning negative and positive deviations of inflation from the target are equally undesirable". In other words, an inflation overshoot will be tolerated so long as the (undefined) medium term average approximates 2%.

Easy money: According to the AFR, global assets under management surpassed $US100 trillion for the first time last year, "as retail and institutional investors rushed into soaring stock and bond markets through the pandemic". The record was fuelled by cashed-up retail investors (i.e. individuals), who accounted for twice as much of the increase as institutional investors (e.g. super funds).


Feature

Managing the virus

Chart showing how COVID-19 cases in the UK have decoupled from hospitalisations and deaths.
Rising COVID-19 cases in the UK have decoupled from hospitalisations and deaths. OurWorldInData.com

Yesterday we covered comments from New Zealand's COVID-19 Response Minister that given the current rates of vaccination in the UK (~86% of adults have had a first dose), he wouldn't remove their restrictions. That stance was reiterated by more than 100 global experts writing in medical journal The Lancet, who warned that the UK's plan to remove restrictions on 19 July is "dangerous and premature".

Why this matters: The UK is somewhat of a canary in the coal mine for Australia, with the government currently modelling the rate of vaccination required to move us into 'Phase 2', which is when the public health focus will shift to outcomes (e.g. hospitalisations and fatalities). It's likely that Australia will require a higher rate of vaccination than the UK, given far fewer of us have immunity from catching the disease.

Digging deeper: The current surge in new COVID-19 cases in the UK has not caused a commensurate rise in hospitalisations and deaths, as they did in prior waves (see chart above). While there are lags between cases and hospitalisations, and admissions have started to rise in recent days, they're still well below what might be considered 'crisis' levels. So far, so good.

Looking forward: Could this change? Absolutely – the virus is constantly mutating and with a full reopening looming, there's a good chance case numbers continue to soar. But so far the UK is demonstrating that it's possible to live with the virus, provided the rate of vaccination is sufficiently high – the vast majority of hospitalisations and deaths are among unvaccinated people.


The Wrap Up

  • 💸 ScoMo said the liquid asset test applied to the government's COVID-19 temporary disaster payment will be waived from the third week of the Greater Sydney lockdown.
  • 🚨 Japan's government placed Tokyo into a state of emergency until after the Olympics (22 Aug), effectively a 'lockdown-lite' with restrictions including no alcohol at restaurants. Crowds were also banned, with sponsors starting to cancel booths and promotional events. 14 days to go...
  • 🥝 Since the 17 October 2020 election, the Kiwi government has spent over $NZ4 million asking itself "patsy questions" in Parliament.
  • England will face Italy in the Euro 2020 final after defeating Denmark 2-1. It will be the team's first final in any major tournament since winning the World Cup in 1966.
  • 💉 Moderna has started human trials on a new mRNA vaccine designed to combat the seasonal flu. The company hopes to target several viruses, including COVID-19, respiratory syncytial virus and human metapneumovirus, with a single vaccine.
  • 🌭 Heinz Ketchup Canada started a petition to make hot dogs and buns come in equal packs (yes, there's a reason they don't).
  • ⚖️ Several US states launched another antitrust case against Big Tech, this time targetting Google's Android app store, Google Play.
  • 💻 Your Microsoft Office products might start looking a bit different soon, with Microsoft rolling out a visual refresh ahead of the Windows 11 launch.
  • 🐱‍💻 More than $US1 billion was spent on crypto-linked Visa cards in the first half of 2021.

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