Gilead’s remdesivir drug failed at the first clinical hurdle yesterday, after results showed that it didn’t improve patients’ conditions during randomised tests. The news was a bit of a setback for US stock markets, but as the news came later on in the day, it only unwound the gains that it had already made. Gilead have disputed the result of the study, because they say it was terminated early and there were limitations in interpreting the data.
Trump tried to shine some light on the situation by saying that shining a light would be the answer to the virus. In a ridiculous press conference – even by his standards – he suggested that irradiating people with UV light, possibly from the inside out, might be an effective way of destroying the virus. If that wasn’t enough he suggested that scientists should look at injecting disinfectant into the body as he’s heard that disinfectant kills the virus – which it does, on surfaces. The idiotic comments have sparked a wave of condemnation from doctors and have professionals concerned that people will now be self-medicating with bleach. You couldn’t make this up.
Also in the US; the list of states preparing to reopen is growing. South Carolina is set to lift some lockdown measures this coming Monday, with a wide range of shops allowed to open so long as they stick to a 20% capacity rule. In Georgia, restrictions are lifting today and the list of businesses allowed to reopen include gyms, bowling alleys and massage therapists – this move is even a step too far for Trump, who has said he disagrees with that approach. The concerns that most people have for this sort of attitude is that if there is a second wave of the virus then there might well be a ‘double dip recession’ where the second dip is far worse than the first one would have been had everyone just listened again to Samuel L. Jackson and stayed home.
The FT summarise it succinctly by saying that even coming out of lockdown number one people will be apprehensive and it may take some time to shake off risk aversion and start to get back to normal. If you then have to send those people back to lockdown then “twice bitten, multiply shy”. The article also points to China as the model, where people have been given more freedoms but yet decide independently not to exercise them and so the return to normal is being tempered by the people, not the authority. If the US can restart with some self-discipline then maybe they’ve got half a chance here and wouldn’t it be great if that were the case. The risk for the rest of us, is that this social experiment will be playing out in the largest economy in the world.
The European leaders summit was a classic can kicker… They’ve agreed to let the European Commission undertake a budget rethinking exercise which would focus on a long term recovery and development package within it. The leaders didn’t agree on how much would be allocated to this part of the budget, with remarks ranging from half a trillion all the way up to two trillion euros. The markets didn’t throw their toys out of the pram though, probably because Italy PM Giuseppe Conte came out of the meeting touting “great progress”. In the short term there will be distributions starting from the bailout funds set up following the last financial crisis and they’ll probably get going from 1st June. So no solution, but no disaster, yet.
The ECB might have another problem to try and solve in the short term though, as banks are now showing the same sort of stress levels they were back in 2012. The EURIBOR benchmark, which is the rate at which banks will lend each other money at is now at its highest level for four years and the gap between this and the ECB’s overnight rate is now at its widest for 8 years. This is a sign that basically banks are starting to trust each other less and putting a premium on their interbank funding to reflect that. This will be something the ECB will be paying very close attention to, as banks with expensive funding costs are at a competitive disadvantage and will either have to pass those costs to their consumers, or restrict the amount of lending they do – either isn’t great for the economies that they’re lending into.
In the UK; Boris could be back to work by Monday to try and deal with the split in cabinet around whether or not the lockdown has gone on long enough. We also might see Rishi Sunak come round to the idea of the government underwriting 100% of small business loans. The chancellor has been resistant to date, but is reportedly working with banks to try and get a plan together to keep the smallest end of the SME market alive.
Overnight we’ve already seen UK consumer confidence numbers come in – unsurprisingly, they’re at record lows, but they’re not as bad as the market had forecast, so there’s perhaps a small glimmer of light. Later on we get retail sales numbers for March, but they’re all but pointless as any kind of forward looking barometer, so it will be down to the markets to decide if they’re feeling lucky going into the weekend.