Our briefing for Tuesday July 20, 2021:

Written by Coronavirus | Jul 20, 2021 7:49:25 PM

In the United States, stocks tumbled on Monday, as investors fear the economic impacts of a resurgence of the coronavirus pandemic. With new cases and hospitalizations on the rise, President Joe Biden begged for more people to get vaccinated during a speech he gave about the economy. The Dow Jones Industrial Average closed down 2.1%, the S&P 500 index fell 1.6%, and the yield on the 10-year United States Treasury bill fell to its lowest level in five months. Biden said that economic recovery will depend on the country’s ability to get the pandemic under control, and that four states with low vaccination rates accounted for 40% of all new coronavirus infections last week.

In Canada, the federal government announced that it will open the border to fully vaccinated Americans beginning on August 9^th. Travellers from other countries can enter by September 7^th. Travellers will have to upload proof of vaccination to the ArriveCAN app or website before they board their flights, and also carry the vaccination certificate with them. The rules are similar to those rules for Canadians returning from non-essential travel, where a 14-day quarantine is not required. The Canada-U.S. border has been shut down to non-essential travel since March 2020, with the restrictions renewed each month since.

After the United Kingdom lifted almost all of their Covid-19 restrictions on Monday, some businesses are warning of a “pingdemic,” as a large number of people are receiving notifications on their phones telling them to self-isolate. The National Health Service’s test and trace app tells people when they’ve come into close proximity with someone who tested positive for the coronavirus by “pinging” them on their phones. Now, some businesses are warning of staff shortages as so many people are self-isolating, some have had to shut down as a result of key staff being pinged. Beginning on the 16^th of August, people will no longer have to self-isolate if they are pinged by the app, they will instead be advised to take a test as soon as possible.

In Brazil, Anvisa, the country’s health regulator, has approved trials with a third dose of the AstraZeneca vaccine. Anvisa said that approximately 10,000 volunteers will receive the third shot between 11 and 13 months after receiving their second shot. Millions of Brazilians are already struggling to get their second shot, approximately 3.1 million have not had it yet, despite being eligible for it, according to vaccine researchers. Only about 40% of Brazilians have had one dose of vaccine and just 15% are fully vaccinated.

In Japan, just days before the Olympic opening ceremony is scheduled to kick-off, Tokyo is reporting 71 cases of Covid-19 linked to the event. Tens of thousands of athletes, staff and media are arriving in Japan in the middle of a state of emergency, and events are scheduled to begin on Wednesday, two days ahead of the formal ceremony. Japanese Prime Minister Yoshihide Suga told International Olympic Committee members that Japan can deliver a successful event despite the world’s situation. “We will protect the health and security of the Japanese people,” he said.

In Australia, three out of six states are now under lockdown, as the delta variant continues to spread. South Australia is the latest to announce a seven-day lockdown, which will be statewide and include schools and the construction industry. “We hate putting these restrictions in place but we believe we have one chance to get this right,” South Australia Premier Steven Marshall said. The state of Victoria extended their lockdown yesterday, while New South Wales has been under lockdown since June 25^th. Experts warn that Sydney could be facing an indefinite lockdown until everyone is vaccinated.

Covid-19 – Due Diligence And Asset Management

Slumping Stocks Might Derail Busiest-Ever Summer for IPO Market

Brief : The great IPO boom of 2021 has already smashed the record for the busiest summer ever, and there are plenty of big deals still to come. Now wobbly markets are threatening to cool the frenzy. Since the start of June, listings by the likes of F45 Training Holdings Inc., the provider of fitness classes backed by actor Mark Wahlberg, Membership Collective Group Inc., the company behind the Soho House members clubs, and ride-hailing giant Didi Global Inc. have raised more than $90 billion through initial public offerings, according to data compiled by Bloomberg. Stock indexes at record levels, until last week at least, and cash-rich investors have lured private equity sponsors and startup founders alike to the equity market. But now investors have been spooked by the resurgent coronavirus, sending the MSCI World Index down for six straight sessions, heading for its longest losing streak since the pandemic began.

Moderna Stock 'Has Taken on a Life of its Own' Ahead of S&P 500 Entrance

Brief: Moderna (MRNA) is set to join the S&P 500 index on Wednesday, replacing Alexion Pharmaceuticals Inc. (ALXN). The stock has soared amid the pandemic after its vaccine became instrumental in the fight against coronavirus. Moderna stock has “taken on a life of its own,” Michael Yee, Managing Director and Senior Research Analyst at Jefferies, told Yahoo Finance (video above). “It's priced in a huge amount of assumptions over the next ten years that haven't played out yet. People believe it’s the Tesla of biotech.” That the biotech firm would be so well-recognized and valued at over $113 billion was no sure bet. For those who invested early in the company, that wager paid off.

Delta Variant Will Likely Create a 'Sloppy' Stock Market This Summer: Strategist

Brief: A likely summer of concerning COVID-19 Delta variant headlines sets the stage for an ugly stock market in the near-term, said Keith Lerner, Truist Advisory Services' chief markets strategist. "Our view is we're seeing another corrective period within a bull market trend," Lerner said in a note to clients after Monday's brutal start to trading. "While the Delta variant complicates the near-term picture, and is likely to lead to a continuation of sloppy trading through the seasonally-weak summer months, our base case remains that the primary trend over the next 12 months remains higher." To be sure, Monday's session was quite sloppy as investors reassessed their risk appetite with growing COVID-19 infections globally at the hands of the Delta variant.

JPMorgan’s Kolanovic Sees Reflation Trade Revival Coming Soon

Brief : The recent selloff in stocks set to benefit most from an improving economy has gone too far and a reversal is imminent, according to JPMorgan Chase & Co. chief global markets strategist Marko Kolanovic. The unwinding of the so-called reflation trade accelerated on Monday with the delta variant of the coronavirus quickly spreading and concerns flaring that the U.S. is reaching peak economic growth. Traders have been piling into growth sectors such as technology that are viewed as safe havens. But Kolanovic sees further gains in those value names that benefit from faster inflation as the global economy recovers from the pandemic.

Hedge Fund Short Sellers Capitalise on UK ‘Freedom Day’ Fears as Rising Covid Rate Sinks FTSE Stocks

Brief: Hopes that the easing of most Covid-19 restrictions in England this week – with 19 July having been dubbed ‘Freedom Day’ – would help accelerate the UK’s nascent economic recovery were soured as travel, manufacturing and retail names were all dented. Travel and tourism-related stocks were among the hardest hit amid continued uncertainty surrounding the UK’s traffic-light quarantine system for travellers, which threatens summer holidays for many. EasyJet dropped 6.8 per cent and IAG, which owns British Airways, fell 5.5 per cent at one point. Hedge funds betting against EasyJet’s share price include AHL Partners and Kintbury Capital, according to FCA regulatory disclosures. Carnival – the cruise line operator which is one of DE Shaw’s short positions – also fell in value on Monday.

Wall Street Eyes COVID-19 Delta Variant as Return to Office Looms

Brief: As the Dow Jones Industrial Average posted its worst day since October of last year over pandemic fears, FOX Business has learned that top executives at the Big Banks are closely monitoring the spread of the coronavirus Delta variant and how it may impact plans to re-open offices particularly in large urban areas such as New York City. People at banks such as JPMorgan, Morgan Stanley and Goldman Sachs say that so far they’ve made no changes to their re-opening plans. JPMorgan and Goldman have already told employees to begin to return to the office after about a year of at-home working during the worst of the pandemic. While Morgan Stanley has said it expects employees to return to the office after Labor Day.

Contact Castle Hall to discuss due diligence

Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

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