US and European stocks drop as Covid cases accelerate


US and European stocks dropped on signs the spread of coronavirus is gathering pace, while a rally in German debt pushed yields on the regional haven to the lowest level since the market tumult in March.

In early Wall Street trading, the technology focused Nasdaq Composite fell 1.6 per cent and the S&P 500 slipped 1.1 per cent. This followed declines in Europe, where the region-wide Stoxx 600 slid as much as 2.5 per cent.

The gloomy mood came after several countries including France and the UK announced new restrictions in an attempt to slow the spread of the virus, which is accelerating across Europe.

The US reported 57,000 new cases on Wednesday, as a record number of states reported daily increases of more than 1,000 new infections, while the Trump administration worried some scientists by appearing to champion a controversial herd immunity strategy.

“Markets have been surprised by the progress of the virus in the second wave,” said John Roe, strategist at Legal & General Investment Management.

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A rally in German 10-year debt pushed yields on the regional haven down 0.05 percentage points to minus 0.624 per cent, the lowest since Italy implemented a national lockdown in mid-March. The yield on US Treasuries of the same maturity fell 0.01 percentage points to 0.7 per cent.

The dollar, as measured against a basket of trading partners’ currencies, rose 0.4 per cent. Brent crude, the international oil benchmark, slipped by almost 3 per cent to $42.22 a barrel.

Mr Roe said economists and investors had not expected governments to allow the virus to reach the point it has now. Across the western world, governments had prioritised social wellbeing, for example by allowing schools and places of worship to reopen, he said.

“The best of the recovery is now behind us,” added Sophie Chardon, strategist at Lombard Odier.

In a sign of the fragility of the global economy, data released on Thursday showed a greater than forecast 898,000 Americans filed for first-time jobless benefits last week. Meanwhile, airline Ryanair sharply cut its winter flight schedule, citing increased government restrictions across Europe.

Ms Chardon said investors should brace themselves for “more volatility” in share prices. The Vix index of expected volatility on the S&P 500 rose by more 2 points to 28.9. The so-called fear gauge’s long-run average is about 20. A similar index forecasting eurozone stock market volatility also rose.

On Wednesday evening, French president Emmanuel Macron declared a public health emergency and imposed a 9pm to 6am curfew on Paris and eight other major French cities.

German chancellor Angela Merkel warned that cases of Covid-19 were in an “exponential growth” phase and limited private gatherings to 10 people from two households. In Britain, households in London will be banned from mixing in any indoor setting from Friday evening.

The map in this story has been amended to correct an erroneous data-point on the spread of coronavirus in Île-de-France due to an error in an external data set.

Additional reporting by Harry Dempsey in London and Peter Wells in New York



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Bendigo and Adelaide Bank to accelerate ‘cost transformation’


Shaw and Partners analyst Brett Le Mesurier said the key source of disappointment to the market was the surge in expenses, after the bank’s guidance earlier in the year for 2 to 3 per cent growth.

“We just want to see a well run bank that does not provide surprises. I’ve been very surprised by the cost growth,” Mr Le Mesurier said.

Meanwhile, Macquarie analysts told clients they remained concerned about further risks to Bendigo’s dividend, and were forecasting cuts in the payment. They also pointed out Bendigo had greater exposure to Victoria’s economy than rivals. According to the bank, 38 perecent of its residential loans are for Victorian properties.

Ms Baker, who has been overseeing a program aimed at improving Bendigo’s technology and products, said the pandemic had accelerated the need for the bank to make the changes.

The bank has not committed to a dollar figure on any savings, but said it would aim to lower its cost base over the medium term. It is also working with Boston Consulting Group to drive its cost-to-income ratio towards 50 per cent, down from 62.7 per cent in the year.

“Looking ahead, we are focused on accelerating our cost transformation program, targeting sustainable cost base reductions, that improve the proposition and experience for our customers, taking costs out of our business and driving growth,” Ms Baker said.

“The events of 2020 have accelerated the need to change in the way we work and how we look and operate. It has accelerated the adoption of digital technologies and reinforced the importance of strong community connections.”

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Bell Potter analyst TS Lim said the market would support more aggressive moves by Bendigo to rein in costs, but deferring its dividend made sense, given the lender had a lower capital position than peers.

Technology accounted for most of Bendigo’s 7 per cent growth in operating expenses, it said, while it also had higher provisions for staff leave because employees had responded to higher demand from customers.

As lenders face pressure to cut costs in response to narrowing profit margins, Ms Baker said the bank would be investing in automation, and it would change branches in response to customer behaviour.

On the outlook, the company said conditions would remain challenging, though Ms Baker said the hit to Sydney and Melbourne house prices would be less damaging than feared. “I think that we will see some impact on house prices, I don’t think it is actually going to be as severe as first anticipated,” she said.

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£84m of funding to accelerate UK vaccine trials revealed as Britain reports lowest daily deaths since March


Earlier today NHS England has announced 90 new coronavirus-related deaths, bringing the total number of confirmed reported deaths in hospitals in England to 24,617.

Beyond the personal tragedy each of these fatalities represent, what do these numbers tell us about the overall coronavirus situation in England? 

Prof Carl Heneghan, director of Oxford’s Centre for Evidence Based Medicine, has analysed the figures – here are some useful takeaways.

First, reported deaths in hospitals in England on the three previous Sundays suggest we are seeing a relatively significant drop in deaths:

  • Sunday  10th May: 178 deaths
  • 3rd May: 327 deaths
  • 26th of April:  336 deaths

And in the last seven days, there have been 1,467 fatalities – which is a drop of 27 per cent compared to the week ending 10 May, and a 69 per cent decrease compared to the week ending the 19th April. 

Dr Stephen Griffin, Associate Professor in the School of Medicine, University of Leeds, added that today’s figures do not demonstrate that easing the lockdown has been effective:

“The lower death toll today, albeit at a weekend where reporting can take a little longer, is of course a welcome sign that things may be improving. However, it is important to remember that most people that sadly succumb to severe COVID19 often do so after two or three weeks, or even longer.

“Thus, this figure likely reflects the last weeks of full lockdown rather than a sign that the new relaxed measures are a success. It will be important to closely monitor case and fatality rates over the coming weeks, using as wide and as intensive a screening effort as humanly possible.”

Our data team have put together this chart showing the UK’s epidemiological curve:





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