The Ray of Hope Fades as COVID-19 Cases Rise and EU Member States Find Little in Common

April 09
03:04 2020

In the early part of the week, we saw the European equity markets find support. The support came in hopes of a slowdown in the number of coronavirus cases that drove demand for riskier assets.

On Monday, we had raised concerns over the market’s eagerness to bet on a single number rather than identify a trend.

While the European equity markets found further support on Tuesday, off the back of market positive COVID-19 numbers for Monday, uncertainty has set in once more.

Through the European session today, we have seen the European markets fall back into the red. Barring a bounce back, we are likely to see an end to a run of 3 consecutive days in the green.

Granted, the pullback is minor relative to moves seen of late but it is a pullback nonetheless.

Coronavirus Numbers in Focus

When we consider the recent coronavirus numbers, there must be some caution in taking single day updates in isolation.

We remain focused on France, Germany, Italy, and Spain from an EU perspective as these are the worst-hit member states.

As at the time of writing, the total number of coronavirus cases across the 4 states totaled 500,523 on Tuesday, giving a daily increase of 29,916. While down from a 42,323 spike from Saturday, it’s up from a lowly 16,711 increase on Sunday…

More significantly was a jump from Monday’s 921 low back to 3,000 levels in Italy. The length of the current lockdown should begin to yield significant results, yet we are still seeing a steady rise on average.

Figures out of France suggest that reporting and testing frequencies continue to influence. On Sunday, we saw the number of new cases fall from a Saturday 25,615 to a Sunday 2,886. On Tuesday, the total number of new cases rose by 11,059. By EU member state standards, the rise was significant. Only Spain came close, with a 10,015 increase on the same day.

So, the markets will need to become more patient and consider means and medians over individual daily numbers.

As we rapidly approach mid-April, Italy is certainly not going to see containment measures ease at the end of this week…

That simply spells more trouble for the Italian and EU economy.

The EU Model

As we continue to consider the economic ramifications of the coronavirus, not just on the EU but beyond, the EU model is in question once more.

Only today, news hit the news wires of EU ministers having failed to agree on a coronavirus economic rescue package.

If we look at the UK, the U.S, Japan, China, and numerous other countries, the EU is well behind the curve. All of these nations have delivered some form of a fiscal stimulus package or at least agreed in principle.

Spain reportedly warned of the country’s EU membership and one can only imagine that a number of others are also questioning their membership.

For “The Establishment”, Britain’s withdrawal couldn’t have come at a worse time. The British government is free from obligations and can go about its business to combat the effects of the virus…

France, Germany, and Italy are also suffering, though economically there is no member state worse off than Italy.

Unsurprisingly Italy was pushing for an Italian Job today… The Netherlands, on the other hand, had different ideas.


Perhaps because The Netherlands has reported just coronavirus 20,549 cases. This is one-fifth of those reported by any of the 4 member states that we follow.

By GDP, The Netherlands ranks below all 4 member states. When considering the economic impact of COVID-19, some support must be expected, however.

So, with there now being two sides to the COVID-19 rescue package, there may also be 2-sides to the very existence of the EU as we know it today.

At the time of writing, the EUR was down by just 0.08% to $ 1.08822 against the Greenback.


Perhaps the markets simply don’t believe that the likes of Italy and Spain would jump ship. Well, perhaps a threat from Germany would sound the alarm bells.

The EU’s largest economy would undoubtedly be forced to foot a large portion of any rescue package. Imagine that, with the more than 100,000 coronavirus cases…

The German electorate is not going to like that, particularly when the Brits are paying nada…

This article was originally posted on FX Empire


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