Covid-19 began its spread from the province of Hubei in China, with the city of Wuhan being at the epicentre of the spread.
There is ample evidence to suggest that the spread has been contained since mid February in China, with daily new cases completely flattened, and recent quarantine measures being lifted since March the 25th, with the City of Wuhan and Jia County being the last to lift quarantine measures on April the 8th.
Fears have persisted that the Coronavirus is set to result in a second wave of re-infections as quarantine measures are gradually being lifted, akin to the second wave seen during the SARS outbreak between 2002-2004 in Canada.
While we believe this to be a valid concern, it is important to take into consideration that almost 2 weeks have passed since China loosened quarantine measures, with the incubation period of Covid-19 being at roughly 14 days, suggesting that rates of re-infection are virtually non-existent.
Furthermore, reports have surfaced lately, especially from the U.S. accusing China of manipulating Covid-19 statistics in order to cover up the real figure of infections in the country.
China Concealed Extent of Virus Outbreak, U.S. Intelligence Says
While a compelling argument can be made in critiquing chinese statistics, we believe that this has to be weighed against the notion that the Chinese Coronavirus response was exceptionally timely and swift, with the resulting lockdowns eventually leading to 0 new cases and the virus being contained.
Additionally, Chinese authorities would not lift quarantine-restrictions if they themselves did not believe that the risk of re-infections was low, suggesting that the data out of China and the subsequent flattening of their Coronavirus cases to be true.
Other Asian nations have followed suit, with South Korea reporting a flattening of daily new infectious cases since early March;
Australia has also reported a peak in their amount of daily new Covid-19 cases since late March, suggesting that the curve is set to further flatten moving forward.
Similar trajectories exist for Japan, Thailand and Vietnam suggest a leveling off in daily new cases;
After Covid-19s ascent in Asia, it quickly spread to Europe, with Italy becoming the epicentre of the outbreak, and spreading to other neighbouring European countries and eventually entire Europe.
Daily cases in Italy have leveled off, with Spain and some other European countries following suit;
As the sample-data suggests, we are seeing daily news cases of the Coronavirus drop in Europe, suggesting that the events unfolding in Asia are set to follow suit in Europe in a not so distant future.
Exceptions exists to these trends, with the United Kingdom and Sweden adopting laxer and delayed responses to the Coronavirus compared to other European nations, resulting in an increase in daily new cases and a higher probablity that virus-containment is set to take a much longer time than originally thought.
Currently the U.S. is the new epicentre bearing the bulk of novel Covid-19 cases, with estimates pointing to containment at the end of April. Other nations such as Canada and Mexico are set to follow the same path as the U.S.
Markets are currently focusing on the amount of daily new cases, as it correlates with the amount of deaths from Covid-19. Death rates are set to decrease as new cases decelerate, and remaining cases clear up in spontaneous recovery.
It is important to note that the death-rate of Covid-19 is at an estimated 1-4%, being highly contingent on age-demographics, with an overly large proportion of deaths being attributed to the elderly with prior medical health conditions weakening their immune systems.
Recent inferred volatility data from various volatility indices, suggests that markets are pricing in a reduction in the amount of new cases, and subsequent reductions in quarantine measures and a return to ordinary economic activity.
The ViX itself dropped from 65.54 to 46.8 March the 22nd to March the 29th, approximately -28.59%.
We at East Invest believe that the ViX is set to fall below 40 the coming week as the amount novel Coronavirus cases is set to decelerate in Europe.
Furthermore, discussions regarding output cuts have ensued from various oil-producing nations in order to stem the supply glut. Unexepectedly Norway offered to join in supply cuts, action that has not been since 2002.
Norway May Join Oil Output Cuts for First Time Since 2002
The U.S. and Canada threatened with tariffs on Saudi and Russian oil in order to protect their domestic oil industries that have been hit hard by the oil-price war.
US and Canada discuss putting tariffs on Saudi and Russian oil
Currently WTI and Brent are trading at significantly higher levels (46-52%*) as sentiment changed rapidly after Trump announced discussions with Russia and Saudi Arabia.
Oil surges as Trump spurs hopes for Russia-Saudi pact
Supply cuts are likely to happen wether oil-producing nations agree or not in the near-term, as physical storage space of crude-oil is at maximum levels, necessitating supply cuts.
East Invest still holds firm to a price-target of 40$ for crude oil since our previous post, but expects sustained volatility moving forward.
More interestingly is the fate of the OPEC+ cartel that is currently under threat as U.S. shale along with Canada has severely limited the cartels ability in maneuvering crude-oil prices, with the collapse in crude oil prices 2014, displaying the resilience of U.S. shale.