Financial markets buoyed by declining infections and mortality rates


While data and key indicators paint a bleak picture of the economic consequences of Covid-19, US stock markets are up 23 percent from their March low.

After a month of varying degrees of lockdown of the Danish and the global economies, data and key indicators now paint an increasingly bleak picture of the economic consequences of Covid-19. 

In Denmark, around 45,000 workers have lost their jobs, and the number would be a lot higher if employees sent home on state-sponsored pay compensation schemes were included, says chief economist at Danske Bank, Las Olsen. In neighbouring Norway, where state-aided pay compensation schemes are more generous, some 350,000 workers are currently on paid leave, and although the numbers do not compare one to one to Danish numbers, they are nonetheless an indicator of the situation in Denmark, says Las Olsen. 


Optimism on the financial markets
In the US, where more than 22 million Americans have filed jobless claims over the past month, the economic data also points to an extreme economic contraction with a huge falls in retail sales and a decrease in industrial production output not seen since 1946. 

”A month into the general lockdown, the situation continues to be very bad as far as we can see. We are starting get actual economic data for March, and it points to an extreme contraction with a fall in retail sales of 8.7 percent and a fall in industrial output of 5.4 percent”, says Las Olsen. 

Meanwhile, US stock markets are up 23 percent since their low in March, a movement also seen in stock markets elsewhere. 


The reopening of hairdressers, shops or cinemas is relatively straight-forward to quantify in terms of employment. But we do not know how consumers will react. How soon will they feel safe to revisit shopping malls or their hairdresser? 

Las Olsen

Chief Economist, Danske Bank


”The financial markets have been fuelled by indications that the current crisis might be short-lived. The numbers of infected, hospitalised and dead are now growing at declining rates in most parts of the world coved by our data - or they are downright falling. This paves the way for reopening the economies as we are now beginning to see in Denmark and other countries", says Las Olsen. 

Uncertain reopening
How economies will reopen and how consumers will react is still shrouded in uncertainty says Las Olsen. For it is one thing for shops and restaurants to reopen. It is another thing for consumers to actually take advantage of it. 

”The reopening of hairdressers, shops or cinemas is relatively straight-forward to quantify in terms of employment. But we do not know how consumers will react. How soon will they feel safe to revisit shopping malls or their hairdresser? We have seen that consumption has also fallen significantly in countries that has not had forced lockdown of the economies, for example restaurants in Sweden", says Las Olsen.
 
Expansive relief packages
More bullish sentiment on financial markets is also fuelled by stimuli measures by central banks and governments around the world. This reduces the risk of a longer-term crisis of persistently lower demand, and it also makes it more realistic that the economic rebound will be V-shaped with the economic contraction followed by a strong economic expansion, says Las Olsen.

”It is safe to say that there are still significant economic and health risks as well as risks and uncertainties in terms of opening up, and significant economic value has been irretrievably lost. This is why stock markets have so far gained only half of what they have lost since mid-February. But we are also seeing quite a few things that points towards better days ahead", says Las Olsen.