Macro Briefing: 20 July 2022

* Brutal heatwave continues to bake Europe
* Extreme heat damages estimated at 0.3% to 0.5% of Europe’s GDP
* Global warming raises risk of extreme heat events
* EU will outline plan to curb Russian gas use as Putin issues new warning
* 100 million Americans issued heat advisory warnings
* UK inflation reaches new 40-year high: +9.4% at annual pace
* US housing starts in June fell to lowest level in nine months:

US Q2 GDP nowcast continues to anticipate quarterly decline, according to revised data from Atlanta Fed’s GDPNow model:

Stocks have yet to reach full capitulation from investors, advise analysts at Sanford C. Bernstein. “We have not yet seen capitulation in outflows from equity funds,” according to strategists Mark Diver and Sarah McCarthy in a research note. “In fact outflows, excluding Europe, have only just begun.” The also note: “We may already have seen capitulation from bond funds. Significant selling in the second quarter has been followed by two weeks of net purchases so far in the third quarter.”

Covid cases are surging again and states appear to be out of ideas for containing the spread. “When you’ve said the same thing over and over about being vaccinated, being boosted, that if you’re vulnerable and you’re indoors with people who are not part of your household and you can’t distance, you need to wear a mask — I mean, the message hasn’t changed since the very beginning,” says Louisiana Gov. John Bel Edwards, a Democrat. “But the receptivity to the messaging, I mean, there’s only so much of that people are going to consume, and it becomes a diminishing return at some point, too.”