Service Sector Recovery, Good News from Dr. Copper, and Remember the Trade War?

The U.S. services sector shot back to nearly pre-pandemic levels in June, significantly outperforming expectations as over 80% of industries reported seeing growth in business activity. That growth doesn’t look strong enough yet to welcome back all laid-off or furloughed workers though; permanent job losses are still climbing even as new claims continue to slow. The travel industry has been one of the hardest hit by the pandemic, and though it received a temporary bump over the holiday weekend, air travel is down 72% from 2019 and business travel in particular has virtually ground to a halt. Dr. Copper doesn’t appear too concerned though; the keystone commodity has been steadily creeping higher and has more than recovered its Covid-sparked losses. Bond holders likely aren’t feeling quite as calm these days though—U.S. investment-grade yields are at record lows and systemic risks are on the rise as financing costs collapse and market-based inflation expectations have been picking up. And remember the trade war? It may have been knocked off the front page by 2020’s other major headline events, but China’s failure to honor the phase one deal should not be overlooked and could complicate negotiations going forward. China’s leading the world for equity gains in 2020 and looks to have moved past the worst of the Covid-19 threat, but can we expect U.S. imports to ramp up enough to hit the deal’s targets when they’re less than a quarter of the way there?