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Analysis & Comment

World in transition – the 4 big challenges

Rapid change is now a constant, globally important institutions are questioned or coming apart, a lot of churn is happening, in society, in the economy, and geopolitical shifts are in the offing.

You are familiar with William Butler Yeats’ poem The Second Coming. I think it captures the mood presented by the profound challenges we face today. We all know the lines: “Things fall apart. The centre cannot hold.” It is invoked so often it is now a cliche.

The second verse and last line may be less familiar: “And what rough beast, its hour come round at last, Slouches towards Bethlehem to be born.” Some literary critics interpret the “rough beast” according to the era. It can be a historical force, communism, fascism, the atomic bomb or something malignant. Is the “rough beast” today’s terrorism, populism, political conflict or a pandemic?

Now that I have provided the setting, let me turn to the four big challenges the world is faced with today.

CHALLENGE I

Disruption. The Covid-19 virus spread silently and swiftly and became a pandemic in a couple of months. Everyone in the world has been disrupted. Many wise people are describing Covid-19 as a historical watershed. It is a searing experience that has touched the lives of every person in the world in a way no other threat has done before.

Covid-19 has taught us many lessons. Many things we took for granted were changed. Disruption was experienced in every domain – freedom of movement, freedom of association, freedom from fear and anxiety for personal well-being. We fear the loss of business, our jobs. We worry about health security and food security. Never have citizens felt more trapped whether they live in democracies or authoritarian systems.

The question everyone is asking is how will Covid-19 change the world? There are different takes.

In an op-ed in The Straits Times in April, I took the position that I do not see a great transformation happening post-Covid-19. Some things will change. Some trends which are already there will be accelerated. But in the end, the national DNAs of countries will assert themselves and things will settle into a new normal, a bit like the old normal. I was in the United States as ambassador when Sars happened. I was there during the Sept 11 attacks and for the global financial crisis in 2008-2009. Each time there was a lengthy self-examination of the problem and the ramping up of defences, a resolve to bring change, but things settled back to much like before.

The International Monetary Fund has predicted that the pandemic will trigger the worst recession since the Great Depression. We will see major economic restructuring. Job losses will be painful, staggering and tragic. Technology use would be accelerated and further developed and e-commerce would gain more ground. People will be more interested in working from home and want flexible working hours. Supply chains will be reconfigured but that was already happening before the pandemic.

The pandemic has seen the return of the state as a positive force where societies have argued for shrinking government. More than ever the pandemic has shown that decisive and active government can better deal with controlling the coronavirus outbreak. In the matter of geopolitics, we will see emerging trends accelerated, particularly in the US-China rivalry.

I believe the importance of the human connection has been brought clearly into relief during our lockdowns and though we connect online, we need to socialise, to meet and gather. We will go to the shops. There will be pent-up demand for travel again.


US President Donald Trump and China’s President Xi Jinping at the Group of 20 summit in Osaka in June last year. The writer says that the unravelling of the existing world order started with the elections of these two leaders. PHOTO: AGENCE FRANCE-PRESSE

Let me leave you with this thought. Over the long term the disruption caused by technological development to the way we live, work, play and learn would be deeper and more severe than the disruption by Covid-19.

CHALLENGE II

Democracy falters. We are hearing a steady stream of voices from the West suggesting democracy has failed and asking why it has failed.

At the end of World War II, the United States and Europe emerged the winners of the war. The Soviet Union was technically on the winning side too as one of the allies in the military alliance to defeat Germany and Japan, but it was an uneasy alliance and the Iron Curtain came down soon after and the Cold War officially began. The world thereafter divided into two camps – the alliance of pro-West, free market democracies and the alliance of centrally planned, command economies of the communist countries. For the next 50 years after the end of WWII, democracy and communism were rival systems for the hearts and minds of the new states in various regions in the world. The collapse of the Soviet Union in 1992 was, for many politicians and intellectuals in Western countries, the triumph of the West, and Francis Fukuyama declared prematurely it was the end of history. It was the triumph of democracy over communism.

President Trump has relied on tax cuts, cutting better trade deals, reducing trade deficits to create more jobs and presumably to help redistribution.

He has had some success in creating more jobs, but there is little evidence that the corporations have shared the savings from tax cuts to raise the wages of their employees. Covid-19 has wiped out all that and claims for unemployment benefits are at a historic high.

Today we hear a great deal about a crisis in democracy in the US and Europe where the systems were born and evolved. It is not the first time that both continents have mourned for democracy. The rise of fascism in the 1930s prompted the same dark forebodings and spawned many explanations. Now a fresh slew of books has appeared: How Democracies Die (2018), Democracy In Chains (2019), How Democracy Ends (2019), Rupture: The Crisis Of Liberal Democracy (2018), Can Democracy Survive Global Capitalism? (2018), Democracy And Its Crisis (2017) to name a few.

The West is going through this self-examination and angst again. The question is why? What does this tell us about societies? And what lessons must Singapore be alert to with developments halfway round the world?

In a sense it speaks to the strength of the democratic system that there is the existence of a healthy discourse to find improvement. The election of Donald Trump as US President, Brexit and extreme populist politics popping up in so many countries have raised more questions about the health of democracy, its institutions, processes and even the very idea of liberalism itself.

I am not saying Western democracy is faltering because of any single individual. The trajectory of US politics was set before President Trump came into the picture. His election was facilitated by highly polarising debate, loss of tolerance, evaporating trust for the political system, patent inequalities, extreme allegations online, and the swirl of post-truth facts or fake facts. Brexit raises questions about referendums and party politics as well as the ability of democracies to absorb globalisation and immigration.

The Pew Research Centre in a poll in 2018 across 27 countries found more people dissatisfied than satisfied with the way democracy worked.

So what went wrong?

• 1. First of all, people react to forces shaping their lives and the economy.

• 2. Then there are country-specific narratives that affect people’s perception of the political system.

There is no doubt that from the end of the 20th century, the full force of globalisation and technology left their mark on society and countries. Globalisation brought the world together, increased trade, spurred growth and speeded the movement of people across borders. But globalisation also has a dark side. There are winners and losers.

Globalisation ushered in the supply chain revolution. It worked for the effective and competitive companies and the ambitious who could make connections globally, manufacturing goods, selling goods, selling services. But large numbers of workers in the older industrialised countries found their factories moving overseas and their jobs and communities disrupted. Furthermore, technology effectively increased productivity and more jobs were displaced. To the job anxiety, there is an added aggravation from increased migration. Over time, the numbers look threatening and fears of loss of identity, a “us versus them” mentality took hold of a segment of the electorate. “America First” and Brexit were political responses to these issues.

Then there is the growing inequality in many countries. Federal Reserve data in 2018 shows the richest 10 per cent in the US held 70 per cent of total household wealth. To these general trends that fuel dissatisfaction, we can add the politics of individual countries that has given the impression that democracy has degraded. The institutions and leaders are not performing. In the US, Congress is gridlocked. Politics is polarised. Little wonder the Edelman Trust Barometer shows trust in elected leaders has been eroded severely. Interestingly, countries in Asia still have trust in their politicians and in Singapore the trust level is high (70 per cent). Western democracies did quite badly.

We are only beginning to appreciate the value of trust in the functioning of democracy and good government. Here I am talking of trust in the political institutions, political processes and the political leaders which makes negotiations and working out compromises achievable. This is necessary in a democracy and good governance.

In the recession of 1984-1985, Singapore leaders managed to persuade workers to accept a cut in the CPF contribution to preserve jobs and keep investors in the country. At that time employers contributed 25 per cent to their employees’ CPF, employees 25 per cent. They added that if the economy improved, the CPF cuts would be restored. CPF was gradually restored, but never up to 25 per cent. However, other benefits and opportunities kicked in when the economy grew, and people accepted it.

Much has been spoken of how social media has exponentially rendered governance more difficult. George Yeo in the 24th Gordon Arthur Ransome Oration, eloquently described the impact of social media, which creates echo chambers fragmenting society, but also reintegrates and combines the elements into new nodes in the networks with new identities based on ethnicity and religion.

It is no wonder people take to the streets to express their anger at the system – the yellow vests in Paris, protesters in Hong Kong, and in the US, the Black Lives Matter protests. If democracies are faltering, can they be fixed? Some writers ask dramatically if in Western democracies the people can recognise when the system is performing at sub-par and would they know the system is dying a slow death.

You can say the political system is not performing optimally. But my sense is that American democracy can survive any individual or any collection of people’s misuse. It needs fixing. However, it is not just about changing leaders, it is reforming the process as well, which is complicated.

At a Chicago Council Conference on Global Cities a few years ago, I made the point that “the essence of democracy is government responsiveness to people”. It is not the Schumpeterian idea of alternation of power between two competing parties. Power can pass between governing party and opposition and nothing changes for the people. People must know leaders are listening and responding to their greatest needs and institutions can deliver.

CHALLENGE III

Capitalism flounders. When Thomas Piketty published Capital In The Twenty-First Century, his book became an instant hit. His book appeared at the right time when economists, business leaders, media commentators, politicians but, most importantly, workers, were beginning to question if capitalism as a model, as a system works for society and the economy.

Why so? Piketty argues that “when the rate of return in capital exceeds the rate of growth in output and income as it did in the 19th century and seems likely to do so in the 21st, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based”.

What went wrong with capitalism? Branko Milanovic, centennial professor at the London School of Economics, pointed out that capitalism has gone through three phases.

• 1. Firstly, classical capitalism of the 19th century when fortunes were made from owning, not working.

• 2. Social democratic capitalism which saw the growth of welfare states in Europe, starting after WWII and ending in the 1980s, softening the hard edges of capitalism.

• 3. Now, there is present-day liberal capitalism or liberal meritocratic capitalism “where rich individuals are capital rich and labour rich”.

In today’s liberal meritocratic capitalism, there are many professionals, executives, who draw high salaries because of their talent and expertise as well as income from financial assets. The elite is more diverse in gender and ethnicity, but this masks the fact of increasing inequality. Milanovic argues that the last 40 years has seen the growth of a semi-permanent upper class that is quite cut off from the rest of society. So the division in the society grows along with the resentment.

So what is the solution? Piketty came up with radical suggestions, not all new. He advocated a social state and a progressive income tax system – a tax rate of 80 per cent for those earning US$500,000 (S$697,500) to US$1 million and 50 to 60 per cent on those earning US$200,000. Then there is an annual wealth tax of 10 per cent on large fortunes. These ideas will not fly. French president Francois Hollande tried the 75 per cent super tax and had to roll it back to 45 per cent as less tax revenue was collected because of less economic growth and capital flight.

In the US, there is talk of a return to socialism in some quarters. Still, overall, Americans aged 30 and above, and that is the majority, are fully supportive of capitalism. Frankly, not many Americans understand what socialism really means. That may explain why Bernie Sanders, though he is 78 years old, won more support from young people than Pete Buttigieg, simply because he advocates more socialist-inspired policies.

Glenn Hubbard, chairman of the Council of Economic Advisers under president George W. Bush, makes more modest suggestions than Piketty or Sanders. In an opinion piece in the Economist titled America Needs To Fix Capitalism To Save It, he argues firmly that one of the roles for an economic system is to improve standards and to deliver prosperity widely. Hubbard suggests introducing policies that provide greater opportunity for people and boost social insurance. The Trump presidency has not defined the problems this way. President Trump has relied on tax cuts, cutting better trade deals, reducing trade deficits to create more jobs and presumably to help redistribution. He has had some success in creating more jobs, but there is little evidence that the corporations have shared the savings from tax cuts to raise the wages of their employees. Covid-19 has wiped out all that and claims for unemployment benefits are at a historic high.

CHALLENGE IV

World order unravels. For more than 70 years we have lived and prospered by the American-led liberal international order and a Pax Americana in the Asia-Pacific. That order is changing. The rise of China and its impact is what countries in the international community are responding to. How China behaves, how the US behaves and the responses of the region and the rest of the world will shape the emerging new order. There is a sense that there has been a quick unravelling of the established liberal international order in recent years. Why is this so?

John Mearsheimer from the University of Chicago argues that the liberal international order existed only after the end of the Cold War when the US emerged the hegemon. From WWII to the end of the Cold War, there were two bounded orders. One led by the US with its friends and allies, the other by the Soviet Union and its friends and allies. The values of the US-bounded order included liberal values such as free market, free trade and free movement of capital, free movement of peoples, democracy and freedoms. It was an order built on strong military alliances. It was also realist and included some authoritarian regimes which were anti-communist. It excluded the Soviet Union and China. The Soviet Union had its bounded order of allies and partners based on shared ideological goals and military and security objectives. It was not until the end of the Cold War and the US emergence as the world’s hegemon that we saw the creation of the liberal international order. The West led by the US launched a policy of promotion of democracy and human rights globally. China and Russia were included in this order and they were allowed to participate in the institutions. China’s growth and rise was greatly helped by this inclusion. Two developments started the unravelling of the existing order.

• 1. The election of Donald Trump as the 45th President of the US

• 2. The election of Xi Jinping as the President of the People’s Republic of China.

President Trump advocated an “America First” and “Make America Great Again” approach in all his policies and came into office distinctly negative towards multilateralism and multilateral agreements. When the largest economy in the world takes this direction, it can be destabilising for the rest. President Xi came into office as a leader of a more confident China. He came in offering ambitious visions. A “China Dream” for the Chinese people and a Belt and Road Initiative for the world. But it was the “Made in China 2025” that was seen as a direct threat to the US economy and security. In combination, the last three initiatives sent the message to the West that China was taking steps to reshape the existing liberal international order.

The fact that it stepped up its activity in the South China Sea, steadily from 2008, caused unease in the region.

The dynamics of the restructuring of the international order have been unleashed more speedily and intensely than anticipated. There is a debate going on in China on what sort of role China will play and should play in world affairs. The Covid-19 pandemic offered China a unique opportunity to step into the role of global leadership given the absence of the US on this issue. The US, caught unprepared, has been struggling with a chaotic response to the coronavirus. This has further fuelled the rivalry.

Given the direction the US-China relationship has taken, John Mearsheimer predicts a return to two bounded orders as occurred after WWII, only this time it will be the US and China. Will the two bounded orders re-emerge? It depends on whether allies will line up unambiguously. The European Union would want to preserve a role for itself as a pole, and it is well known that there are differences between the US and EU on major issues. So there will be three poles or 2½ poles. It is not certain that China wants to confine itself to a clearly bounded order. World order is unravelling.

My own sense is that the changing world order will look a lot messier before it becomes clearer.

• Professor Chan Heng Chee chairs the Lee Kuan Yew Centre for Innovative Cities at the Singapore University of Technology and Design. She is also chairman of the ISEAS – Yusof Ishak Institute.

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World News

Global coronavirus cases exceed 11 million: Live updates

Grim milestone comes as WHO urges countries hit by serious outbreaks to ‘wake up’ to ground reality and ‘take control’.

  • The World Health Organization (WHO) urged countries hit by serious coronavirus outbreaks to “wake up” to the realities on the ground instead of bickering, and to “take control” of the pandemic. 

  • Brazil passed 1.5 million confirmed coronavirus cases, as cities reopen bars, restaurants and gyms sparking fears infections will keep rising.

  • Saudi Arabia passed milestone of 200,000 confirmed novel coronavirus cases, the health ministry said, weeks before an annual Hajj pilgrimage drastically cut back because of the pandemic.

Here are the latest updates.

Saturday, July 4

02:48 GMT – Colombia judge bans special restrictions for the elderly

A Colombian judge has prohibited the country’s government from subjecting those aged 70 or older to special restrictions during the coronavirus pandemic.

The judge described as discriminatory the measures which prescribe quarantine for the elderly until the end of August while lifting movement restrictions on the rest of the population in mid-July.

01:17 GMT – Brazil surpasses 1.5 million coronavirus cases

Brazil reported 42,223 additional coronavirus cases in the past 24 hours, the Health Ministry said, bringing the total tally to 1,539,081.

The number of coronavirus deaths rose by 1,290 to 63,174, according to the ministry.

01:13 GMT – Air France, Hop! to shed 7,580 jobs

Air France management said it planned to eliminate 7,580 jobs at the airline and its regional unit Hop! by the end of 2022 because of the coronavirus crisis.

The planned job cuts amount to 16 percent of Air France’s staff and 40 percent of those at Hop!

“For three months, Air France’s activity and turnover have plummeted 95 percent, and at the height of the crisis, the company lost 15 million euros a day,” said the group, which anticipated a “very slow” recovery.

00:46 GMT – Global coronavirus cases rise to more than 11 million

Global coronavirus cases have exceeded 11 million, according to tallies by Reuters News Agency and the Johns Hopkins University, marking another milestone in the spread of the disease that has killed more than half a million people in seven months.

The number of cases is more than double the figure for severe influenza illnesses recorded annually, according to the WHO.

Many hard-hit countries are easing lockdowns put in place to slow the spread of the coronavirus while making extensive alterations to work and social life that could last for a year or more until a vaccine is available.

Some countries are experiencing a resurgence in infections, leading authorities to partially reinstate lockdowns, in what experts say could be a recurring pattern into 2021.

00:13 GMT – Several US states hit highs in COVID-19 cases

Alabama, North Carolina, South Carolina, Tennessee and Alaska reported record increases in coronavirus cases on Friday as Florida’s most populous county imposed a curfew in advance of the Independence Day weekend.

The surge in cases, most pronounced in southern and western states, has alarmed public health officials, who urged caution before a July 4th holiday weekend that in normal times would feature big gatherings of families and friends.

Hello and welcome to Al Jazeera’s continuing coverage of the coronavirus pandemic. I’m Zaheena Rasheed in Male, Maldives. 

You can find all the key developments from yesterday, July 3, here. 

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Business

Oil falls below $43 a barrel on virus fears, still heads for weekly gain

LONDON (Reuters) – Oil fell below $43 a barrel on Friday as a resurgence of coronavirus cases raised concern that fuel demand growth could stall, although crude was still headed for a weekly gain on lower supply and wider signs of economic recovery.

The United States reported more than 55,000 new coronavirus cases on Thursday, a new daily global record for the pandemic. The rise in cases suggested U.S. jobs growth, which jumped in June, could suffer a setback.

“If this trend continues, oil demand in the region is at risk,” said Louise Dickson of Rystad Energy.

Brent crude was down 38 cents, or 0.9%, at $42.76 a barrel by 12:03 p.m. EDT (1603 GMT), and U.S. West Texas Intermediate (WTI) crude fell 44 cents, or 1.1%, to $40.21.

U.S. trade was thinned by the Independence Day holiday.

“The fragile U.S. economic rebound is at risk of being undone by the latest surge in new infections,” said Stephen Brennock of oil broker PVM.

Both benchmarks rose more than 2% on Thursday, buoyed by strong U.S. June jobs figures and a drop in U.S. crude inventories. Brent is still on track for a weekly gain of 4%.

Signs of economic recovery, and a drop in supply after a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, have helped Brent more than double from a 21-year low below $16 reached in April.

Boosting recovery hopes, a private survey showed on Friday that China’s services sector expanded at the fastest pace in over a decade in June.

OPEC oil production fell to its lowest in decades in June and Russian production has dropped to near its OPEC+ target.

The bankruptcy filing of U.S. shale pioneer Chesapeake Energy also supported prices by raising expectations production will decline, JBC Energy said in a report.

Gasoline demand will be closely watched as the United States heads into the July 4 holiday weekend.

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World News

Berlin drops derogatory name for metro station after protests

BERLIN (Reuters) – Berlin’s public transport company BVG said it would rename a city centre metro station that has become notorious for bearing a name based on a derogatory word for Black people.

The announcement comes amid a worldwide reckoning with buried legacies of racism and colonial crimes underpinning many western societies that was sparked by the death in the United States of George Floyd, a Black man, at the hands of a police officer.

Berlin’s BVG said that the “Mohrenstrasse” metro station – literally Moor Street, using the medieval term for people from North Africa, would be renamed after another nearby street, the Glinkastrasse, named after 19th century Russian composer Mikhail Ivanovich Glinka.

The station, a few hundred metres from the Brandenburg Gate at the very centre of Berlin, has born a string of names since it was opened in 1908. It acquired its present name in 1991.

Though the word “mohr” is no longer used in modern German, its history – linguists say it had acquired a derogatory flavour by the 18th century – have caused complaints over its use in some street names.

Last month, unidentified activists taped over the station’s entrance, temporarily naming it “George Floyd Street”.

“Out of respect for the sometimes controversial debate about the street name, BVG has decided not to use it to name the metro station any longer,” it said. “BVG rejects all forms of racism and discrimination.”

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Business

Oil falls below $43 on virus fears, still heads for weekly gain

SEOUL/LONDON (Reuters) – Oil fell below $43 a barrel on Friday as a resurgence of coronavirus cases raised concern that fuel demand growth could stall, although crude was still headed for a weekly gain on lower supply and wider signs of economic recovery.

The United States reported more than 55,000 new coronavirus cases on Thursday, a new daily global record for the pandemic. The rise in cases suggested U.S. jobs growth, which jumped in June, could suffer a setback.

“If this trend continues, oil demand in the region is at risk,” said Louise Dickson of Rystad Energy.

Brent crude LCOc1 was down 54 cents, or 1.3%, at $42.60 a barrel by 1210 GMT, and U.S. West Texas Intermediate (WTI) crude CLc1 fell 53 cents, or 1.3%, to $40.12.

“The fragile U.S. economic rebound is at risk of being undone by the latest surge in new infections,” said Stephen Brennock of oil broker PVM.

Both benchmarks rose more than 2% on Thursday, buoyed by strong U.S. June jobs figures and a drop in U.S. crude inventories. [EIA/S] Brent is still on track for a weekly gain of more than 5%.

Signs of economic recovery, and a drop in supply after a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, have helped Brent more than double from a 21-year low below $16 reached in April.

Boosting recovery hopes, a private survey showed on Friday that China’s services sector expanded at the fastest pace in over a decade in June.

OPEC oil production fell to its lowest in decades in June [OPEC/O] and Russian production has dropped to near its OPEC+ target.

The bankruptcy filing of U.S. shale pioneer Chesapeake Energy also supported prices by raising expectations production will decline, JBC Energy said in a report.

Gasoline demand will be closely watched as the United States heads into the July 4 holiday weekend.

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Business

COVID recovery vs COVID reality

LONDON (Reuters) – World shares inched towards a four-month high on Friday and industrial bellwether metal copper was set for its longest weekly winning streak in nearly three years, as recovering global data kept nagging coronavirus nerves at bay.

The market rally fuelled by record U.S. jobs numbers had largely blown itself amid a spike in U.S. COVID cases, though the fastest expansion in China’s services sector in over a decade and more stimulus ensured optimism remained.

Chinese shares had charged to their highest level in five years [.SS], helping the pan-Asian indexes to 4-month peaks, so the sight of European markets stalling early on took some traders by surprise.

Currency and commodity markets also had a subdued feel after an otherwise strong week for confidence-sensitive stalwarts such oil, copper </MCU3=LX>, sterling and the Australian dollar, which all struggled on Friday.

“I think infection rates and fears of localised lockdowns have doused some of the enthusiasm,” said Societe Generale strategist Kit Jukes.

“We have three elements now; vaccine hopes, decent data in most places but also the return of infection rates which can make you nervous.”

Against a basket of currencies, the dollar rose slightly in early London trading. It was up less than 0.1% at 97.306 and still firmly on track for its biggest weekly fall since the first week of June.

The euro was down at $1.1226 and though it gained against the safe Swiss franc it fell versus the sometimes commodity-driven Norwegian crown.

S&P 500 futures were down 0.2% but volumes were lower than usual due to a U.S. markets holiday on Friday for Independence Day.

U.S. nonfarm payrolls surged by 4.8 million jobs in June, above the average forecast of 3 million jobs in June, thanks to rises in the hard-hit hospitality sectors.

But economists noted there were caveats to the upbeat headline figures.

The number of permanent job losers continued to rise, increasing by 588,000 to 2.9 million in June while the unemployment rate remains a chunky 7.6 percentage points above its February level. A Deutsche Bank analysis put the U.S. unemployment rate behind all its developed market peers barring Canada.

The recovery also faces more headwinds as a surge of new coronavirus infections prompts U.S. states to delay and in some cases reverse plans to let stores reopen and activities resume.

More than three dozen U.S. states saw increases in COVID-19 cases, with cases in Florida spiking above 10,000.

Nevertheless markets are largely overlooking the spikes, taking the view that overall the situation was still improving overall.

Ten-year German government bond yields are up 5 basis points this week and set for their biggest weekly rise in a month, though they nudged down on Friday to -0.44%. Riskier Italian yields fell to 1.26% as well though, which is their lowest since late March. [GVD/EUR]

Oil prices also eased after an otherwise solid week. Brent crude fell 0.65% to $42.86 a barrel while U.S. crude dropped 0.66% to $40.38 a barrel. Both were around $25 this time two months ago.

Copper prices were poised for a seventh consecutive weekly gain, their longest winning streak in nearly three years, despite a slight easing on the day after top supplier Chile had assured traders about supply.

Three-month LME copper was hovering at $6,040 a tonne, more than $1,500 up from lows it ploughed to in March. [/MET/L]

“The one issue that hangs over all the markets is will we see a surge in secondary infections that will trigger a second wave of national rather than regional shutdowns?” Malcolm Freeman, director of Kingdom Futures, wrote in a note.

(GRAPHIC: China recovery – here)

(GRAPHIC: COVID-19 in U.S. – here)

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Business

Oil falls as virus resurgence fears weigh on fuel demand recovery

SEOUL (Reuters) – Oil prices eased on Friday, reversing earlier gains, as the resurgence of the coronavirus globally and in the United States, the world’s largest oil consumer, stoked worries that a fuel demand recovery could stall.

Brent crude LCOc1 futures were down 29 cents, or 0.7%, at $42.85 a barrel as of 0339 GMT, and U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 31 cents, or 0.8%, to $40.34 a barrel.

Both benchmarks rose more than 2% on Thursday, buoyed by stronger-than-expected U.S. jobs data and a fall in U.S. crude inventories. For the week, Brent is up 4.4% and WTI is up 4.8%.

Increases in the daily cases of the coronavirus, however, globally and in the United States pressured prices. New U.S. COVID-19 cases rose by more than 50,000 on Thursday, setting a record for a third consecutive day, according to a Reuters tally.

“Crude oil prices are notoriously fickle when it comes to oscillations in global sentiment,” said Dimitri Zabelin, analyst at DailyFX.

Should the number of coronavirus cases continue to grow and increase the need to take stronger measures to stem the spread of the virus, the weakened growth implications of such policies could weigh on crude oil prices, Zabelin said.

“The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery,” ANZ Research said in a note.

Gasoline demand will be closely watched as the United States heads into its July 4 holiday weekend when many Americans are expected to hit the road

“The recovery in gasoline demand will plateau until the U.S. economy improves,” ANZ Research added.

U.S. gasoline stocks USOILG=ECK rose by 1.2 million barrels in the week to June 26, according to data from the Energy Information Administration released on Wednesday.

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Business

Asian stocks set to follow U.S. jobs rally, China in focus

NEW YORK (Reuters) – Asian stocks were likely to track a firmer Wall Street session on Friday after strong U.S. jobs data although growing Sino-U.S. tensions and a worrying surge in coronavirus cases is likely to cap gains.

Japan’s Nikkei 225 futures rose 0.45% and Australia’s S&P/ASX 200 futures climbed 0.58%.

E-mini futures for the S&P 500 rose 0.14%.

“While June data reflected a big improvement in the U.S. labor market, the recent sharp acceleration in new virus cases plus the prospect of an end to unemployment benefits by the end of July are two big layers of uncertainty,” said NAB Markets analyst Rodrigo Catril, adding that the uptick in U.S. cases could mean extended headwinds for the labor market.

Wall Street ended Thursday higher following a record increase in payrolls and a decline in unemployment. U.S. markets are closed on Friday in observance of Independence Day.

However, investor focus is shifting to worsening strains between China and the United States.

More than 75 U.S. members of congress sent a letter to the President Donald Trump urging him to take make a formal determination on whether China’s treatment of Muslim Uighurs and other groups constitutes an atrocity.

The U.S. State Department also warned American companies including Amazon.com Inc, Walmart Inc and Apple Inc to check their supply chains and ensure they are not doing business with entities linked to alleged human rights abuses against Uighurs in China’s Xinjiang province.

Separately, Congress passed legislation seeking to punish banks that do business with Chinese officials who implement Beijing’s draconian new national security law on Hong Kong.

MSCI’s gauge of stocks across the globe gained 0.92%. The Dow Jones Industrial Average rose 0.36%, the S&P 500 gained 0.45% and the Nasdaq Composite added 0.52%.

The positive economic data also pushed oil prices higher.

Brent crude futures settled at $43.14 a barrel, rising $1.11, or 2.6%. U.S. West Texas Intermediate (WTI) crude futures settled at $40.65 a barrel, up 83 cents, or 2.1%.

Investors still embraced the safe-haven dollar and gold, which usually rise when risk appetite declines, as an acceleration in new COVID-19 cases across the country prompted fresh restrictions.

The dollar index rose 0.058%, with the euro up 0.01% to $1.1239.

The Japanese yen weakened 0.02% versus the greenback at 107.53 per dollar, while sterling last traded at $1.2468, up 0.02% on the day.

Spot gold rose 0.4% to $1,777.04 per ounce

U.S. Treasury yields ended the day lower ahead of the July 4 long weekend, with the benchmark 10-year yield fell 1.1 basis points at 0.6709%.

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Oil falls as growing coronavirus cases stoke fuel demand worries

SEOUL (Reuters) – Crude prices fell on Friday as the resurgence of the coronavirus globally and in the United States, the world’s largest oil consumer, dimmed the prospects of fuel demand recovery.

Brent crude LCOc1 futures were down 37 cents, or 0.9%, at $42.77 a barrel as of 0042 GMT, and U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 34 cents, or 0.8%, to $40.31 a barrel.

Both benchmarks rose more than 2% on Thursday, buoyed by stronger-than-expected U.S. jobs data and a fall in U.S. crude inventories. For the week, Brent is up 4.3% and WTI is up 5.6%.

Increases in the daily cases of the coronavirus, however, globally and in the United States pressured prices. New U.S. COVID-19 cases rose by more than 50,000 on Thursday, setting a record for a third consecutive day, according to a Reuters tally.

“The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery,” ANZ Research said in a note.

“The recovery in gasoline demand will plateau until the U.S. economy improves,” it said.

Gasoline demand will be closely watched as the United States heads into its July 4 holiday weekend as many Americans are expected to hit the road.

U.S. gasoline stocks USOILG=ECK rose by 1.2 million barrels in the week to June 26, according to data from the Energy Information Administration released on Wednesday. [EIA/S]

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Dollar in narrow range as U.S. virus cases grow

TOKYO (Reuters) – The dollar was hemmed into a narrow range on Friday, supported by safe-haven flows as a resurgence of the coronavirus in the United States discouraged some investors from taking on excessive risk.

The yuan was stable in offshore trade before data on China’s services sector, but investors may avoid taking big positions due to worries about diplomatic friction between Washington and Beijing over civil liberties in Hong Kong.

The U.S. economy added more jobs than expected in June, data showed on Thursday, but reaction in the currency market has been muted because another spike in coronavirus infections threatens to once again put the breaks of economic activity.

“New infections in the United States have been on an uptrend since June,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities.

“The market is leaning more toward buying the dollar, particularly against emerging market currencies, because the dollar is considered the safest asset around.”

Against the euro EUR=D3, the dollar was quoted at $1.2395 on Friday in Asia.

The dollar held steady at 0.9469 Swiss franc CHF=D3 on Friday after three straight days of gains.

The British pound GBP=D3 traded hands at $1.2471.

The dollar was little changed at 107.50 yen JPY=EBS.

A wave of coronavirus infections has prompted the halting of or back-pedalling on plans to reopen economic activity in several U.S. states after months of strict lockdowns.

Officials are also taking steps to curtail activity during the extended Independence Day holiday weekend starting on Friday.

Trading in currency markets on Friday may be subdued before the U.S. holiday, but analysts say sentiment favours more gains in the dollar as investors turn cautious.

Relations between the United States and China are also in focus.

The U.S. Senate unanimously approved legislation on Thursday to penalize banks doing business with Chinese officials who implement Beijing’s new national security law for Hong Kong, raising the chances of further friction between the world’s two- largest economies.

In the offshore market, the yuan CNH=D3 was little changed at 7.0732 per dollar.

The Australian dollar AUD=D3 held steady at $0.6917 on Friday before data expected to show a sharp rebound in retail sales in May.

Across the Tasman Sea, the New Zealand dollar NZD=D3 traded at $0.6509.

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