The cure must not be worse than the disease

While new coronavirus cases are plateauing, although not yet declining significantly, countries in Europe are beginning to judge the economic pain wreaked by Covid-19 containment measures to be worse than the infection itself and are shifting focus slowly but surely towards revitalising their economies.

A lifting of lockdowns - however gradual they may be - will result in a rise in economic activity from a very low base, so quarter-on-quarter GDP growth is likely to be positive in Q3. Downside protection amid 'gloomy economists' and irrational markets Yet, with social distancing set to persist, activity will be slow to recover and there is still risk that Q3 could negatively surprise markets, triggering a change in sentiment. Lockdowns also may need to be reintroduced if and when hospitals look like they will be overwhelmed again, and markets have yet to price in this key risk. ...