Month: April 2020

Virus Update

The number of tests suddenly doubled to more than 300k yesterday. Let’s see what happens…If 20-25% of tests are positive (last 27 days average), it would translate into daily new cases jumping above 60k in the next 5 days or so.

US medical device industry aims for 25 million tests by the end of April, trade group says

“If testing 200,000 to 300,000 people per day is the requirement, we will try our best to meet that demand.” (…)

Currently, the US is testing about 150,000 people a day and more than 4.1 million Americans have been tested, according to the Covid Tracking Project, a research portal launched by magazine The Atlantic. (…)

Which, btw, is the source for the stats charted up there.

More testing is rather timely given that

There is evidence that public worry has leveled off or is even beginning to moderate. A Gallup analysis of trend data collected through April 12 concluded: “Americans Less Pessimistic About COVID-19 Situation,” and data updated since that article was published show optimism is continuing to increase. As many Americans now say the coronavirus situation in the U.S. is getting better as say it is getting worse. A trend compilation by FiveThirtyEight also shows a definite drop in the percentage of Americans “very” concerned about getting infected. And new Gallup data show that Americans are modestly less likely to worry about hospital capacity than they were the prior week.

• Study Raises Questions About False Negatives From Quick COVID-19 Test
• Spain reported the most new coronavirus cases and fatalities in almost a week, a day after the government secured parliamentary approval to extend a state of emergency through May 9.
• Singapore confirmed an additional 1,037 cases of coronavirus cases with the majority coming from foreign worker dormitories. This compares with 1,016 cases the day before. Initially seen as a global model for how to contain the pandemic, Singapore now has the most reported infections in Southeast Asia as cases among foreign laborers living in densely packed dormitories surged.
• Coronavirus study points to vast number of cases under the radar in China
• New Study Shows Nearly 9 in 10 Covid-19 Patients on Ventilators Don’t Make It

A mysterious blood-clotting complication is killing coronavirus patients Once thought a relatively straightforward respiratory virus, covid-19 is proving to be much more frightening

(…) One month ago when the country went into lockdown to prepare for the first wave of coronavirus cases, many doctors felt confident they knew what they were dealing with. Based on early reports, covid-19 appeared to be a standard variety respiratory virus, albeit a contagious and lethal one with no vaccine and no treatment. They’ve since seen how covid-19 attacks not only the lungs, but also the kidneys, heart, intestines, liver and brain.

Increasingly, doctors also are reporting bizarre, unsettling cases that don’t seem to follow any of the textbooks they’ve trained on. They describe patients with startlingly low oxygen levels — so low that they would normally be unconscious or near death — talking and swiping on their phones. Asymptomatic pregnant women suddenly in cardiac arrest. Patients who by all conventional measures seem to have mild disease deteriorating within minutes and dying at home.

With no clear patterns in terms of age or chronic conditions, some scientists hypothesize that at least some of these abnormalities may be explained by severe changes in patients’ blood. (…)

Autopsies have shown some people’s lungs fill with hundreds of microclots. Errant blood clots of a larger size can break off and travel to the brain or heart, causing a stroke or heart attack. On Saturday, Broadway actor Nick Cordero, 41, had his right leg amputated after being infected with the novel coronavirus and suffering from clots that blocked blood from getting to his toes. (…)

“The problem we are having is that while we understand that there is a clot, we don’t yet understand why there is a clot,” Kaplan said. “We don’t know. And therefore, we are scared.” (…)

Although there was no consensus on the biology of why this was happening and what could be done about it, many came to believe the clots might be responsible for a significant share of U.S. deaths from covid-19 — possibly explaining why so many people are dying at home.

In hindsight, there were hints blood problems had been an issue in China and Italy as well, but it was more of a footnote in studies and on information-sharing calls that had focused on the disease’s destruction of the lungs. (…)

“One of the theories is that once the body is so engaged in a fight against an invader, the body starts consuming the clotting factors, which can result in either blood clots or bleeding. In Ebola, the balance was more toward bleeding. In covid-19, it’s more blood clots,” he said.

A study published in JAMA on Wednesday found that a large number of covid-19 patients admitted to New York State’s largest health system came in with blood test readings that indicated clotting problems.

And a Dutch study published April 10 in the journal Thrombosis Research provided more evidence the issue is widespread, finding 38 percent of 184 covid-19 patients in an intensive care unit had blood that clotted abnormally. The researchers called it “a conservative estimation” because many of the patients were still hospitalized and at risk of further complications.

Early data from China on a sample of 183 patients showed more than 70 percent of patients who died of covid-19 had small clots develop throughout their bloodstream.Although acute respiratory distress syndrome still appears to be the leading cause of death in covid-19 patients, blood complications are not far behind, said Behnood Bikdeli, a fourth-year fellow at Columbia University Irving Medical Center, who helped anchor a paper about the blood clots in the Journal of The American College of Cardiology.

“My guess is it’s one of the top three causes of demise and deterioration in covid-19 patients,” he said. (…)

“There’s lots of speculation,” Krumholz said. “That’s one of the frustrating things about this virus. We’re in a lot of darkness still.”

Shanghai Offers City-Wide Virus Testing as China Seeks to Reopen

Companies and individuals in Shanghai can book the nucleic acid tests at their own expense in designated hospitals and clinics, according to the city government’s statement on Weibo. The tests will be conducted on a voluntary basis, aimed at helping companies and schools resume operations.

Similar efforts are likely to be rolled out nationwide after Chinese Premier Li Keqiang called at a Wednesday meeting for large-scale nucleic acid and antibody testing to better prevent and control the epidemic. (…)

• The World Health Organization said there are 83 coronavirus vaccines in development globally, with six candidates — half of them in China — already in human trials, as drugmakers race to find a cure for the deadly pathogen. That’s an improvement from April 13, when the WHO said there were 70 vaccines in development, with three candidates in human trials.

Trump Says Coronavirus ‘Might Not Come Back at All’ in Fall

(…) “We’re going to be watching for it. But it’s also possible it doesn’t come back at all,” Trump said. If Covid-19 does return, it “won’t be coming back in the form that it was” but in “smaller doses we can contain.”

Asked how he could be certain, Trump said, “I didn’t say it’s not. I said if it does, it’s not going to come back on anything near what we went through.” (…)

“We will have coronavirus in the fall. I am convinced of that because of the degree of transmissibility that it has,” said Anthony Fauci, the task force’s top infectious disease expert. “What happens with that will depend on how we’re able to contain it when it occurs.” (…)

• President Donald Trump’s handling of the coronavirus pandemic and the economic collapse has shaken voters’ confidence in him, with the percentage of undecided voters more than doubling in the last two weeks. Former Vice President Joe Biden, the presumptive Democratic nominee, is also seeing voters take a second look at their support. With his campaign limited to a few livestream events a week, he hasn’t been able to capitalize on Trump’s newfound weakness. Three weeks ago, only 5% of voters overall were undecided in the 2020 race. That number has jumped to 12%, and 16% in one Fox News poll, as voters appear to find both candidates wanting during a national emergency.
• US virus official says he was demoted after drug disagreement Rick Bright claims the Trump administration put politics ahead of saving lives

The craze for Trump’s chloroquine COVID-19 remedy is dying out Two new data points released in recent days might well end the craze completely.

The two latest developments include a study of cases at Veterans Affairs Department hospitals showing that COVID-19 patients who received hydroxychloroquine died at higher rates than those who didn’t receive it.

The second development is an advisory from the National Institutes of Health recommending against the use of hydroxychloroquine in conjunction with the antibiotic azithromycin in COVID-19 cases. The advisory carries the code A-III, meaning that it’s a “strong recommendation” against, based on “expert opinion.” The NIH cites the drug combination’s “potential for toxicities.” (…)

• Fox News hosts go mum on the covid-19 drug they spent weeks promoting In the past week or so, Trump has all but stopped talking about hydroxychloroquine. And so have Fox News’s hosts.

PANDENOMICS

• Americans’ Confidence in Fed Chair Hits 15-Year High
• US business groups seek protection from coronavirus lawsuits Companies worry about their legal risks as they begin to contemplate reopening
• Chancellor Angela Merkel and coalition leaders sealed an accord to temporarily reduce value-added tax for restaurants and increase the amount of money paid as state wage support as part of a seven-point plan to fine-tune the government’s crisis response. The agreement came after almost eight hours of wrangling in the chancellery in Berlin. Meanwhile, the number of cases in Germany rose for the second time in five days.
• German Chancellor Angela Merkel called for a Europe-wide economic stimulus program to be financed by the European Union’s budget, making a national appeal that helping its partners would be good for Germany.
• China’s Uneven Reopening Shows Fear Might Hold Back Economies Going back to work seems less scary than shopping or eating out.
• China Looks at How it Could Expedite U.S. Farm Goods Purchases

Eurozone’s PMI Points to –7.5% GDP

The flash IHS Markit Eurozone Composite PMI plummeted to an all-time low of 13.5 in April, down from a prior record low of 29.7 in March (…). By comparison, the lowest reading seen during the global financial crisis was 36.2, reached in February 2009. (…)

The service sector bore the brunt of the impact from the lockdown measures, with the business activity index sliding from 26.4 in March to just 11.7 in April. (…)

Manufacturing also saw a record fall in production, the output index slumping from 38.5 in March to 18.4*, with many non-essential businesses having closed and others reporting either dramatically reduced demand or being constrained by shortages of staff and inputs. Supply chain delays hit the highest ever reported.

Overall inflows of new business fell at the steepest rates yet recorded in both manufacturing and services, resulting in a record depletion of overall backlogs of work. An unprecedented fall in service sector backlogs was accompanied by a near all-time record reduction in manufacturing. (…)

Average prices charged for goods and services fell at the sharpest rate since June 2009 as companies increasingly offered discounts to boost sales in the face of slumping revenues. Such discounting was especially widely reported in the service sector, where average rates charged fell at a record pace. Prices charged for goods declined at the fastest rate since November 2009.

Price cuts were often facilitated by lower costs. Average input costs fell to an extent not seen since July 2009. However, while a record fall in service sector input prices was recorded, largely linked to lower payroll costs, factory input prices fell at a reduced rate (albeit remaining among the fastest since 2016), in part reflecting some upward price pressures emanating from supply shortages.

By region, the unprecedented scale of the collapse was broad-based, with composite flash PMI output indices hitting all-time lows of 17.1 and 11.2 respectively in Germany and France (down from 35.0 and 28.9 in March), while the rest of the region saw the composite PMI slide from 25.0 to 11.5.

Japan’s PMI Points to –10% GDP in Q2

PMI data for Japan tell us that the crippling economic impact from the global coronavirus pandemic intensified in April. Furthermore, the data show us the initial impact of Japan’s lockdown. The survey was conducted between 7 and 21 April. The 7th was the day Prime Minister Abe announced a state of emergency in some parts of Japan, although this was upgraded to a nationwide state of emergency on the 16th and extended the lockdown to the whole country.

(…) Overall, GDP looks set to decline at an annual rate in excess of 10% in the second quarter. The current state of emergency will stay in place until 6 May, although given Japan’s lagged response relative to other parts of the world, one would expect this to be extended, meaning the harsh economic effects are likely to drag out further.

The U.S. flash PMI is out later this morning. From Goldman Sachs yesterday:

Globally, we expect real GDP to contract by 2.7% this year, making 2020 weaker than the year following the Global Financial Crisis. We expect the global recession to be front-loaded, with a recovery in H2, assuming that the physical constraints on economic activity gradually loosen towards the end of Q2.

In the US, we expect -34% qoq annualized real GDP growth in Q2 before a gradual recovery in H2 in which a bit more than half the near-term output decline is made up by year end, leaving full-year 2020 growth at -5.7%. We see unemployment reaching 15% in Q3 and core PCE inflation rising to only 1¼% by year-end 2020.

With this background, GS looks at 2021 and sees U.S. GDP up 5.5%, an unemployment rate of 7.4% and S&P 500 EPS jumping from $110 (consensus $137) to $170 ($171). I have some doubt on such a rebound with the expected weak consumer and the virus only potentially controlled.

Mnuchin Says ‘We Need to Spend What It Takes’ to Overcome Crisis Treasury Secretary Steven Mnuchin said he is sensitive to concerns about rising federal debt but emphasized the urgency of helping the economy during the coronavirus pandemic.

Paying Americans Not to Work

Much of the harm from the coronavirus is unavoidable, but it would be nice if politicians didn’t compound the damage by ignoring the laws of economics. The worst blunder so far on that score is the $600 increase in federal jobless benefits that is already undermining the economic recovery. (…)

Employees say they’ll take the unemployment check for as long as they can make more money by not working. One internal Trump Administration analysis estimates that this work disincentive applies to millions of Americans. (…)

This means that no matter when governors announce their states’ reopenings, many businesses will still have to wait until July 31—when the extra $600 expires—to be able to afford the workers they need to reopen.

The question now is whether the Trump Administration will learn from its negotiating mistake. Democrats will try to extend the $600 for another few months, and then a few more after that, as they describe anyone who disagrees as heartless. Republicans who cower at that argument without fighting back will hurt their own electoral prospects as the jobless rate will stay higher for longer and the recovery will take that much longer to take hold. (…)

Bail Out the States? Any more federal aid should come with very strict conditions.

(…) President Trump has signaled he’s open to a state bailout because, well, he’s open to anything these days. But Senate Majority Leader Mitch McConnell caused a stir Wednesday when he said states should consider bankruptcy rather than get a bailout. He cited the Chapter 9 workouts of cities like Detroit.

But some doubt that state bankruptcy is constitutional under the Contracts Clause, and any Chapter 9 filing would be challenged in court. Mr. McConnell’s larger point is that states shouldn’t get more no-strings cash. Private companies that borrow from the Fed and Treasury have to meet stiff conditions, including limits on compensation, and the same should apply to state governments. (…)

European Central Bank to Accept Some Junk-Rated Bonds as Loan Collateral This is the latest ECB action to ensure eurozone banks can access central bank cash during the coronavirus pandemic.

Oil Price Rout to Hit U.S. Regional Economies Wyoming, Alaska, Oklahoma, North Dakota and West Virginia could be hurt more than Texas, which has diversified

Rating agencies put 1,000 CLO slices on review for downgrade Economic effects of coronavirus push up risks for leveraged loan investors

TECHNICALS WATCH

• 13/34–Week EMA Trend (CMG Wealth):

• Volume Demand vs. Volume Supply

This is from Ned Davis Research via CMG. The yellow highlights shows the current signal.

And this is Lowry’s Research chart:

Meanwhile, this dry powder is appealing (via Bloomberg):

But, trends are not friendly just yet:

Credit Suisse Girds for Soured Loans as Profit Rises Credit Suisse joined U.S. banks in sharply raising the cash it holds against potential losses from borrowers affected by the coronavirus shutdown, it is the first major European bank to report first-quarter earnings.

The bank, Switzerland’s second-largest by assets, set aside 568 million Swiss francs ($584 million) to cover potential loan losses from global corporations and Swiss borrowers who might struggle to bounce back following the shutdown. First-quarter 2019 provisions were 81 million francs. (…)

European banks are expected to take lower provisions than their American rivals because they follow different accounting rules and have been urged by regulators to look beyond short-term risks. However, Credit Suisse uses U.S. accounting rules. (…)