Virus Update

• Global cases top 99,000; death toll 3,386
• Iran, the worst affected country in the Middle East, reported 1,234 new cases, taking the total to 4,747. The country reported 17 more deaths, taking total fatalities to 124.
• In the United States, at least 57 new cases of coronavirus were confirmed as the virus struck for the first time in Colorado, Maryland, Tennessee and Texas, as well as San Francisco in California. Some 230 people have been infected in total, and 12 have died.
• A ship with 125 people on board was blocked in the port of Naples after nine staff members showed symptoms that could be potentially linked to coronavirus, Ansa reported, citing unidentified officials from the port authority.
• The number of confirmed cases in Germany rose to 534 from 400, while those in Spain jumped to 345 from 261. Belgium reported 59 new cases.
• France’s Haut-Rhin department has 81 confirmed cases of coronavirus from 10 two days ago, and the number is expected to increase.
• Three UBS employees in Switzerland have tested positive for the coronavirus, according to the bank. An employee at a UBS Geneva office tested positive for the coronavirus, following which the bank sent home the employee’s team members and employees working in the surroundings. Two employees in Ticino in southern Switzerland also tested positive.
• The Norwegian military quarantined 1,300 personnel in a base in the northern part of the country after a case of coronavirus was confirmed among them.
• Singapore has confirmed 13 new cases, its largest daily increase yet.
• Cameroon’s government confirmed the country’s first coronavirus case after a 58-year-old French citizen tested positive. Slovakia and Serbia also reported their first infections.
• The Vatican temporarily closed its clinic after one patient tested positive for coronavirus. Vatican City is home to about 600 people, including Pope Francis.
• Samsung Electronics Co. is suspending production at its key Gumi smartphone factory for the third time after discovering another coronavirus infection among its employees, prompting the shift of some of that plant’s output to Vietnam.
• Note this is an incomplete list…

An increasing number of people faced a new reality as many were asked to stay home from work, schools were closed, large gatherings and events canceled, stores emptied of staples like toiletries and water, and face masks a common sight.

South Korea has conducted 140,000 tests in a short time that have uncovered about 5,700 infections.

Japan, meantime, had tested fewer than 3,000 people as of March 3, finding 317 infections.

Most countries follow WHO guidelines, which limit the scope of tests by establishing criteria for suspected cases. (…) When Italy strayed from the agency’s testing recommendations, its case load swelled, rising to more than 3,000 as of Thursday — the most outside Asia. Health authorities there counted hundreds of people who had the virus with hardly any symptoms.

China may have ‘no new virus cases’ outside Hubei epicentre by mid-March

A senior researcher involved in efforts to contain the coronavirus epidemic is predicting there may be no more new cases in mainland China, except for the Hubei province epicentre, by mid-March, but the death of a patient after being discharged from hospital has added a worrying new aspect to the spread of Covid-19. (…)

“We have analysed the infections trend. So far, the daily infections in places other than Hubei have almost gone down to zero since late February,” Zhang told the official People’s Daily.

“According to our analysis of the statistics, we expect cities other than Wuhan in Hubei province will be basically free of [new] coronavirus patients in the middle of March. The hope is that Wuhan won’t have daily new cases in late March.”

Zhang, who is also director of the Tianjin University of Traditional Chinese Medicine, said people in other parts of China might be able to remove their masks in April, but that did not mean the coronavirus would be completely gone and there could still be cases, including among people arriving from overseas.

China’s National Health Commission reported 139 new cases on Thursday, up from 119 a day earlier, and 31 new deaths. Of the new infections, 134 were in Hubei and 131 in Wuhan. (…)

Shanghai-based news portal Thepaper.cn reported that another of the temporary facilities for coronavirus patients, Jiangan Fangcang Hospital, had issued an emergency notice on Wednesday saying more discharged patients had been readmitted after they fell ill again. The hospital said it would conduct antibody tests on all patients before they were discharged from Thursday to make sure they had fully recovered.

On Monday, Wuhan closed the first of its makeshift hospitals after discharging the last 34 of its patients. (…)

Is this true? This next piece suggests it could be (my emphasis):

• The WHO sent 25 international experts to China and here are their main findings after 9 days

The WHO has sent a team of international experts to China to investigate the situation, including Clifford Lane, Clinical Director at the US National Institutes of Health. (…)

China can now produce 1.6 million test kits for the novel coronavirus per week. The test delivers a result on the same day. Across the country, anyone who goes to the doctor with a fever is screened for the virus: In Guangdong province, far from Wuhan, 320,000 people have been tested, and 0.14% of those were positive for the virus. (…)

The vast majority of those infected sooner or later develop symptoms. Cases of people in whom the virus has been detected and who do not have symptoms at that time are rare – and most of them fall ill in the next few days. (…)

Since the end of January, the number of new coronavirus diagnoses in China has been steadily declining (shown here as a graph) with now only 329 new diagnoses within the last day – one month ago it was around 3,000 a day. “This decline in COVID-19 cases across China is real,” the report says. The authors conclude this from their own experience on site, declining hospital visits in the affected regions, the increasing number of unoccupied hospital beds, and the problems of Chinese scientists to recruit enough newly infected for the clinical studies of the numerous drug trials. (…)

One of the important reasons for containing the outbreak is that China is interviewing all infected people nationwide about their contact persons and then tests those. There are 1,800 teams in Wuhan to do this, each with at least 5 people. But the effort outside of Wuhan is also big. In Shenzhen, for example, the infected named 2,842 contact persons, all of whom were found, testing is now completed for 2,240, and 2.8% of those had contracted the virus. In Sichuan province, 25,493 contact persons were named, 25,347 (99%) were found, 23,178 have already been examined and 0.9% of them were infected. In the province of Guangdong, 9,939 contacts were named, all found, 7,765 are already examined and 4.8% of them were infected. That means: If you have direct personal contact with an infected person, the probability of infection is between 1% and 5%. (…)

“China’s bold approach to contain the rapid spread of this new respiratory pathogen has changed the course of a rapidly escalating and deadly epidemic. In the face of a previously unknown virus, China has rolled out perhaps the most ambitious, agile and aggressive disease containment effort in history. China’s uncompromising and rigorous use of non-pharmaceutical measures to contain transmission of the COVID-19 virus in multiple settings provides vital lessons for the global response. This rather unique and unprecedented public health response in China reversed the escalating cases in both Hubei, where there has been widespread community transmission, and in the importation provinces, where family clusters appear to have driven the outbreak.”

“Much of the global community is not yet ready, in mindset and materially, to implement the measures that have been employed to contain COVID-19 in China. These are the only measures that are currently proven to interrupt or minimize transmission chains in humans. Fundamental to these measures is extremely proactive surveillance to immediately detect cases, very rapid diagnosis and immediate case isolation, rigorous tracking and quarantine of close contacts, and an exceptionally high degree of population understanding and acceptance of these measures.”

“COVID-19 is spreading with astonishing speed; COVID-19 outbreaks in any setting have very serious consequences; and there is now strong evidence that non-pharmaceutical interventions can reduce and even interrupt transmission. Concerningly, global and national preparedness planning is often ambivalent about such interventions. However, to reduce COVID-19 illness and death, near-term readiness planning must embrace the large-scale implementation of high-quality, non-pharmaceutical public health measures. These measures must fully incorporate immediate case detection and isolation, rigorous close contact tracing and monitoring/quarantine, and direct population/community engagement.”

Coronavirus Snarls Trans-Pacific Shipping and Ripples Through U.S. Business Congestion at Chinese ports and interrupted sailings have squeezed space on China-bound vessels and left an imbalance in shipping containers, especially the refrigerated ones used for farm products; “Everyone is fighting for containers. It’s cutthroat.”

(…) Containership operators have canceled nearly 60 trans-Pacific sailings to the ports of Los Angeles and Long Beach, Calif., in the first quarter and more than 110 to all of North America. Normally there are about 200 sailings of container ships across the Pacific a month.

That means fewer ships are available to make the return journey east, and the normal turnover of containers has stalled. (…)

A record two million containers of seaborne shipping capacity was idled in late February, according to Alphaliner, a Paris-based marine data provider. That is more than the 1.5 million containers of capacity idled in 2009 at the height of the financial crisis. (…)

The number of idled container ships in the Pacific region has reached 370, compared with about 230 at the beginning of the year, according to Jonathan Roach, an analyst at Braemar ACM Shipbroking. He said that, in addition to canceled sailings due to trade disruptions, about 100 of the ships have been pulled out of service to retrofit their exhaust systems to comply with new regulations.

Some shipping lines have levied surcharges as high as $2,000 per refrigerated container on voyages to China and other Asian destinations, roughly doubling the cost to ship a container of oranges. Other lines have warned exporters they will be saddled with costs if congestion at Chinese ports forces ocean carriers to divert cargo to other countries. (…)

There are signs that broader trade flows could start to pick up: Chinese factories are resuming production as the spread of the virus abates in that country, and port congestion is easing as China’s dockworkers, cargo handlers and truck drivers return to work. Meat and citrus groups say Chinese demand for their products remains strong, especially as trade tensions ease between the U.S. and China. But it will be weeks before the full impact on U.S. factories and farms is clear. (…)

Since it takes most manufactured goods 25 to 30 days to come from Asia by sea, he said the company didn’t expect to see the full impact of the disruption on U.S. rail volumes until later in March or April. The most immediate impact is on trucking companies that ferry goods to and from ports to warehouses and rail connections. (…)

Coronavirus Piles More Pressure on the Struggling Car Industry This year is shaping up to be the toughest for manufacturers since 2009 as the epidemic hits auto sales while they’re down

(…) Goldman Sachs on Thursday downgraded its forecast for 2020 global auto sales to a decline of 3.5%, from 0.3%. That would make the total effect of 2019 and 2020 similar to that experienced by the industry during the financial crisis in 2008 and 2009, which tipped some players into bankruptcy. (…)

On the brink: China’s bakers, bars and beauty spas struggle to survive coronavirus The coronavirus outbreak in China is pushing many small businesses to the brink, as efforts to stem its spread left usually bustling streets deserted and malls shut or empty.

Didi Chuxing was already struggling. Then came coronavirus Disruption yet another obstacle on Chinese ride-hailing app’s long road to profitability

Costco says coronavirus sparking surge in buying, can’t keep up with some demand

(…) Some of the frequently purchased items include bleach, bottled water, dry grocery items, sanitizing wipes, sanitizers and water filtration products.

“We’re getting deliveries daily, but still not enough given the increased levels of demand on certain key items,” Chief Financial Officer Richard Galanti told analysts, and added that shopping frequency has been off the charts.

Costco said its February comparable sales, on an adjusted basis, rose 11.7%, adding that concerns related to the virus outbreak had boosted comparable sales by about 3%. The company added the rise in traffic has been continuing into March. (…)

 Reservations for domestic flights and hotels in China are recovering from the virus-induced slump as people return to work across the nation, online travel company Tongcheng-Elong Holdings Ltd. said. Hotel bookings in the week to March 1 surged 40% from the previous week, while peak daily bookings for domestic flights soared 230% from the lowest level recorded in February, the company said.

Meanwhile in Europe:

From STR, we know that U.S. industrywide hotel RevPAR decreased 0.2% YoY during the week ended February 29, compared with flat over the last 4 weeks. However, Raymond James notes that hotel occupancy was down 1-2% industrywide in the U.S. and that group cancellations “increased rapidly towards the end of last week”. STR reports that occupancy in NYC fell 0.8% last week and is down 2.4% over the past 4 weeks.

U.S. GOING VIRAL?

Goldman Sachs designed a Coronavirus Consumer Activity Tracker and a Coronavirus Consumer Price Tracker to try to track the impact of the virus in the USA using data such as movie ticket sales, hotel occupancy rates and sporting event attendance. Through Feb. 29, the data suggests that “at least for now, consumers aren’t avoiding mass gatherings in response to the coronavirus news” and are not cutting back on spending if price activity is a decent guide.

EARNINGS WATCH

We now have 489 reports in and Q4’19 earnings are seen up 3.1%. Q1’20 estimates keep falling, however, and are now expected at +2.0% but don’t bet too much on that number.

THE MEANING OF CASHFLOW

The FOMC cut its benchmark rate 50 bps this week and many discount its impact. But the Fed is very much aware of corporate America’s high indebtedness, partly due to its interest rate policy. The Fed realized the strangling effect its tightening had in 2018 and wants to avoid that during this crisis.

The truth is that if you are even remotely sensitive to tourism, traveling and hospitality, you now understand what cashflow means. When nobody is buying your services and wares, there is actually no cash coming in, zero revenue, zero cash in the tilt, while you still have to pay labor, rent and interest.

At the end of 2019, S&P 500 companies had a debt/equity ratio of 0.9, a record outside of the Financial crisis. Smaller companies are even more indebted. Some 37% of the Russell 2000 companies are losing money before interest expense. Many of these are now, or soon will be experiencing empty cash registers. All this credit is owed to debtors and the Fed must be worried of a cascading effect in a long crisis.

MESSAGE TO HARRISON W.

Harrison, thank you very much for your donation. Very much appreciated. Strangely, the email address link always bounces back. Can you reach me again (edgeandodds [at] gmail.com) so I can send you a proper thank you note and the other perks coming with your donation. Denis.

Coronavirus Spreads World-Wide, Containment Is an ‘Unlikely Outcome’ More cases of the novel coronavirus were reported globally, from Australia to South Korea, as some health officials warned it would be impossible to fully contain the pathogen now that infections are spreading within communities.

On Thursday, Australian officials said there were now 52 confirmed cases of the virus, up from 41 a day earlier. Six people who tested positive had no history of overseas travel and four of those cases are associated with a nursing home in Sydney, including a 95-year-old who recently died—indicating that transmission among local residents is under way. The source of infection for three other cases is being investigated. (…)

Community transmission is a milestone for any disease and makes it more difficult for health officials given that the virus could be circulating among the general public. (…) “The biggest thing is the announcement of community transmission in various places,” said Siouxsie Wiles, an associate professor in microbiology at the University of Auckland in New Zealand. “That’s starting to change the picture quite a bit.” (…)

“I don’t think we’re at the peak, I think we’re at the beginning of the increase,” Ms. McIntyre said, noting that it could take up to two weeks for infected people to start showing symptoms. “There’s going to be some time delay in seeing the epidemic unfold.”

Virus Update

• Global cases at least 95,550; death toll 3,285
• Asian nations have pledged $38 billion in budget measures
• BOJ mulls new lending program, RBI pledges “proactive” approach
• Economists keep downgrading their forecasts for China’s economy

China on Wednesday reported an additional 31 coronavirus deaths by March 4, bringing the total to 3,012, with all of the newest fatalities coming from Hubei province, the original source of the outbreak. The country also reported an additional 139 confirmed cases of the virus, bringing the total to 80,409. Discharged patients climbed by 2,189 to 52,045. (see below)

Local authorities in another city in Hubei — the same province that Wuhan belongs to — reported on Feb. 22 that a 70-year-old man was infected by the virus but only showed symptoms 27 days later.

South Korea’s total tally of coronavirus cases within the nation exceeded 6,000 as of 4pm local time, according to the Health Ministry. Yonhap News reported the death toll rose to 40. The daily tally in the country, released every morning at 10am, showed a 3-day slowdown from Monday — with an increase of 438 for Wednesday, compared with 516 the previous 24 hours and 600 the day before that.

All schools in the Northshore School District, north of the city of Seattle, will be closed starting March 5 for 14 days as officials monitor the health situation. The outbreak in counties near Seattle is the most concentrated of the coronavirus clusters detected so far in the U.S.

Facebook Inc. said an employee in Seattle has been diagnosed with the coronavirus, the first known infection within the company as the virus continues to spread in the region. The employee, a contractor, was last in Facebook’s Stadium East office in Seattle on Feb. 21. The company alerted employees Wednesday night and said the Seattle office will be closed to all employees until March 9. Employees in Seattle are also being encouraged to work from home until the end of the month.

Separately, Microsoft Corp. became the largest employer in Washington state’s Puget Sound region to tell all workers to do their jobs from home if possible, until March 25, after King County made a similar recommendation to limit the spread of Covid-19.

An employee at HSBC’s London office has tested positive for the coronavirus, prompting an evacuation at the firm’s research department, which has been deep-cleaned and sanitized, according to a person familiar with the matter.

The number of cases in Germany rose by 87 to 349, the Robert Koch Institut said. The biggest cluster is in the country’s most populous state of North Rhine-Westphalia, where 175 people are infected. Belgium detected 27 more cases, bringing the total numbers of cases to 50, the country’s health ministry said.

Italy Preparing Stimulus Package of Almost 5 billion euros

Infections in Iran reached 3,513 with 107 deaths after 591 new cases were reported. A health ministry official said the outbreak has spread to all provinces and more than 23,000 people have been tested. The nation closed schools and universities until March 20, leading into a two-week holiday for the Iranian new year.

The novel coronavirus outbreak will cost the airline industry $63 billion to $113 billion in lost revenue from passengers this year, the International Air Transport Association said, revising a more conservative estimate issued last month.

‘Recovered’ Covid-19 patient dies as China reports more repeat cases

A 36-year-old man has died of respiratory failure in Wuhan, five days after being discharged from one of the makeshift hospitals built to contain the outbreak, according to a report by Shanghai-based news portal The Paper. (…)

The report was later removed…

Coronavirus Spread in China Slows Drastically But Doubt Remains

One of my points yesterday:

(…) At a World Health Organization briefing on Tuesday, infectious disease expert Maria Van Kerkhove said that about 1% of cases in China are asymptomatic at first, but 75% of those patients eventually develop symptoms.

This means that provinces not counting asymptomatic cases in their official tally are likely under-reporting their numbers. There’s some evidence of that: Chinese media outlet Caixin reported that Heilongjiang province in northern China had 104 asymptomatic infections which it did not add to its total of 480 confirmed cases on Feb. 25.

China does not release the number of asymptomatic infections in its daily nationwide tally, underscoring the uncertainty which remains over whether the outbreak is truly contained at its heart.

Image: Pantheon Macroeconomics (via Isabelnet)

Global Economy Is Gripped by Rare Twin Supply-Demand Shock The coronavirus is delivering a one-two punch to the world economy.

West Coast Shows the Damage Outbreak May Do to U.S. Businesses

(…) The district — packed with pricey restaurants, luxury shops and gleaming hotels — is usually a magnet for tourists and conference-goers. But with travel cooling and a string of conferences canceled in the last two weeks, some businesses are experiencing a sharp and sudden downturn. Shopper traffic is slow. Taxi drivers are sitting idle. Hotel demand is dwindling.

“It’s devastating,” said Anna Marie Presutti, general manager of the 533-room Hotel Nikko, which has seen its occupancy rate plunge from nearly 90% to just below 50%. “We’re experiencing what we experienced right after 9/11.”

While San Francisco has yet to have a confirmed case of the coronavirus, surrounding counties reported some of the country’s first instances of community transmission. That’s keeping tourists and even some residents at home — a phenomenon already starting to ripple around the country, hitting business owners and threatening broader damage to the economy. (…)

Laurie Thomas, owner of two restaurants in the Cow Hollow neighborhood and the director of the Golden Gate Restaurant Association, has seen as much as a 40% drop in reservations since last Thursday. “A 40% contraction is really significant in this business,” she said. (…)

“There’s just no one walking around,” said Jennifer Guckert, who works in the small shop that sells specialty teas and purple honey lavender macarons. “We barely had anyone in here today and the customers we had said most of their coworkers are working from home.” (…)

Thom Conboy, a high-end yacht salesman in Fort Lauderdale, Florida, said spring is typically when clients book yacht charters to the Mediterranean, but that’s been drying up because of virus fears. Superyachts, those 100 feet or longer, are especially sensitive to economic swings such as recessions and trade wars, Conboy said, so he’s nervous that he could also start losing sales of those vessels.

Jeffrey Starr, president of A-1 Limousine in Princeton, New Jersey, said his company usually has a busy-season boost for his drivers running people to airports. So far, “we haven’t seen the uptick,” he said. (…)

Raymond James is hosting a conference in Orlando this week. “Regarding coronavirus, most/all of our [restaurant] companies have yet to see a discernible impact on sales trends.” It always begins on the West coast…

At said conference, WMT said they have not yet seen any major supply chain impacts from the virus.

Fastest contraction in business activity since October 2013

February data signalled the first contraction of U.S. service sector business activity for four years. The decrease in output stemmed from only a fractional rise in client demand and a further contraction in new business from abroad as customers held back from placing orders amid global economic uncertainty and the coronavirus outbreak. As a result, business confidence remained historically subdued and employment growth slipped to the weakest since last November.

Efforts to attract and retain clients and a softer pace of input price inflation meanwhile led to a slower increase in output charges. The rate of selling price inflation eased to a three-month low.

The seasonally adjusted final IHS Markit US Services Business Activity Index registered 49.4 in February, unchanged from the ‘flash’ figure, but notably down from 53.4 seen at the start of the year. The contraction in output was only marginal overall, but was nonetheless the fastest in over six years. Firms attributed the decline to less robust domestic demand conditions and a further fall in export sales.

In line with a slower expansion in client demand, new business rose at only a fractional rate that was the softest in the current four month sequence of growth.

Reflecting the international impact of increased uncertainty was a further drop in foreign client demand, which led to the largest drop in new business from abroad since last November.

Subsequently, service providers expanded their workforce numbers at the slowest rate for three months. The marginal rate of job creation was below the series trend, with growth weighed down by subdued demand and reduced pressure on capacity following a contraction in backlogs of work.

Outstanding business decreased fractionally in February, representing the first fall since last October, as firms reported sufficient capacity to fulfil existing business requirements.

Meanwhile, service providers were slightly more upbeat regarding the outlook for output over the coming 12 months in February. Although still well below the series average (data collection for the series began in July 2012), the degree of optimism picked up to a nine-month high. Greater confidence was supported by hopes of an uptick in client demand and the expansion of available service lines.

Finally, inflationary pressures remained historically subdued midway through the first quarter as rates of input price and output charge inflation softened. The slower rise in selling prices was linked to some reports of challenging demand conditions and efforts to remain competitive and a softer increase in cost burdens. Furthermore, the rate of input price inflation was well below the series trend and the slowest for three months.

The IHS Markit Composite PMI Output Index* registered 49.6 in February, notably down from 53.3 posted at the start of the year. The decrease in overall output was the first for over six years.

New orders rose only fractionally, as both manufacturers and service providers noted subdued client demand. The expansion of new business was the slowest since data collection began in October 2009. Domestic demand supported the upturn, helping offset a further drop in new export orders.

Despite slower new order growth, firms continued to expand their workforce numbers, albeit at only a marginal pace. Meanwhile, backlogs of work fell amid reduced pressure on capacity.

Although relatively muted and well below levels seen early last year, business confidence picked up in February to reach a nine-month high based on hopes of an uptick in demand.

Finally, inflationary pressures across the private sector were subdued midway through the first quarter, as rates of increase in input prices and output charges eased to three-month lows.

Chris Williamson, Chief Business Economist at IHS Markit:

The US service sector took a knock from the coronavirus outbreak and growing uncertainty about the economic and political outlooks in February. The fall in the headline index measuring business activity levels was the second-largest seen since the global financial crisis over a decade ago, exceeded only by the brief slump in activity during the 2013 government shutdown. Combined with a weak manufacturing survey in February, the data are consistent with annualised GDP growth slipping from around 2% at the start of the year to just 0.7% midway through the first quarter.

Business sectors such as travel and tourism are reporting weakened activity due to the virus outbreak, most notably in terms of foreign visitors and overseas sales. However, other sectors such as financial services and business services are reporting virus-related hits to demand, suggesting a more broad-based weakening of demand across the economy, exacerbating the supply-shock that is constraining manufacturing.

Companies have meanwhile grown increasingly concerned about client spending and investment being curbed ahead of the presidential election. Political and economic uncertainty, the coronavirus outbreak and financial market turmoil all risk building into a cocktail of risk aversion that has severely heightened downside risks to the economy in coming months. Much will depend of course on the speed with which the virus can be contained and how quickly business can return to normal.

Strange PMI findings:

• Markit’s U.S. Services PMI sank from 53.4 to 49.4, a huge drop in itself, and in contraction area. It was unchanged from the flash figure of Feb. 21 which is based on data collected between Feb. 12-20 while the final PMI includes data up to Feb. 25.
• But the ISM Services PMI rose from 55.5 to 57.3 to a record in February.
• Markit’s Eurozone Services PMI improved a little in February, from 52.5 to 52.6 but was somewhat lower than the flash reading of 52.8. Solid growth was recorded in new domestic business. Data was collected between Feb. 12-20 (flash) and Feb. 12-21 (final).
• Markit’s UK Services PMI edged lower in February but remained comfortably above 50.0. Even Italy’s Services sector recorded the quickest increase in activity in 4 months.

The probable explanation for the divergence between Markit’s U.S. Services PMI and the ISM is that the ISM is more weighted towards larger companies and companies are not asked to exclude their foreign activities in their ratings. Markit’s panels are larger and wider in sizes and specifically require respondents to focus on U.S. activities.

Thus, the ISM February survey may have been helped by better readings in Europe per Markit’s Eurozone PMIs.

If that is true, then we must conclude that Markit’s February U.S. Services PMI is a closer reflection of the reality and that the U.S. economy slowed considerably in February, before the coronavirus actually began to hurt business.

Coronavirus Fears Hammer Europe’s Tourism Industry Thousands of people have canceled their trips to the region since the virus began to spread in Italy last month, drying up revenue for hotels, restaurants, nightclubs and conference planners across the continent.

Coronavirus Sparks Business-Tech Deployments Facing disruptions, companies green light new projects, most tied to remote work

House Passes $8.3 Billion Bill to Battle Coronavirus The House passed a roughly $8.3 billion emergency spending package for combating the coronavirus outbreak, sending the legislation to the Senate as lawmakers raced to respond to the quickly spreading outbreak.

Ray Dalio: My Thoughts About the Coronavirus

(…) in the US there will be much more testing happening over the next couple of weeks, which will dramatically increase the numbers of reported infected people, which will also probably lead to more severe reactions and greater social distancing controls.  I am told that the stresses on hospitals could become very large, which will make handling the cases of all patients more difficult. In short, I am told that we should expect much more serious problems ahead.

Reactions to the virus (e.g., “social distancing”) will probably cause a big short-term economic decline followed by a rebound, which probably will not leave a big sustained economic impact. The fact of the matter is that history has shown that even big death tolls have been much bigger emotional affairs than sustained economic and market affairs. My look into the Spanish flu case, which I’m treating as our worst-case scenario, conveys this view; so do the other cases. (…)

The actions taken to curtail business activities will certainly cut revenues until the virus and business activity reverse which will lead to a rebound in revenue. That should (but won’t certainly) lead to V- or U-shaped financials for most companies.  However, during the drop, the market impact on leveraged companies in the most severely affected economies will probably be significant. We will show you what that looks like shortly. My guess is that the markets will probably not distinguish well between those which can and cannot withstand well the temporary shock and will focus more on their temporary hit to revenues than they should and underweight the credit impact—e.g., a company with plenty of cash and a big temporary economic hit will probably be exaggeratedly hit relative to one that is less economically hit but has a lot of short-term debt.

Additionally, it seems to me that this is one of those once in 100 years catastrophic events that annihilates those who provide insurance against it and those who don’t take insurance to protect themselves against it because they treat it as the exposed bet that they can take because it virtually never happens. These folks come in all sorts of forms, such as insurance companies who insured against the consequences that we are about to experience, those who sold deep-out-of-the-money options planning to earn the premiums and cover their exposures through dynamic hedging if and when the prices get near in the money, etc. The markets are being, and will continue to be, affected by these sorts of market players getting squeezed and forced to make market moves because of cash-flow issues rather than because of thoughtful fundamental analysis.  We are seeing this in very unusual and fundamentally unwarranted market action. Also, what’s interesting is how attractive some companies with good cash yields have become, especially as many market players have been shaken out. (…)

The most important assets that you need to take good care of are you and your family. As with investing, I hope that you will imagine the worst-case scenario and protect yourself against it. 

OPEC Agrees on Output Cut, Russian Backing Is Unclear

OPEC agreed to cut oil production by 1.5 million barrels a day to offset the huge demand hit from the coronavirus epidemic, but it was unclear whether its key ally Russia was on board.

GET USED TO THIS

Goldman Sachs now sees a deeper slowdown in China and a wider geographic transmission of the virus and expects global growth to contract by 2.5% QoQ in Q1 and a rebound in subsequent quarters that leaves full-year 2020 growth around 2% (vs. expectations of just over 3% prior to the virus shock).

In the US, GS forecasts 1.3% YoY growth in 2020, “with virus impacts lessening over H2, but shaving about 1pp off of Q4/Q4 growth in 2020 vs. our pre-virus forecasts”

It expects “the Fed to deliver an additional 50bp of cuts (25bp each in March and April) in addition to the recent 50bp emergency cut, owing to growing coronavirus concerns.”

TECHNICALS WATCH

13/34–Week EMA Trend Chart (CMG Wealth):

At todays pre-opening (3060), The R20 P/E is 20.85.