Virus Update
- Spain reported its fewest new coronavirus cases since March 20 and Germany reported a drop in infections for the fifth consecutive day.
- European leaders are starting to sketch out their strategy for putting the economy back to work once the coronavirus has been brought under control. Austria and Denmark are beginning to open up some schools and shops this week and President Emmanuel Macron on Monday said he wants to begin phasing out restrictions from May 11.
- It is too early to judge if the virus spread in Germany is slowing down, as lower case numbers in recent days have been affected by the Easter holidays, the head of the country’s public health authority has warned. Authorities have conducted fewer tests and submitted less data in recent days, Lothar Wieler, President of the Robert Koch Institute said. “We cannot finally conclude if new case numbers are really falling,†he said.
- Confirmed coronavirus infection cases rose by 2,774, the third straight day that number has risen, according to data from Russian consumer health watchdog Rospotrebnadzor. Total cases have almost doubled in past five days and the number of new infections has been above 2,000 a day since Sunday. The death toll hit 170 with 22 people dying overnight.
- Deaths involving Covid-19 in England are running 15% higher than the number reported by the National Health Service. The Office for National Statistics said 5,979 deaths up to April 3 had been registered by April 11. That compares with the 5,186 reported by NHS England, a number which is itself revised several days after the official daily tally from hospitals.
- Coronavirus can survive long exposure to high temperature, a threat to lab staff around world: paper Professor Remi Charrel and colleagues at the Aix-Marseille University in southern France heated the virus that causes Covid-19 to 60 degrees Celsius (140 Fahrenheit) for an hour and found that some strains were still able to replicate. The scientists had to bring the temperature to almost boiling point to kill the virus completely, according to their non-peer-reviewed paper released on bioRxiv.org on Saturday. (…) The heating process resulted in a clear drop in infectivity but enough living strains remained to be able to start another round of infection, said the paper. (…)
- Green light for human trials on more China Covid-19 vaccine hopefuls Medical products watchdog gives approval to two pharma firms to combine the first two phases of clinical testing. In all, 70 potential coronavirus vaccines are in development around the world, with three already being tested on humans, according to the World Health Organisation.
Ten U.S. states developing ‘reopening’ plans account for 38% of U.S. economy
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Trump says his ‘authority is total.’ Constitutional experts have ‘no idea’ where he got that.
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It’s Trump Versus the States as Virus Rages On
U.S. governors formed coalitions for the reopening of their economies, even as President Donald Trump insisted he alone has that authority and complained that governors hadn’t done more to prepare their states for the pandemic.
The president’s claim — which legal experts dispute — reflects an escalating battle with state governors, whom Trump warned could face political consequences, perhaps in the form of future losses at the polls, should they rebuff his directives.
Six northeast states, including New York, New Jersey and Pennsylvania, announced they will jointly develop a plan to reopen schools and businesses when the virus subsides. California, Washington and Oregon will work together on their own framework.
The message from these states, led by Democratic governors, is a blunt one. It comes as Trump is set today to announce a council of doctors and business people to advise him on restarting the economy.
More than 2,100 U.S. cities brace for budget shortfalls, with many planning cuts and layoffs The bleak outlook, laid out in a survey of local officials released Tuesday, led some top mayors and other leaders to call for greater federal aid to protect cities.
PANDENOMICS
Volkswagen AG’s Audi unit is among automakers gradually reopening factories in Europe, even as lockdowns drag on across much of the region. Hyundai’s car-making facility in Nosovice, Czech Republic, is resuming output with two shifts instead of the usual three, CTK reported. And Renault is working on restarting factories in Portugal, Romania and Russia, Chairman Jean-Dominique Senard said on Friday.
The Coronavirus Economic Reopening Will Be Fragile, Partial and Slow From airlines to car makers, companies are planning to gear up again. The new normal will look anything but, with safety shields, blood tests and plenty of space between customers.
(…) Officials and business leaders predict that operations won’t fully return to normal until an effective vaccine hits the market, estimated at least a year away.
Some firms may bring office workers back in alternating groups to allow for social distancing in open-plan offices. Restaurant chains may operate at half capacity, installing plexiglass shields between booths, while stores may do away with tester cosmetics and sanitize items after customers try them on. Major League Baseball has discussed a season with no spectators, held in a part of the country where it can essentially sequester players for weeks at a time. (…)
“It’s going to be a testing-informed transition to the new economy.†(…)
Manufacturers have redrawn factory floor plans and implemented processes, such as staggering shift workers or asking employees to take turns eating lunch in their cars to avoid cafeteria crowding, practices that may become standard as more plants come back online. (…)
Goldman Sees Advanced Economies Shrinking 35% Amid Pandemic That’s four times as much as the previous record set in 2008 during the financial crisis.
Coronavirus Outbreak Sends Consumer Expectations Plummeting
The New York Fed’s Center for Microeconomic Data released results today from its March 2020 Survey of Consumer Expectations (SCE):
- The expected shape of the recession (based on the BofA Global Fund Manager Survey) (via The Daily Shot):
From an interesting slide deck from Mehlman, Castagnetti:
Saudi Aramco slashes selling prices to Asia for second month after historic OPEC+ deal
(…) This is Saudi Arabia’s second consecutive monthly price cut after it slashed crude prices by $5-$8/b for April loading crude last month.
Aramco set the OSP differentials for its Arab Extra Light, Medium and Heavy crudes headed to Asia in May at the same level of minus $7.40/b, crunching quality premiums for its lighter crude grades against heavier ones.
Its May OSP differential for Arab Super Light was set at minus $3.65/b, down $5.50/b from the April OSP for Asia.
Overall, Aramco cut its Asia OSPs by $2.95/b to $5.50/b from April to May, according to the letter. Traders expected cuts for all shipments to Asia by $1-$4/b, the Platts survey showed.
JPMorgan Profit Plunges to Lowest Since 2013
JPMorgan Chase & Co. said first-quarter profit tumbled 69% to the lowest in more than six years as credit costs surged, giving investors a first glimpse at the extent of the damage Covid-19 is wreaking on bank results.
The bank set aside $8.29 billion for bad loans, the biggest provision in at least a decade and more than double what some analysts expected, as it grappled with the effects of the pandemic on the economy. That prompted the bank’s first drop in profit since the fourth quarter of 2017.
J&J Cuts 2020 Outlook
For the full year, J&J said it expects sales of $79.2 billion to $82.2 billion. Previously, it had forecast revenue for the year of $85.8 billion to $86.6 billion.
However, J&J posted stronger sales and earnings for the first quarter compared with a year ago, and boosted its quarterly dividend.
Can Europe’s Banks Weather the Coronavirus Crisis? Banks around the world are being pressed to lend trillions to keep economies afloat. In Europe, scarred by a debt crisis last decade, some lenders risk buckling under the strain.
(…) Europe’s banks are both especially vulnerable and especially vital. Bond markets are less developed than in the U.S., so banks provide most of the funding for companies. But the region’s banks have struggled to earn profits—interest rates are negative and there is too much competition. Their average return on equity—a key measure of how profitable a bank is—was around 5% last year, half the mean at U.S. banks. (…)
If it lasts more than a few months, the picture darkens. “That will be the kiss of death for countries and the stability of their financial systems,†said Emilios Avgouleas, a professor of banking at the University of Edinburgh’s law school. “Banks in the countries most affected will need help from the state.†(…)
But Ms. BotÃn [Santander’s executive chairwoman] has also warned too great a burden may be falling on countries with insufficient fiscal firepower to help. She and other bank executives have called for a eurozone-wide program such as the issuance of common European debt that can be used by weaker countries. The rich northern countries are resistant.
In her home country, Spain, the government has pledged to guarantee up to €100 billion in loans banks provide to companies whose businesses have frozen because of the lockdown. But the guarantee only covers 70% to 80% of a loan, meaning banks must bear the rest of the risk.
By contrast, in wealthy Germany, the government last week announced a 100% guarantee on an unlimited amount of loans to midsize firms, the backbone of its economy. (…)
Many economists expect the overall eurozone economy to contract by as much as 20% in the second quarter and by around 10% for the whole of 2020. At eurozone banks, that scenario could push bad loans, which now comprise around 3% of their lending books, as high as 15%, according to Jack Allen-Reynolds, senior Europe economist at Capital Economics, a London-based economics research firm, basing his estimate on what happened in 2009. (…)
Unless a decision is taken by all the eurozone countries to share the burden among all member states, “we will be facing a banking crisis, perhaps in 18 months, of significant proportions,†Mr. Avgouleas said. (…)
Bank credit to eurozone firms and households is currently close to 90% of gross domestic product, according to data from the Bank for International Settlements, compared with about 50% in the U.S. (…)