(…) Depending on how well the country carries out social-distancing measures, testing, and containment, we could be looking at a high end of almost two million cases by the end of March. A more conservative estimate places the US at around 228,000 cases, and a very optimistic estimate would be near 18,600 cases. (…)
Under the high-risk scenario, we may expect that around 10% of COVID-19 cases require hospitalisation, equalling almost 200,000 cases that need hospital-level care at the same time, which is significantly more than US capacity. However, GlobalData does not expect the high-risk scenario to be very likely, especially if containment measures continue to escalate. As the US ramps up testing over the next few weeks, we may initially see a significant increase in cases. Improvement to testing is crucial to contain the epidemic as it allows identification of those who were infected and can thus be isolated in a timely manner.
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China’s Virus Epicenter Sees No New Cases
China still faces another concern as imported cases continue to add to the country’s tally of infections. The National Health Commission reported 34 new cases for March 18, all of them patients who brought the disease from other countries.
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BETTER LATE THAN NEVER
A chilling new study forced the United Kingdom to sit up and take coronavirus seriously, and the White House task force is also reportedly using it to guide strategy. The study predicts that if we only try to slow the spread, the number of hospital beds could be overwhelmed, leading to about 250,000 deaths in the U.K. and more than a million in the United States. The study, by London’s Imperial College COVID-19 Response Team, recommended stronger measures would need to be taken to reduce the death toll further.
In a rare pre-recorded televised message, Chancellor Angela Merkel said Germany is facing its gravest challenge since World War II. “Take it seriously,” she said. “Since German reunification, not since World War II, there’s not been a challenge to our country that depends as much on our united actions done in solidarity.†(Axios)
Bank of Canada asks retailers to stop refusing cash payments over virus fears
Biggest Factory Shutdown Since World War II Hits U.S., Europe The synchronized shutdown is unlike any seen since the 1940s, historians say.
Americans Losing Work as Businesses Cut Back Over Virus Employers are cutting shifts, suspending work and starting to lay off workers as the new coronavirus devastates business across the country
Treasury Secretary Steven Mnuchin told lawmakers that the unemployment rate could spike to almost 20 percent (from its current level of 3.5 percent), people familiar with his comments told The Washington Post.
Detroit Car Makers to Temporarily Close U.S. Plants Over Virus Concerns The Detroit car companies have agreed to temporarily shut down factories in the U.S. to protect workers against the rapidly spreading coronavirus.
Consumers Face a Massive Credit Crunch. Lenders Are Still Figuring Out What To Do. Out-of-work customers could miss loan payments and suffer plunging credit scores. Lenders and credit-reporting firms are being asked to help.
Coronavirus Hits State and City Budgets States and cities across the U.S. are scrambling to quickly draw millions of dollars from their reserves to help cover coronavirus-related expenses such as testing and unemployment insurance, while also bracing for steep tax-revenue declines.
The Economic Rout Accelerates The Fed and Treasury need to liquify business now or liquidate later.
You know you have a big economic problem when you roll out your grand solution and markets tank another 6%. That was the sorry story Wednesday, as the Trump Treasury disclosed its $1 trillion proposal to rescue the pandemic economy, and the panic accelerated.
The rout in stocks was the least of it. Oil fell 17% to about $20 a barrel, which is lower than it’s been since after 9/11. Financial markets also showed more stress, as asset holders liquidated holdings even in supposedly safe havens like Treasurys and gold. Money managers are shedding those traditional hedges against risk because they fear even those are too risky to hold. They’re literally selling those for cash to stick in the vault, if not a mattress. (…)
The market has figured out that American commerce is shutting down right before our eyes with no end in sight. (…) second quarter GDP could fall by 10% or more. For comparison, the worst single quarter during the financial panic was minus-8.4% at the end of 2008. Mass layoffs could begin soon in the hardest hit parts of the economy, spreading and growing if there’s no sign of recovery. (…)
The Fed is deploying its 2008 tools to ease constraints in money markets, and that’s useful for the economy’s financial plumbing and banks. The commercial paper facility is good for the biggest companies. But this doesn’t address the dramatic and immediate need for liquidity—financing, i.e., loans—across the breadth of American business to survive this unprecedented economic shutdown.
President Trump’s Treasury seems to think this can be solved by handing out $500 billion in cash to individual Americans in two installments in April and May. Chuck Schumer and Nancy Pelosi will see and raise. This won’t stimulate much of anything, but it might even be tolerable as a political price if it helped to sell the proper medicine for the larger economy.
Secretary Steven Mnuchin’s proposal that he sent to Senate Republicans includes $50 billion for the airlines, plus another $150 billion in loans to other affected businesses. This is too little, too cumbersome, and too political. Wait until Congress attaches strings to that cash, and wait until the bureaucrats get around to doling it out. The airlines may get rescued, perhaps with price and route controls attached, but they won’t have many passengers if a million Americans a month lose their jobs.
The same goes for another $300 billion for a new small-business loan program to be administered through private lenders, though it isn’t clear what rules would apply or how long this would take to set up. If it’s anything like the Small Business Administration, prepare for a long wait. (…)
You don’t calm a panic by floating ill-considered trial balloons or chanting “go big†as an illusion of proper and thoughtful action. Markets are panicked in part because they sense that our political leaders are more panicked than the public is.
(…) The government needs to act to prevent the liquidity panic from becoming a solvency rout that becomes a banking crisis. And it needs to act fast.
Mr. Mnuchin should adapt his pet plans and work with Mr. Powell to set up a new facility under Section 13(3) of the Federal Reserve Act to provide financing to otherwise healthy businesses jeopardized by the pandemic shutdown against good collateral. (…) Mr. Mnuchin and President Trump should also ask Congress to backstop this facility, in case there are losses, with that $150 billion Treasury has proposed for industry-specific rescues. The Fed should be able to set it up in a week.
This pandemic may be the biggest demand shock to the U.S. economy since World War II. The only alternative we see to this liquidity solution is if the pandemic eases faster than we think, or policy makers make a different calculation about viral versus economic risks. If we don’t do the latter, we need to do the former or suffer the economic damage.
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The Economic Response We Need to the Coronavirus A strong recovery requires immediate relief to be coupled with long-term investment.
(…) One of the best ways to restore faith in the economy when the public-health emergency abates would be to ensure that it coincides with the largest public investment in infrastructure in generations. (…)
If Congress passes a major infrastructure and clean-energy bill before the April recess, shovels can start hitting the ground when workers, businesses and investors are looking for signs of hope, indications of growth, and reasons to believe that the worst has passed. And while it can take years to complete a project, the act of investment — and putting people to work — sends exactly the kind of signal to the marketplace that our country will need. (…)
Canada could be announcing a limited-time holiday on its 5% national sales tax to incite people to spend earlier than later. Provinces could do the same, providing an even greater incentive to spend now.
There is no federal sales tax in the U.S. but the federal gov. could finance states doing it.
Credit Is the Scariest Market to Watch, Not the Dow or S&P
ECB Announces New €750 Billion Bond-Buying Program
Federal Reserve to Backstop Money-Market Mutual Funds The Federal Reserve said Wednesday it would launch a new lending facility to backstop the money-market mutual-fund sector as part of a broadening effort to calm turmoil sparked by the novel coronavirus epidemic.
Banks Have Nowhere to Hide in the Coronavirus Crisis European bank stocks are back at levels last seen in the 1980s as investors struggle to size up the impact of the economic shutdown
A problem for airlines is a problem for banks. A problem for oil producers is a problem for banks. A problem for restaurants is a problem for banks.
Sitting at the heart of the economy, banks are spared no pain. They are usually protected by the diversity of their lending—only one or two industries or regions struggle at a given time—but the widespread economic shutdown to contain the novel coronavirus is a crisis for nearly everyone, everywhere. (…)
Lenders are much stronger now than a decade ago. Since the 2008 financial meltdown they have built up substantial capital under acute regulatory scrutiny. Yet many are still wondering if the buffers will be big enough.
The root problem is that the scale of the coming default wave is impossible to assess. Even under normal circumstances only a bank truly knows its loan book. (…)
Interest rate cuts may help a few borrowers and delay defaults in the immediate crisis, but longer term they make life harder for lenders struggling to generate profits. Governments’ apparent willingness to backstop loans and unleash fiscal policy is more welcome. (…)
China to ramp up spending to revive economy, could cut growth target
The ramped-up spending will aim to spur infrastructure investment, backed by as much as 2.8 trillion yuan ($394 billion) of local government special bonds, said the sources. The national budget deficit ratio could rise to record levels, they added. (…)
Higher spending could push the 2020 budget deficit ratio to as high as 3.5% – up from last year’s 2.8%, the sources said. (…)
PANDENOMICS
Fedex March 17 conf. call:
FedEx flew 246 flights in and out of China just last week, which is aligned with our normal flight schedule and over the past couple of weeks, our flights have been full, and we have registered record load factors intra-Asia, especially with our hub in Guangzhou. (CEO)
FDX stressed
that China continues to recover as manufacturing output (led by large manufactures) has
recovered back to 65-75% utilization and despite a ~40% decline in air cargo capacity (due to
a decrease in widebody belly capacity), FDX has seen week-over-week rebound in air demand
to and from China since March 3. Importantly, while clearly encouraging, FDX also noted that
the COVID-19 demand shock to Europe/N.A. remains unknown, as initial European factories
are beginning to shut. (Raymond James)
Goldman Sachs’ China Consumer Activity tracker takes the average year-over-year change in traffic congestion, movie box-office revenue, daily property sales, and passenger load factors on domestic flights. Its US consumer activity tracker includes hotel occupancy, movie box-office receipts, Broadway box-office receipts, Redbook retail sales, college basketball attendance, and commercial airline available seat miles. Because the considered consumer activities are likely highly affected by the coronavirus, the measures likely overstate the declines in overall activity.
Meanwhile…
US oil companies race to restructure debt Advisers report surge in activity as price war threatens bankruptcies across shale patch
Oil War, Virus Plight Force $13.3 Billion in Saudi Spending Cuts
(…) It was targeting a fiscal deficit of 6.4% of gross domestic product this year under the assumption that Brent would average about $65 per barrel. It needs oil at almost $84 to balance this year’s budget. (…)
Saudi Arabia would run a budget deficit of 23% of GDP if Brent falls to $20, while its current-account shortfall would reach 15.6% of economic output, or $122 billion, JPMorgan Chase & Co. analysts estimate.
“Such a situation would imply a very fast rate of depletion†of Saudi foreign-currency reserves, JPMorgan analysts including Nicolaie Alexandru-Chidesciuc said in a report. “It would also be associated with a rapid increase in debt/GDP and would thus create serious financial stability issues. Consequently, the kingdom may not sustain the price war for very long.†(…)
The kingdom is consulting with other Group of 20 countries about a potential summit next week in an attempt to unify efforts to slow the pandemic. Saudi Arabia is the G-20’s host nation this year.
Saudi Aramco Will Find It Increasingly Hard to Serve Two Masters With the steep drop in oil, the company’s role as a main source of government funding will likely put pressure on its obligation to shareholders as a public company.
(…) This is an inflection point for Aramco and Saudi Arabia. The kingdom receives more than 60% of its revenue from the oil industry, and while it has options to help meet its budget — debt, austerity, or new taxes — it is truly reliant on Aramco payments. The government receives funds from Aramco mostly in three ways: a 50% income tax, a royalty on barrels of oil produced and a dividend. With low profit expected in 2020, the cash transferred to the government for the income tax will be limited. With low oil prices, the royalty payments, which are 15% of the price of Brent, will be exceedingly low. And if the company upholds its commitment to public shareholders, there would be less profit left to pay a dividend to the government.
In 2019, net income for Aramco was $88.2 billion, down $22.9 billion from the year before. With Brent now trading significantly below its price at the start of this year, Aramco is looking at lower profits just like every other oil producer. (…)
Free cash flow fell to $78.3 billion in 2019 from $85.8 billion the year before. If Aramco’s board, at the direction of the monarchy, provides a special dividend to the government, it could be pulling money from Aramco’s cash reserves. This would decrease the value of the company’s shares and hurt the Saudi population, 20% of whom bought into the IPO, often on leverage. It would also hamper any plans for another offering of company shares to raise further capital for the government. (…)
If Aramco’s board of directors fails to provide the $75 billion dividend to all public shareholders, and, worse yet, if it funds the government at the expense of the company, it will mean that the monarchy has proclaimed Aramco to be a tool for its power and not public firm at all. And, because it is listed solely on the Saudi exchange, there will be no recourse for any shareholders, except for the loss of faith in the company and a stigma on its shares.
Sure seems MBS is not great at chess…
We will likely get a cure before a vaccine.
WHO and Roche launch trials of potential virus treatments Worldwide efforts intensify to find drug that counters deadly disease
China’s Science and Technology Ministry official Zhang Xinmin has said that Japan-based Fujifilm’s anti-flu drug Favipiravir helped Covid-19 patients recover.
Developed by Fujifilm Toyama Chemical, and also referred to as Avigan, Favipiravir gained approval in Japan in 2014. In 2016, Japan provided Favipiravir as emergency aid for the Ebola virus outbreak in Guinea, noted Reuters. (…)
In Shenzhen city in China, a clinical trial involving 80 participants demonstrated better chest improvement in those treated with Favipiravir, noted Zhang. Also, patients treated with the drug tested negative for the genomic trace of the virus in lesser time, compared to those not administered with the drug. The drug was able to shorten the recovery time from 11 days to four days for mild and regular cases. Another trial in Wuhan showed that the drug shortened fever duration from an average of 4.2 days to 2.5 days.
Zhang said that Favipiravir has been effective, without any obvious side-effects, in helping coronavirus patients recover.
At today’s pre-op of 2358:
