U.S. Coronavirus Cases Rise at Slowest Pace in a Week The total number of infections in the country climbs to more than 3.8 million and the death toll nears 141,000
New coronavirus cases in the U.S. rose by more than 60,000, the smallest daily increase in a week, as parts of the country took steps to try to curb the virus’s spread. (…)
Chicago Mayor Lori Lightfoot said restrictions on some businesses in the city would be tightened amid a steady increase in new cases. Starting Friday, bars must stop indoor operations, restaurants and bars must limit table sizes to six people and gyms must cap indoor classes.
New York City entered phase four of its reopening Monday, but Mayor Bill de Blasio said the city is holding back on allowing museums, malls and indoor dining to reopen. Mr. de Blasio also said the city was stepping up enforcement after a weekend in which crowds of unmasked people gathered closely together in Queens, ignoring social-distancing guidelines. (…)
India has reported more than 200,000 new cases in the past week (…).
In Australia, an outbreak in the country’s southeastern region showed little sign of easing, with Victoria state recording 374 more cases on Tuesday and three more deaths. Mask wearing will become mandatory in the state capital of Melbourne from midnight Wednesday. (…)
Tokyo reported 237 new cases Tuesday, the first time in three days the daily tally has surpassed 200. (…) (WSJ)
Trump Reverses Course on Masks, Calling Them ‘Patriotic’ After Allies Split With Him The mask may have reached a tipping point.
Although that seems to have been reached last week. Trump is reacting, not leading.
This week’s survey finds the highest overall use of face masks since the pandemic began — with 99% of Democrats and 75% of Republicans now saying they’re wearing a mask sometimes or all of the time when they go out. (Axios)
Vaccine Data Raises Hope for Trio of Candidates The results buoyed the prospects a successful vaccine could arrive before year-end
Vaccines being developed by University of Oxford researchers and AstraZeneca AZN -3.96% PLC; Pfizer PFE 0.69% Inc. and German partner BioNTech BNTX 3.46% SE; and China’s CanSino Biologics 6185 1.74% all reported fresh updates showing their shots generated immune responses and were safe to use.
The results cement the trio’s position among a few drugmakers and institutions at the vanguard of the race to develop a Covid-19 vaccine. About 160 vaccines are in development, including about 20 that have started human testing, according to the World Health Organization. (…)
However, the most advanced results to date for an experimental coronavirus vaccine were published Monday in the Lancet, for the second study of a shot codeveloped by CanSino Biologics and the Beijing Institute of Biotechnology. It was the first time that a stand-alone phase 2 study for a coronavirus vaccine had been published in a peer-reviewed journal.
The study of more than 500 volunteers found the vaccine was safe and induced significant immune responses in the majority of people after a single shot. (…)
Still, all three vaccine candidates updating Monday remain unproven. All, though, are poised to enter large-scale clinical trials designed to show whether the shots safely protect people from Covid-19, which could begin to yield answers in a few months. Positive results could support the availability of initial doses by the end of this year. (…)
PANDENOMICS
LinkedIn cuts 960 jobs (6%) as pandemic puts the brakes on corporate hiring
Thirty-six percent of U.S. adults said they are comfortable dining out right now, down from 41% in mid-June. By mid-June, consumers’ comfort levels with activities such as dining out or going shopping were on the upswing, with the share of people expressing safety doubling in many cases since late April, when Morning Consult first began tracking. But as the number of confirmed coronavirus cases began to surge in the latter half of June, consumers became less comfortable with returning to leisure activities.
EU Leaders Agree on $2 Trillion Spending Plan for Recovery European Union leaders agreed on a $2.06 trillion spending package aimed at containing an unprecedented economic downturn by resorting to new measures that could ultimately deepen the bloc’s economic integration.
The package, built around the bloc’s first-ever issuance of hundreds of billions of euros of common debt, came together early Tuesday after four days of talks among the bloc’s 27 leaders—the bloc’s longest summit in 20 years. German Chancellor Angela Merkel and French President Emmanuel Macron were forced to compromise on what would be spent and how much would be handed out in grants.
Leaders ultimately agreed on a €750 billion recovery plan. Of that, €390 billion will be offered in grants and the rest will come in the form of loans. That is down from €500 billion recently proposed by Brussels. The leaders also agreed on a multiyear EU budget of over €1 trillion that will run from next year to 2027. (…)
The agreement represents a significant step in the EU’s move toward a more genuine fiscal union. Some have hailed it as the bloc’s Hamiltonian moment, referring to Alexander Hamilton, the first U.S. Treasury secretary, who had the federal government absorb the debts of U.S. states. Some economists, however, say the cash may only make a modest difference to revive depressed economies. (…)
Without the bailout plan, Italy’s national debt risks ballooning to a level that could endanger the euro. Wealthier northern countries decided that helping Rome now was preferable to facing a currency crisis later. The recovery plan grants must be paid out by 2023 and loans allocated by then. Repayments will take place over decades, ending in 2058, leaders agreed. (…)
After the deal was secured Tuesday morning, Dutch Prime Minister Mark Rutte said the recovery plan wouldn’t convert the EU into a wealth-transfer union because the Netherlands and its allies had ensured it was a time-limited, one-off program launched for the health crisis. (…)
Mr. Rutte also insisted that member states be allowed to hold up payments to other countries if they don’t push economic reform plans. (…)
ING’s take:
Is this the most effective recovery fund and budget possible? No, it isn’t. In terms of size, the fund is still relatively small given the severity of the economic crisis. Also, the fund will only become effective on 1 January, with the first money probably reaching the real economy not much before mid-2021. On top of that, there have been cuts to the original proposal on long-term investment funding such as research and development, digitization, greening and health. Still, given that more than a year ago a meagre eurozone budget was almost impossible and given how far apart member states had been at the start of the discussion, this morning’s outcome is still remarkable. Even if it is what a soccer player might call a “dirty victory”. It is not the result of unity and solidarity but rather a hard-fought compromise, and only time will tell how much of the drama has been for the voters at home and how much political porcelain has been smashed.
According to our preliminary calculations for the first two years, the maximum amount of grants disbursed from the RRF will be 1.6% of EU GDP at 218.75bn euro with large differences among countries. More vulnerable countries like Italy and Spain can receive grants for around 2.5% and 3.5% of GDP, while France, Germany and the Netherlands have maximum allotments of 0.9%, 0.4% and 0.5% of GDP over those two years respectively. Especially for the countries that were more vulnerable going into the coronavirus crisis, this will provide a decent amount of stimulus to their economies. Many of those are also the ones with sharper economic downturns due to stricter lockdowns to curb the virus. However, don’t forget that the fund will only become effective next year and that 30% of it will only be disbursed in 2023. To tackle the economic impact of the virus now, the countries in need will and should lean on the options offered by the ESM, looser fiscal rules and SURE.
The fact that there will now be grants is an enormous step towards solidarity in Europe. The fact that there will be something like a common bond is an important step towards further integration. Even if the impact should not be overestimated. It is still a one-time fund exceptionally created for the coronavirus crisis and the bitter fights at the Council show that it is not a given that future crises will receive a similar response.
Whether these significant steps, however, will have the maximum symbolic impact remains to be seen. From a positive perspective, the fact that government leaders negotiated to the bitter end to find a deal and did not simply decide to postpone the decision shows that all of them saw the sense of urgency. Also, the fact that Germany and France have been working closely together on all of this should have strengthened markets’ believe in more integration. From a more negative perspective, the hard-fought compromise will have smashed some political porcelain and has not always sent a signal of strong unity. Only time will tell which of these two perspectives will become the dominant narrative in financial markets.)
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Plateau in European activity points to economic headwinds Tourism begins to revive but work travel is well below normal and job vacancies are scarce
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European banks braced for €800bn of loan losses if pandemic worsens Worst-case scenario from Oliver Wyman consultancy paints bleak picture for sector still struggling from 2008
EARNINGS WATCH
48 companies have reported. Beat rate: 77%, surprise factor +11.9%. Those 48 companies showed aggregate earnings down 43.7% on revenues down 2.1%.
Q2 earnings are still seen down 43.2%. Q3 and Q4 estimates are also stable at -24.1% and -13.0% respectively.
Trailing EPS are $140.34. Full year 2020: $124.81e. 2021: $163.32e.
The Rule of 20 P/E using trailing EPS is 24.5. Using 2021 estimates: 20.0. How forward looking do you want to be, especially knowing analysts are generally too optimistic?
Global presence an advantage as U.S. companies brace for second-half slump Smaller U.S. companies will bear the brunt of the economic downturn triggered by a prolonged coronavirus crisis as they struggle to cut costs as much as bigger multinational peers, analysts’ estimates compiled by Reuters showed.
The data, which pooled over 1,000 U.S companies that have market capitalizations of least $1 billion, showed that analysts expect U.S. firms to post an 18% drop in profit in the second half of 2020.
Revenue will be down 3.8% in the same period, marking the steepest fall in at least a decade, according to Refinitiv data.
The situation looks grim for most U.S. companies, with data showing that firms with large domestic operations are likely to post a 22.7% drop in profit, compared to the 17% fall expected at multinationals.
Companies with an international presence are expected to have revenue shrink at a higher rate, but their profits will fare better, helped by cuts in operating expenses that company plans show will average 16.5% versus 6% for U.S.-centric rivals. (…)
PANDENOMIUM
China May Retaliate Against Nokia, Ericsson If EU Countries Ban Huawei Beijing is considering retaliating against the Chinese operations of two major European telecommunication-equipment manufacturers, Nokia and Ericsson, should European Union members follow the lead of the U.S. and U.K. in barring China’s Huawei from 5G networks.
Jack Ma’s Ant Group Plans Massive IPO, Bypassing the West Jack Ma’s Chinese tech and financial-services giant, which owns mobile-payments network Alipay, is planning IPOs in Hong Kong and Shanghai, bypassing New York. The combined offering could be among the largest in history.
(…) Ant’s listing would draw more global investors to Hong Kong, and make mainland Chinese companies an even larger part of the city’s $5 trillion stock market. Many U.S. money managers already hold Hong Kong-listed stocks, and some retail brokers also let individual investors in the U.S. trade shares on the city’s bourse. (…)
Russian interference in UK the ‘new normal’, intelligence report warns Long-awaited study says Kremlin has access to top British political and business leaders