- New coronavirus cases spiked in several states, with Arizona, Texas and California reporting new daily records of infections, prompting elected officials to tighten rules on gatherings and strongly urge people to stay home and follow social-distancing guidelines.
- Coronavirus cases in the U.S. increased by 35,695 from the same time Monday to 2.33 million, according to data collected by Johns Hopkins University and Bloomberg News. The 1.6% gain was higher than the average daily increase of 1.3% the past seven days. Deaths rose 0.7% to 120,913.
- Cumulative hospitalizations of Floridians rose by 199, or 1.5%, to 13,318. On a rolling seven day-basis, they reached 1,112, the highest level since May 25. The new rate of people testing positive for the first time climbed to 10.9% for Monday, from 7.7% on Sunday.
- Texas health department reported 5,489 new cases, bringing the total to 120,370. That represented a 4.8% increase, well in excess of the 3.7% seven-day average. Hospitalizations, meanwhile, surged more than 10% to 4,092. The 381 new admissions were the biggest daily increase since the pandemic emerged.
- There are 1,488 Covid-19 patients in ICU beds across the county, leaving only 134 intensive-case beds available and another 326 surge beds in reserve.
- The volume of daily coronavirus tests has risen 23% over the last two weeks, and the positive test rate has risen by 1.3pp to 6.2%. Fatalities have declined over the last two weeks (-12% to 1.9 per million), but fatalities lag new cases by multiple weeks.
- The federal government recommends states meet four criteria to proceed with
reopening: symptoms should be declining, new cases should be declining, the positive test rate should be below 10%, and at least 30% of ICU capacity should be available. Currently Arizona and South Carolina—accounting for 4% of the US population—meet none of the four criteria; 8 states including Texas and Florida meet only 1 criterion; 14 meet 2; 12 meet 3; and only 14 states meet all 4 criteria. - States make their own decisions about reopening, but we think a decline in
hospital capacity below 20% could pressure states to consider slowing or reversing reopening. According to the CDC, Alabama and Maryland currently have 23% of ICU beds available (with Covid patients accounting for 7% and 13% of occupancy respectively), and Arizona has 25% available (with Covid patients accounting for 11%). (GS)
Charts from the FT:
Americans increasingly concerned about ‘second wave’ of coronavirus in the U.S.
Our latest Axios-Ipsos Coronavirus Index finds that Americans are increasingly concerned about coronavirus and seeing ‘regular’ activities as increasingly risky after sentiment moderated earlier in June.
- Currently, 85% of Americans are at least somewhat concerned with the outbreak, including 56% who are extremely or very concerned. This is up from 80% and 48% respectively in early June.
- Concern with communities re-opening too soon (to 71% from 64%) and the possibility of getting sick (to 76% from 69%) are also up 7 percentage points over the last two weeks.
- Eighty-five percent of Americans are concerned about a second wave of the coronavirus, including 59% who are extremely or very concerned.
“Normal†activities are seen as increasingly risky by many including doing their job, going to the grocery store, or socializing with friends after multiple weeks of minimizing concerns.
Americans continue to report that if a second wave hits their state, they will substantially withdraw to protect their health. They also express that they are watching for a wide range of signals of a second wave indicating it may not be official announcements that trigger a rebound in behavior.
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Americans would rather return to lockdown
A new survey from data firm CivicScience of nearly 2,500 U.S. adults finds 65% of the general population over the age of 18 supports returning to lockdown if cases of COVID-19 rise significantly.
- Two economists from the University of Chicago confirm what many had expected: fear of catching COVID-19 caused people to stay at home, whether that was required by law or not. https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_202080v2.pdf
- Coronavirus Races Across Latin America, a Warning to Poor Nations Latin America is the new center of the pandemic, accounting for nearly half the world’s Covid-19 deaths in the past two weeks. The pandemic is sending poverty rates skyrocketing and eroding the social gains the region made in the past two decades.
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India Reports Almost 16,000 New Cases
- In South America, the number of new diagnoses continues to rise, particularly in Brazil and Chile, with the latter country adding a large number of previously omitted cases last week. Cases are clearly rising in North America too, though mainly in parts of the United States that suffered relatively few cases earlier in the year.
PANDENOMICS
U.S. FLASH PMI
Economic downturn eases markedly in June as lockdown lifts
U.S. private sector firms signalled a notable slowdown in the rate of output contraction in June, as businesses began to reopen on a larger scale. Manufacturers and service providers alike registered much softer declines in output compared to May.
Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 46.8 in June, up from 37.0 in May, indicating that the rate of contraction slowed further from April’s record low. The decrease was the softest since February, before the pandemic escalated.
New business across the private sector declined further in June, albeit at only a marginal pace. Despite many firms noting a rebound in client demand, some stated that renewals and requests for new business were historically muted.
The rate of contraction nevertheless slowed notably, with manufacturers in particular registering only a fractional decrease.
The downturn in new business from abroad also slowed significantly, as clients in key export markets increased their buying activity amid looser lockdown restrictions.
The June survey meanwhile signalled further cuts to workforce numbers across the private sector, albeit at only a modest rate. Where an increase was noted, some businesses reported the return of furloughed staff. That said, hiring freezes and relatively weak demand led many other companies to shed employees in an effort to cut costs.
Backlogs of work also continued to be reduced, with the rate of decline faster among manufacturers than service providers.
For the first time since February, private sector firms recorded increases in both input prices and output charges. Firms stated that higher input costs from suppliers due to COVID-19 related supply chain issues were partially passed on to clients, with some mentioning that demand conditions were such that discounting was no longer required.
Private sector firms also reported a notable pick-up in confidence in June, with the degree of optimism about output in the year ahead reaching a four-month high. Expectations of a rise in activity over the coming year contrasted with negative sentiment seen in April and May. The reopening of states and reports of client interest reportedly sparked the return to optimism.
The seasonally adjusted IHS Markit Flash U.S. Services PMIâ„¢ Business Activity Index registered 46.7 in June, up from 37.5 in May. The pace of contraction eased substantially as increasing numbers of service providers returned to work.
The slower decline in activity was commonly linked to only a marginal decrease in new orders. A pick-up in domestic and foreign client demand reportedly helped boost sales across some firms, although conditions remained historically muted overall.
That said, companies were able to partially pass higher costs onto clients in June as both input prices and output charges increased. The moderate rise in selling prices contrasted with a sharp fall seen in May.
Service providers were generally optimistic of an increase in activity over the coming year at the end of the second quarter. Hopes that demand will return to previously seen levels came amid the reopening of states and client businesses.
Manufacturers indicated only a fractional deterioration in operating conditions in June, as the IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™)posted only slightly below the 50.0 no-change mark at 49.6, up from 39.8 midway through the second quarter.
The marked softening in the pace of overall decline largely stemmed from notably slower falls in output and new orders. Although still signalling contractions, rates of decrease were their slowest since before the escalation of the pandemic.
Although the rate of job shedding eased in June, backlogs of work continued to be reduced sharply, showing signs of ongoing spare capacity. Where higher employment was noted, this was generally linked to the return to work of furloughed workers and the hiring of extra staff.
Alongside a boost to business confidence, which was reportedly linked to hopes of a swift return to pre-pandemic new order volumes, firms began to increase their output charges in an effort to pass on higher cost burdens to clients. The increase in output prices was the first such rise since February.
Chris Williamson, Chief Business Economist at IHS Markit:
“The flash PMI data showed the US economic downturn abating markedly in June. The second quarter started with an alarming rate of collapse but output and jobs are now falling at far more modest rates in both the manufacturing and service sectors. The improvement will fuel hopes that the economy can return to growth in the third quarter.
“However, although brief, the downturn has been fiercer than anything seen previously, leaving a deep scar which will take a long time to heal. We anticipate that the US economy will contract by just over 8% in 2020. The coming months will therefore see the focus turn to just how much recovery momentum the economy can muster to recoup this lost output.
“Any return to growth will be prone to losing momentum due to persistent weak demand for many goods and services, linked in turn to ongoing social distancing, high unemployment and uncertainty about the outlook, curbing spending by businesses and households. The recovery could also be derailed by new waves of virus infections. Continual vigilance by the Fed, US Treasury and health authorities will therefore be required to keep any recovery on track.â€
Fifth District manufacturing held fairly steady in June, according to the most recent survey from the Richmond Fed. The composite index rose from −27 in May to 0 in June, as shipments were relatively flat, more firms reported increases in new orders, and firms generally reported continued declines in employment. The index for local business conditions rose notably in June, indicating optimism among firms after three months of some of the most negative readings on record for that series. Manufacturers were also optimistic, overall, that conditions would improve in the next six months.
Survey results suggested that some manufacturing firms saw decreased employment in June. Meanwhile, wages, the average workweek, and availability of skills appeared fairly flat, on the whole. Survey respondents expected employment, wages, and the average workweek to increase in the coming months.
The WEI is an index of ten daily and weekly indicators of real economic activity, scaled to align with the four-quarter GDP growth rate. The WEI is currently -8.20 percent, scaled to four-quarter GDP growth, for the week ended June 20 and -7.74 percent for June 13; for reference, the WEI stood at 1.54 percent for the week ended February 29.
May U.S. Home Sales Dropped 9.7%
(…) The May closings represent the lowest annualized sales activity since October 2010, said Lawrence Yun, NAR’s chief economist.
Economists surveyed by The Wall Street Journal expected an 8.8% monthly decline.
Homes typically go under contract a month or two before the contract closes, so the May data largely reflects purchase decisions made in March or April, when millions of Americans were staying home to prevent the spread of the coronavirus.
“We hit a low point in the month of May, [but] it looks like quite a sharp rebound ahead,†Mr. Yun said, citing an increase in pending sales in some regions in recent weeks. “It looks like a V-shaped recovery for the housing sector.†(…)
(Haver Analytics)
Small businesses face post-lockdown cash crunch
A recent poll of 7,317 small business owners by Alignable finds that 43% of firms that received money through the Paycheck Protection Program (PPP) say they could be out of cash in a month or less.
That’s largely because they spent all of the money in the first eight weeks after receiving it so they could qualify to have the loans forgiven.
69% of small businesses that did not receive PPP funding say they expect to be out of cash reserves next month.
76% of minority-owned businesses that did not receive PPP funding say they will run out of cash in July — with 52% saying they have already depleted their reserves.
An IBM Institute for Business Value survey poll of more than 18,000 U.S. consumers in May and early June found that 21% of consumers say they’re shopping less and more than half believe the country will experience a major economic downturn over the next year or more.
This could mean spending plateaus or even declines after this month rather than accelerating. (Axios)
Macklem Sees Long Road Ahead for Canada’s Economic Recovery
(…) In his first public speech as governor, Macklem said Canada’s economy should resume growth in the third quarter as containment measures are lifted. He cautioned, however, that any recovery will be “prolonged and bumpy†and the central bank will be “laser-focused†on supporting the rebound with stimulus.
“It will be a very long period before we start discussions about removing stimulus,†Macklem said in response to questions after his speech, which he gave via video-conference to Canadian Clubs and Cercles canadiens. “It’s not a discussion we’re engaged in right now.†(…)
The bank sees the economy rebounding quickly during the first phase after governments allow normal activities to resume. But after that, the growth trajectory may be uneven and slow, since not all industries will be able to operate until a vaccine is created. (…)
The bank continues to express concern around the potential for lower inflation. Although businesses are reopening, millions of Canadians remain out of work and spending has dropped. The bank expects supply to be restored faster than demand, which could put downward pressure on prices. (…)
Macklem isn’t a fan of negative rates. The governor made sure to highlight in his speech that low rates could lead to distortions in the behavior or financial institutions, while reiterating policy makers will using asset purchases until a recovery is underway. (…)
Regulator Keeps Capital Buffer at 1% for Canada’s Big Banks
Canada’s banking regulator kept the domestic stability buffer for the biggest banks unchanged at 1% of risk-weighted assets in its semi-annual review of the capital requirement, signaling confidence in the nation’s financial system amid the coronavirus pandemic.
“Canada’s largest banks entered this downturn from a position of strength and both the quantity and quality of their capital remains strong,†the Office of the Superintendent of Financial Institutions said Tuesday in a statement. “Fiscal and monetary policy responses have helped to cushion the impact of the pandemic.†(…)
Reasons to fear the march of the zombie companies
(…) Even before the Covid-19 crisis, a decade of low interest rates helped to fuel a rise in the number of “living deadâ€: companies unable to cover their debt-servicing costs from profits in the long term. Leverage in the corporate sector has increased significantly since 2008. Deutsche Bank Securities estimates the zombies’ share of US companies alone has roughly tripled since the financial crisis to more than 18 per cent.
The pandemic has created new ones. There are also fears of a proliferation of unviable “zombie jobsâ€, kept on life support through furlough schemes. People working in sectors struggling under strict social-distancing rules, such as hospitality and retail, are especially vulnerable. (…)
Research has shown these companies are a drag on productivity growth. (…)
PANDEMONIUM
U.S. Eyes $3.1 Billion of EU, U.K. Imports for New Tariffs
The U.S. is weighing new tariffs on $3.1 billion of exports from France, Germany, Spain and the U.K., adding to an arsenal the Trump administration is threatening to use against Europe that could spiral into a wider transatlantic trade fight later this summer.
The U.S. Trade Representative wants to impose new tariffs on European exports like olives, beer, gin and trucks, while increasing duties on products including aircrafts, cheese and yogurt, according to a notice published late Tuesday evening. The statement lays out a month-long public comment period ending July 26. (…)
In October the U.S. gained the upper hand when the WTO authorized President Donald Trump to retaliate against $7.5 billion worth of EU exports in response to Europe’s illegal subsidies to Airbus SE. Next month the WTO is expected to deliver a retaliation award to the EU in its separate but related case against U.S. subsidies to the Boeing Co. (…)
“The U.S. has stepped back from the settlement talks in recent weeks,†EU Trade Commissioner Phil Hogan told European trade ministers on June 9. “If this remains the case, the EU will have little choice but to exercise its retaliation rights and impose our own sanctions.†(…)
Silicon Valley CEOs Criticize Trump’s Visa Restrictions Silicon Valley executives pushed back against President Trump’s move to suspend new immigration on several employment-based visas programs, warning it could damage the U.S. tech industry’s competitiveness and jeopardize job creation.
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Trump’s Immigration Gift to China His limits on foreign workers will send more U.S. jobs overseas.
(…) He wants America to be the world’s high-tech business hub, but then he closes off the human talent essential to stay globally competitive. (…)
As the National Foundation for American Policy recently noted, the vast majority of H-1Bs—which are capped at 85,000 a year—are for computer programming. The unemployment rate for these occupations was 2.5% in May compared to 13.3% for the entire economy. The Labor Department’s JOLTS survey found 122,000 information industry job openings in April, slightly more than the year before. (…)
Keeping out high-skilled foreign workers will hamstring U.S. innovation, aiding China’s effort to dominate artificial intelligence, semiconductors and biotech. The winners will be China’s national champions including Huawei, Baidu and Tencent.
The same goes for L-1 visas for foreign transfers in managerial positions or those requiring special skills, which provide multinationals flexibility to manage their global workforces and support American jobs. If companies can’t bring foreign managers into the U.S., they will move jobs abroad.
As for seasonal guest workers, H-2B visas are capped at 66,000 each year. Businesses must show they tried to hire American workers before applying for H-2B visas and pay at least the market “prevailing†wage. Good luck getting college students to change bed linens at Aspen hotels or mow fairways at Mar-a-Lago. (…)
Seasonal businesses can’t move jobs abroad so they will close or reduce operations if they can’t get enough workers.
This will have ripple effects on local economies—note that the top H-2B states were Texas, Colorado, Florida, North Carolina and Pennsylvania—and retard the national recovery. Mr. Trump’s immigration limits won’t help American workers even as they hurt American companies and the economy.
(…) “Innovation has always been happening, but right now it’s happening at an exponential pace†because of the pandemic, said Eva Lau, the founding partner of Two Small Fish Ventures and a long-time tech-sector leader in Toronto, including at Wattpad Corp. Mr. Trump’s move, she continued, “is putting us in the best position to capture the next generation of tech giants here in Canada.†(…)
The Council of Canadian Innovators, a lobbying group that represents more than 100 scale-up tech companies, estimates that the sector had 220,000 job vacancies before the pandemic began. That’s more than domestic workers could fill and includes positions that would benefit from experience gained elsewhere. (…)
US lawmakers consider making it easier to sue China over coronavirus
Risk of military conflict between US and China higher than ever, experts say Tensions rose after near-collision between American and Chinese destroyers, president of National Institute for South China Sea Studies says.
FYI:
Free Trades, Jackpot Dreams Lure Small Investors to Options
(…) Adding to the appeal: The contracts allow an investor to put down a relatively small amount of cash—called option premium—for a potentially outsize return if the investor’s hunch proves to be correct. The downside is that an investor can lose the premium paid should a stock or index move unfavorably.
A record 28 million options contracts have changed hands on an average day this year, a jump of 45% from last year, according to Options Clearing Corp. data.
Individuals are helping drive the surge. The percentage of options volume stemming from small trades of just one contract on 50 of the most-traded stocks has risen to 14% this year, from 10% at the end of 2019, according to an analysis by Goldman Sachs.
Online brokerages have seen big jumps in customer options activity. E*Trade Financial Corp. ETFC 1.02% reported record levels of derivatives trades, which mostly involve options, for the first quarter of 2020. Data from TD Ameritrade Holding Corp. AMTD -1.47% show daily options trades surged about 60% in the quarter ended March 31 from the previous quarter, although overall trading, including stock volumes, grew even faster. (…)
“Other than a casino, there’s nowhere else you can get a return like that,†Mr. Rodela said. “It’s much higher risk and higher reward†than stocks. (…)
Robinhood imposes fewer hurdles on options than some other brokers. New clients assess their own suitability through a questionnaire. Those who say they don’t have much of an investing background can’t open an options account initially. But users can simply revise their answers to enable trading. (