Virus Update
LOG SCALE
- Total world Cases reach 472,109; 21,308 dead, 114,870 recovered
- Over 1,000 people in the U.S. have died from the coronavirus. That puts the U.S.’s death toll just behind France, which has 1,331 deaths. Italy has suffered the highest death toll in the widening global pandemic, with more than 7,500 deaths as of Thursday.
- In Canada, the number of confirmed cases rose to 3,385, an increase of 72% over the course of the day. There were 35 deaths, a rise of roughly 30%. It was not immediately clear if improvements in testing contributed to the spike in cases.
- Spanish doctors are forced to choose who to let die from virus
- Fatalities from novel coronavirus infection in Indonesia jumped to 78, the most in Southeast Asia, as the world’s fourth-most populous nation continues to see a surge in fresh cases. The total number of peopled infected rose to 893 on Thursday from 790 a day earlier. The number of new infections topped 100 for a third consecutive day.
- Malaysia added 235 confirmed cases of the new coronavirus, the biggest daily jump so far, after Prime Minister Muhyiddin Yassin decided to extend the lockdown until April 14. And Hong Kong reported 43 additional cases, the second biggest daily jump in confirmed cases.
- Thailand, a Southeast Asian country now entering what’s traditionally one of its hottest periods of the year, saw total cases surpass 1,000 following confirmation of 111 new cases Thursday.
- Moscow reported a sharp increase in the number of cases, with the total jumping by a third over the last day to 546. The national total rose to 840.
- Tokyo confirmed more than 45 additional coronavirus cases Thursday. That exceeded the count of 41 for the previous day. The city has become the new center of coronavirus cases in the country, overtaking Hokkaido as the area with the most infections. The jump comes as the annual cherry blossoms appear across the capital, bringing crowds out for traditional viewing celebrations in public parks.
- WHO Issues a Rare Public Scolding, Saying Countries Wasting Time
Robert Bosch GmbH said it developed a test that can diagnose Covid-19 in less than 2.5 hours and might help efforts to fight the coronavirus outbreak.- U.K.-based Mologic Ltd. has sent prototypes of a 10-minute coronavirus test to laboratories for validation before it can begin full-scale manufacturing. The company and its partner, the Senegalese research foundation Institut Pasteur de Dakar, have developed a finger-prick test to determine whether a person had the illness and the state of his or her immune system. The company is also working on a separate saliva test to detect the presence of the virus.
Up to 10 per cent of recovered virus patients in Wuhan study test positive
About 3 to 10 per cent of patients who recovered from Covid-19 tested positive again after being discharged from hospital, doctors in Wuhan have found.
Researchers around the world are trying to determine whether recovered patients can still infect people with the coronavirus that causes the disease and if they have developed antibodies offering them immunity to the disease.
Doctors from Tongji hospital in the city, where the disease was first identified, told state broadcaster CCTV that they have found no evidence that these patients who again tested positive became infectious , based on close observations of their family members and laboratory tests. (…)
These incidents have raised questions about whether nucleic acid tests might not be reliable in detecting traces of the virus in some of the recovered patients.
Some experts have also expressed concerns about the sensitivity and stability of the test kits, and the collection and handling of patients’ samples.
(…) he said it was imperative for recovered patients to stay in isolation for two weeks after discharge so they could be tested again for confirmation.
Hospital Capacity Crosses Tipping Point in U.S. Coronavirus Hot Spots The relentless climb in the Covid-19 infection rate is forcing some hospitals in hot spots to move patients to outlying facilities, divert ambulances and store some bodies in a refrigerated truck.
Europe Opts for Economic Freeze in Coronavirus Tradeoff As the new coronavirus gained momentum in Europe, reluctant nations coalesced around a strategy: freeze economies now and worry about the bill later.
Package Limits Damage, Not Restore Economy Economists say rapid payments are essential, and further measures would be needed to aid households, firms
(…) “As big as this is, you’ll never look back on this and say, ‘We went too big.’ You’ll look back and say, ‘What did we miss?’” said Diane Swonk, chief economist at Grant Thornton. “A number of people that are hurt will be hurt longer than this package will last.”
At more than 9% of gross domestic product, the measure is larger than the three major packages enacted to counter the 2007-09 recession, said Ernie Tedeschi, an economist at Evercore ISI. Even so, more will be needed, he said.
“The scale of the problem is accelerating, and it’s moving faster than fiscal policy makers are acting,” Mr. Tedeschi said. (…)
“All of these different measures are meant to plug the holes in the boat, if you will, as opposed to trying to speed things up,” said Wells Fargo economist Michael Pugliese.
Plugging the boat will take time. Trump administration officials said they hope to begin making the first payments to households within a few weeks. During the last downturn, it took more than two months. (…)
Payments to households, estimated to total $300 billion, would likely come in waves, first to people whose information the government already has, such as federal benefit recipients and people who file regular tax returns. Harder to reach may be the most vulnerable: people who don’t file taxes because their income is too low.
The payments might be delayed by the burden they place on an underfunded Internal Revenue Service, with a workforce strained by the pandemic and unable to staff taxpayer assistance centers.
One of the potentially most helpful pieces of the bill, economists said, is a broad expansion in unemployment insurance. The measure would extend benefits to gig economy workers and freelancers and would increase current unemployment assistance by $600 a week for four months.
The launch of a new program under the Small Business Administration would also take time to distribute $350 billion in loans to companies with fewer than 500 employees. Employers who keep paying workers through the downturn could have the loans forgiven.
Once the program is established, the SBA would then have to assess the eligibility of borrowers. Firms would need to prove the size of their workforce and their previous payroll expenses to determine loan sizes. (…)
“The number of people that are hurt will be hurt longer than this package will last,” said Ms. Swonk of Grant Thornton.
Of particular concern is the impact on state budgets later in the year, Ms. Swonk said. The bill provides additional money to states for expenses related to the coronavirus, but that may not be enough.
A sharp rise in unemployment could cost states billions in lost revenues and higher benefit spending, forcing them to scale back budgets for the next fiscal year and weighing on economic growth.
“You don’t want to have this major setback just as you’re starting to ramp up,” Ms. Swonk said.
Goldman Sachs:
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To put this figure in context, we expect economic output to decline by roughly $700bn in 2020 from the 2019 level, or roughly $1.2 trillion compared to an assumption of trend growth. (…)
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The legislation is unlikely to substantially change the short-term outlook for growth, as the 6% (24% at an annualized rate) decline in output we expect in Q2 is driven by the physical constraints on economic activity imposed by social distancing requirements and other efforts to reduce the spread of the virus. However, these programs should reduce the medium-term damage to affected businesses and the labor market, and should allow for a faster recovery in Q3, assuming that measures to contain the spread of the virus have been loosened by that point.
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Why $2 Trillion Could Be Just the Start
(…) Small businesses, in particular, have emerged as the epicenter of this crisis. There are millions of them and they employ about half of the U.S. workforce. The expected $350 billion in loans that the package apportions to small businesses may be insufficient.
The biggest problem is that until the spread of the novel coronavirus is contained, the economic damage it is wreaking will continue. Businesses that have closed as a result of the virus aren’t going to open until state and local governments deem it safe, and many of them won’t log much in the way of sales until their customers feel the same way. (…)
Canada Nearly Doubles Fiscal Package, Warns of ‘Enormous’ Job Losses
(…) Mr. Morneau said the package, targeting income-strapped households, is now budgeted at 52 billion Canadian dollars ($35.88 billion) versus the original C$27 billion.
Along with the income support, the government will defer tax payments of C$55 billion, for a total short-term financial injection of C$102 billion, or nearly 5% of Canada’s gross domestic product. (…)
Mr. Trudeau said his government was “absolutely looking at more direct help” for businesses.
Canadian officials are working on a financial package for the energy sector, which is contending with both a plunge in economic activity and increased output from Saudi Arabia, according to people familiar with the situation. The premier of Alberta, the oil-rich Canadian province, said the oil-and-gas sector requires government support topping C$10 billion. (…)
Retailers Cancel Orders From Asian Factories, Threatening Millions of Jobs Retailers in the U.S. and Europe are suspending and canceling clothing orders, threatening millions of factory jobs in Asia just as China shows signs of recovering from the worst of the coronavirus outbreak.
US urges Saudi Arabia to ‘rise to the occasion’ and end its oil price war with Russia
In a statement released by the U.S. State Department Wednesday, a spokesperson confirmed that Secretary Mike Pompeo had spoken with Saudi Crown Prince Mohammed bin Salman on Tuesday.
“Secretary Pompeo and the Crown Prince focused on the need to maintain stability in global energy markets amid the worldwide response,” the statement said.
“The Secretary stressed that as a leader of the G-20 and an important energy leader, Saudi Arabia has a real opportunity to rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty,” it added. (…)
(…) The TD report notes that global cuts in corporate budgets will likely be much greater, particularly when factoring in cuts from major oil companies. Five of those – Royal Dutch Shell PLC, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA – have collective annual spending of US$100-billion on upstream operations. (…)
PANDENOMICS
Stocks are Still Pricing an Optimistic Version of the Coronavirus Crisis A bounce in global equities has left the S&P down by 23% for the year. That is a lot, but investors might want to consider whether it could get worse.
(…) But even if there are no major financial icebergs lurking beneath the surface—by no means guaranteed—markets still appear too sanguine on the real shock to the U.S. economy.
(…) St. Louis Federal Reserve economists estimate that 52.8 million Americans could be unemployed next quarter. That is 32.1% of the labor force, a ninefold increase in joblessness.
Even presuming that 90% of the workers furloughed return to their previous jobs in a few months at previous salaries and that the businesses they work for resume exactly their previous health, that would leave an unemployment rate of something like 6% based on the size of the labor force now. That level of unemployment was last seen in mid-2014, when the S&P 500 was struggling to break north of 2000. (…)
Research suggests that even after relatively short bouts of unemployment, workers keep their consumption lower to rebuild financial buffers eroded during their joblessness.
We still know uncomfortably little about the virus and, more important, about the efficacy of the various methods employed to halt its spread. But most scenarios look worse than the one markets appear to be anticipating. Secondary outbreaks in regions that appear to be past the worst, or even to have defeated the epidemic, are a grim possibility. (…)
And at 14.4 times earnings for the next 12 months, the S&P 500 is still priced close to its 15-year average, nowhere near the lows reached in 2011, when that multiple fell to as low as 10. (…)
A greater depression?
This is from Nouriel Roubini. The media will trip over each other to publish this and interview Dr. Doom and he will happily obliged. Hopefully, Roubini has changed since 2009-10 when he displayed much superior aptitudes to marketing than to factual economic analysis.
(…) The contraction that is now underway looks to be neither V- nor U- nor L-shaped (a sharp downturn followed by stagnation). Rather, it looks like an I: a vertical line representing financial markets and the real economy plummeting.
The best-case scenario would be a downturn that is more severe than the GFC (in terms of reduced cumulative global output) but shorter-lived, allowing for a return to positive growth by the fourth quarter of this year. In that case, markets would start to recover when the light at the end of the tunnel appears. (…)
Unfortunately for the best-case scenario, the public-health response in advanced economies has fallen far short of what is needed to contain the pandemic, and the fiscal-policy package currently being debated is neither large nor rapid enough to create the conditions for a timely recovery. As such, the risk of a new Great Depression, worse than the original – a Greater Depression – is rising by the day. (…)
Moreover, the fiscal response could hit a wall if the monetization of massive deficits starts to produce high inflation, especially if a series of virus-related negative supply shocks reduces potential growth. And many countries simply cannot undertake such borrowing in their own currency. Who will bail out governments, corporations, banks, and households in emerging markets?
In any case, even if the pandemic and the economic fallout were brought under control, the global economy could still be subject to a number of “white swan” tail risks. With the US presidential election approaching, the COVID-19 crisis will give way to renewed conflicts between the West and at least four revisionist powers: China, Russia, Iran, and North Korea, all of which are already using asymmetric cyberwarfare to undermine the US from within. The inevitable cyber attacks on the US election process may lead to a contested final result, with charges of “rigging” and the possibility of outright violence and civil disorder.
Similarly, as I have argued previously, markets are vastly underestimating the risk of a war between the US and Iran this year; the deterioration of Sino-American relations is accelerating as each side blames the other for the scale of the COVID-19 pandemic. The current crisis is likely to accelerate the ongoing balkanization and unraveling of the global economy in the months and years ahead.
This trifecta of risks – uncontained pandemics, insufficient economic-policy arsenals, and geopolitical white swans – will be enough to tip the global economy into persistent depression and a runaway financial-market meltdown. After the 2008 crash, a forceful (though delayed) response pulled the global economy back from the abyss. We may not be so lucky this time.
TECHNICALS WATCH
Lowry’s Research issued a ST buy signal yesterday for “a staged buy program by aggressive investors. (…) more conservative investors may wish to wait for a 32 point drop in Selling Pressure from its most recent high, currently at 231 before beginning a staged buy program.”
This will be a very volatile market as algos attempt to “machine learn” a global pandemic…
(…) Americans invested in stocks through 401(k)s and other retirement accounts may be unaware that they are part of a small minority of investors who are in it for the long run. Guy De Blonay, a fund manager at Jupiter Asset Management, said 80% of the stock market was controlled by machines during the selloff in 2018’s fourth quarter. In 2017, analysts at J.P. Morgan said “fundamental discretionary traders” accounted for only 10% of stock trading volume. (…)
The 13/34–Week EMA Trend Chart sell signal was a little late but it is nonetheless a “cyclical bear market” signal.
Also late:
The 200-d m.a. has turned down:
At yesterday’s close:
G-7 Meeting Ends in Disagreement Over Coronavirus Name U.S. wanted a statement referring to the coronavirus as the ‘Wuhan virus.’ Other nations disagreed.
(…) The State Department is using the hashtag #WuhanVirus on Twitter. (…) “This isn’t a time for blame; this is a time to solve this global problem. We are focused on that today,” Mr. Pompeo told reporters. (…)
Mr. Pompeo reiterated his previous criticism of China for what he called a disinformation campaign about the virus. He also said that Chinese authorities still were withholding information about the outbreak that started in Hubei province. (…)