Virus Update
- Cases top 549,600; 24,361 dead, 127,531 recovered
- The total number of infections in the United States, more than 85,000, for the first time exceeded those in China. More than 1,200 Americans have died as the outbreak spread exponentially into new territory in the Midwest and the South.
- New York City, where 385 people have died, remains the hardest hit by the virus. But Michigan, which had only 350 cases a week ago, now has more than 3,000. The mayor of Los Angeles and the governor of Louisiana both warned that their populations were following the same path as New York.
- ‘I don’t believe you need 40,000 or 30,000 ventilators’: Trump questions New York’s plea for critical equipment
- Cases in Germany rose to 43,039 on Friday from 37,179, while the death toll jumped to 262 deaths from 203, based on Bloomberg-compiled data. In a worst-case scenario based on limited government action, 70% of the German population would swiftly be infected and the death toll would exceed 1 million, Der Spiegel magazine reported, citing an internal interior ministry study.
- Indonesia reported the biggest daily jump in new coronavirus infections with the total number of confirmed cases topping 1,000.
- Africa is inching toward a shutdown of its sea, land and air borders. A majority of its 54 nations have banned flights from countries with at least 100 coronavirus cases or temporarily closed their domestic and international airports. Most sea ports still allow cargo vessels, but passengers and crews from cruise ships are barred.
PANDENOMICS
Washington’s Trillions Alone Can’t Stop the Jobpocalypse A record surge in U.S. jobless claims is a foretaste of even worse numbers with a danger of cascading losses
The Labor Department on Thursday reported the number of American workers filing new claims for jobless benefits last week rose to 3.28 million from 282,000 a week earlier. Nothing in the 53-year history of the series comes close. In the worst week of 2009, when the job market was reeling, initial claims hit 665,000.
Worse, the 3.28 million in new claims doesn’t reflect all the people who were pushed out of jobs last week as the novel coronavirus crisis emptied out Main Streets and shut businesses down. (…)
The Second Virus Shockwave Is Hitting China’s Factories Already
Since last week, emails from foreign clients have been flooding into export manager Grace Gao’s in-box, asking to delay orders already made, putting goods ready to be shipped on hold until further notice, or asking for payment grace periods of up to two months. (…)
“It’s a complete, dramatic turnaround,” lamented Gao, estimating sales in April to May will plunge as much as 40% from last year. “Last month, it was our customers who chased after us checking if we could still deliver goods as planned. Now it’s become us chasing after them asking if we should still deliver products as they ordered.”
This emerging pattern poses a grave risk to the chances the world’s second-largest economy can repair the damage from the closures in February to curb the virus. (…)
Goldman Sachs:
We expect global real GDP to contract by 1.2% this year, making 2020 weaker than the year following the Global Financial Crisis. We expect the global recession to be front-loaded, with a recovery in H2, assuming that the physical constraints on economic activity gradually loosen towards the end of Q2. But the risks to our forecasts are skewed to the downside, mainly because it may take longer than we expect to slow new infections.
In the US, we now expect virus mitigation measures will lead to an exceptionally sharp near-term contraction in economic activity. We forecast US growth to decline by 3.7% yoy in 2020, with virus impacts lessening over H2, although the exact timing of the recovery is highly uncertain.
In the Euro area, we expect that the coronavirus outbreak will lead to a 9% yoy decline in growth in 2020, owing to a large H1 contraction.
In China, we forecast 3% yoy GDP growth in 2020, though this assumes the pandemic comes under control over the next few months.
From the Conference Board:
Rosenberg: Silver linings and why a depression may now be averted
(…) There actually is a chance, just based on the numbers alone, that all of this infusion of money into the economy helps stem the recession in its tracks in the second quarter, and blaze the trail for a sharp recovery, believe it or not.
Just as everyone, even the bulls, have thrown in the towel on the V-shaped recovery, maybe that now becomes the big surprise. (…)
The FDR New Deal was US$800-billion in today’s dollars. The Reagan tax cuts came to US$170-billion annually. The Bush tax cuts amounted to US$150-billion at an annual rate. The Obama infrastructure package in 2009/10 was barely over US$80-billion per year. The ballyhooed Trump tax cuts of 2018 came to US$150-billion annually.
We are talking about at least US$2-trillion and it is immediate, not spread out over ten years as other big stimulus plans have been constructed. Assuming we see real GDP come in at negative 1 per cent for Q1 at an annual rate and say negative 20 per cent for Q2, we will have driven a US$1.3-trillion hole in the economy. That is a massive shock. If real GDP collapses 30 per cent in Q2 as some now suggest, that would be a US$1.5-trillion hit.
But the fiscal stimulus way more than offsets that big downside hit and enters the economy with little or no lags. This goes beyond income replacement — it provides a bonus to the economy, together with loan guarantees that should remove a lot of the bond default risk. So, if anything, the economy may well come out of this with a net gain of between US$500-billion and US$1-trillion. Then slap on the fact that we are going to be left with a super-accommodative Fed policy for an extended period of time, with zero rates and open-ended quantitative easing as far as the eye can see.
So, could it be the case, actually, that once this bill passes, we end up with a fiscal stimulus that actually swamps the shock. The key will be (i) when do we go back to work and (ii) how much caution will there still be from the lingering virus. The answer to (i) is when there is a flattening in the “case curve”and evidence that we have a surplus, instead of a deficit, of hospital beds so the very sick can actually be treated and (ii) this will be evident in what the savings rate does — will consumers revert to their pre-shock behavior or will they withdraw at the margin because of lingering concern of contracting the virus (will people be that quick to travel again)? (…)
OPEC ++ The Coming Slick Deal
Russia calls for new enlarged OPEC deal to tackle oil demand collapse
A new OPEC+ deal to balance oil markets might be possible if other countries join in, Kirill Dmitriev, head of Russia’s sovereign wealth fund said, adding that countries should also cooperate to cushion the economic fallout from coronavirus. (…)
Dmitriev and the Energy Minister Alexander Novak were Russia’s top negotiators in the production cut deal with OPEC. The existing deal expires on March 31.
“We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets.” (…)
“Efforts to restore relations between Russia and the United States are now as important as ever, we will take all the efforts our side and hope the United States will also understand that this is necessary,” he said. (…)
Earlier this week, Reuters reported that last Monday, the U.S. fast-tracked the appointment of Victoria Coates as a special energy representative to Saudi Arabia.
The Trump administration will appoint Victoria Coates as special energy representative to Saudi Arabia as Washington struggles to deal with a global oil price crash dragging on the economy and threatening U.S. energy producers, an Energy Department official said on Monday.
Coates, who was one of President Donald Trump’s longest-serving security aides, moved from the White House in February to become a senior adviser to Energy Secretary Dan Brouillette.
“Coates will be based in Saudi Arabia to ensure the Department of Energy has an added presence in the region,” the official said. “While her assignment comes at a pivotal time for global oil markets, it has been in the works for a while.” (…)
On Monday, Brouillette said the Trump administration would soon make a diplomatic push on stabilizing energy markets.
He told Bloomberg TV that a U.S.-Saudi oil alliance was one of “many, many ideas” that had been discussed, but no decisions have been made on “anything of that nature.”
What needs to be done is find ways by which the U.S. can “join” the OPEC club without triggering anti-trust accusations…
Corporate Insiders Are Betting on a Rebound in Stocks Corporate insiders are buying stock in their own companies at a pace not seen in years, a sign they are betting on a rebound after a coronavirus-induced rout.
More than 2,800 executives and directors have purchased nearly $1.19 billion in company stock since the beginning of March. That’s the third-highest level on both an individual and dollar basis since 1988, according to the Washington Service, which provides data analytics about trading activity by insiders.
The insiders spent more money in the first 24 days of the month than they did during the entire three-month stretch from December through February, the data show—and more than five times the monthly average of about $235 million. (…) the number of individuals buying stock is the most since November 2008, during the global financial crisis. (…)
Insiders from 1,201 companies have purchased shares so far this month, far outpacing the 685 companies where insiders sold. In February, insiders at only 558 companies purchased shares, while those at 1,036 companies sold, according to the Washington Service. (…)
“Insiders think [the market downturn] is going to be temporary—they don’t think this is going to be a permanent dent,” said Nejat Seyhun, a finance professor at the University of Michigan who has studied insider activity for decades. “China solved the [coronavirus] problem, South Korea solved the problem, and they already showed us what to do to solve the problem.”
Insiders “seem to think that this doesn’t justify a 30% fall in stock prices,” Dr. Seyhun added. (…)
Interesting, but be aware that insiders were also very active buyers in the fall of 2007, and again the fall of 2008.
Number of inside buyers purchasing company shares, monthly
Also, energy insiders seem to have been particularly active recently, maybe because they also see an end to this stupid price war. We don’t know how many non-energy insiders are buying.
Insiders within the energy and materials sectors have appeared particularly bullish this month, according to an analysis by Ned Davis Research Inc., which used data from Refinitiv. Dr. Seyhun, the University of Michigan professor, said his own analysis of insider activity similarly shows elevated levels of buying within those sectors.
“I’ve never seen a number like that before,” Dr. Seyhun said, referring to the buy-to-sell ratio that he calculated for the energy sector. Beyond Marathon Oil, insiders at companies including Exxon Mobil Corp., Sunoco LP and Continental Resources Inc. have also purchased shares. He said the increased level of buying may signal that energy executives believe “the oil price war is not going to last too long.”
U.S., China Trade Blame for Virus, Hampering Global Economy Rescue The frayed relationship between the two governments contrasts with the way Washington and Beijing cooperated during the financial crisis.
Chinese President Xi Jinping has been on a telephone spree this month, dialing the leaders of coronavirus-battered France, Italy, Spain and Germany with offers of support including masks and other medical equipment. For weeks, the one phone number he hadn’t tried was Donald Trump’s.
The leaders of the world’s two biggest economies finally spoke by phone in a call Mr. Trump initiated, according to China’s official Xinhua News Agency on Friday. (…)
After the call Mr. Trump tweeted, “Just finished a very good conversation with President Xi of China. Discussed in great detail the CoronaVirus that is ravaging large parts of our Planet.” The president, who along with other U.S. officials had been referring to the virus as the “China virus” or “Wuhan virus,” also said he was working closely with Mr. Xi.
“Under current circumstances, China and the U.S. must unite to fight the virus,” Mr. Xi was quoted by Xinhua as telling Mr. Trump. Bilateral relations are at a crucial juncture, Mr. Xi said, adding “Cooperation is the only right choice.” (…)
A relationship that helped pull the world out of a global recession a decade ago now is on the rocks, with Mr. Xi looking to score points by courting Washington’s allies and Mr. Trump ignoring appeals to use the crisis to turn away from protectionism. (…)
On Tuesday, G-7 finance ministers and central bankers conferred and released a statement stressing their commitment to do “whatever is necessary” to restore confidence and ultimately revive economic growth. The G-20 statement on Thursday largely repeated that pledge.
A separate meeting of G-7 foreign ministers ended without a joint statement, because members refused to go along with a U.S. request to refer to the novel coronavirus as the “Wuhan virus,” according to an official familiar with the matter. (…)
The South China Morning Post’s account is somewhat different (my emphasis):
“The virus knows no boundaries and ethnicity, and it is our common enemy. The international community can only defeat it through working together.
“The relationship of China and the US is at a critical juncture. Cooperation is mutually beneficial to both nations, while fighting will hurt. Cooperation is the only correct choice.
“It is hoped that the United States will take concrete actions to improve China-US relations, and the two sides will work together to strengthen cooperation in areas such as epidemic control,” he said.
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Donald Trump signs TAIPEI Act to support Taiwan’s international relations
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U.S. Moving Forward With Rule to Limit Chips to Huawei The Trump administration is moving ahead with new restrictions aimed at cutting off Chinese telecom-equipment maker Huawei from one of its main suppliers of advanced semiconductors, according to people familiar with the situation.