Virus Update
- The number of cases surpassed one million world-wide (1,030,600). Globally, more than 54,000 have died. Cases in the U.S. exceeded 245,000. New York state, the hardest-hit, had more than 92,000 cases. Some 5,900 people have died of the disease in the U.S.
- US accounts for 40% of rise in Covid-19 cases
- The US is now the global centre of the pandemic, with the number of new cases increasing every day, and total infections in the last week alone passing 100,000. New confirmed case counts in some European countries have started to plateau, however, and in Italy the number of new infections had begun to fall.
- The U.S. has distributed half the ventilators in its stockpile and has fewer than 10,000 on hand, far below forecast demand. President Trump used the Defense Production Act to secure supplies for the companies scrambling to build more.
- Hospitals in the U.S. scrambled to get enough critical supplies as forecasts say hospitalizations could peak as soon as mid-April, when hospitals are projected to need 88,000 more beds than are currently available.
- Health experts believe nearly one in three patients who are infected are nevertheless getting a negative test result. That assessment is based on limited data but casts doubt on the reliability of a wave of new tests rushed into use with minimal regulatory oversight and little time to do robust studies.
- Come together to beat Covid-19, Chinese scholars tell Beijing, Washington ‘As two of the great countries on Earth, cooperation between China and the US could, and should, be used to bring a more positive outcome for all humankind,’ academics say in open letter.
- Brazil’s president is determined to keep the country open for business, even as infections near 8,000, a policy drawing growing opposition.
- Churches defy coronavirus restrictions in Brazil and Africa
Covid-19 could be under control by end of April, Chinese expert says
(…) “With every country taking aggressive and effective measures, I believe the pandemic can be brought under control. My estimate is around late April,” Zhong Nanshan, who heads a Chinese team of top experts that advises the government on managing the outbreak, said in an interview with Shenzhen Television broadcast late on Wednesday.
“After late April, no one can say for sure if there will be another virus outbreak next spring or if it will disappear with warmer weather … though the virus’ activity will certainly diminish in higher temperatures,” he said. (…)
Mike Ryan, director of the World Health Organisation ’s health emergencies programme, said this week that there were signs of the outbreak stabilising in Europe as the lockdowns imposed last month started to bear fruit.
In the US, the Institute of Health Metrics and Evaluation at the University of Washington said that hospitals were likely to face the peak of Covid-19 patients around April 20. (…)
Patrick, an old friend and reader, sent me a link to The Independent discussing the potential help from warmer weather. The article offered a link to this MIT study: Will Coronavirus Pandemic Diminish by Summer?
PANDENOMICS
- The cost of the coronavirus pandemic could be as high as $4.1 trillion, or almost 5% of global gross domestic product, depending on the disease’s spread through Europe, the U.S. and other major economies, the Asian Development Bank said. A shorter containment period could limit the damage to $2 trillion, or 2.3% of world output, the Manila-based lender said in its Asian Development Outlook report released Friday. Developing Asia, including China, accounts for 22% to 36% of the pandemic’s total cost, it said. (…) “The possibility of severe financial turmoil and financial crises cannot be discounted.”
- A record 6.6 million U.S. workers applied for unemployment benefits last week. It was double the then-record number of filings a week earlier.
- Amazon.com has hired 80,000 workers in a few weeks, a bid to meet soaring demand for online orders.
The U.S. ISM Manufacturing New Orders Index is at the lowest level since 2009 and tends to lead U.S. GDP by 5 months. Image: Nordea and Macrobond
The U.S. federal government debt is on track to balloon to World War II levels.
- The European Central Bank’s 750 billion-euro ($810 billion) emergency bond-buying program is the “central pillar” of its response to the coronavirus crisis, but Europe also needs continent-wide fiscal action, Finnish governor Olli Rehn said on Friday. In a Bloomberg Radio interview, the ECB policy maker said so-called coronabonds — jointly issued debt — would be one option to help tackle the financial fallout from the outbreak. He also expressed optimism that finance ministers will agree on a joint response when they meet next week. German Finance Minister Olaf Scholz wants to reject the creation of coronabonds at a meeting of Euro area finance ministers on Tuesday, Spiegel reported, citing a Finance Ministry preparatory paper.
THE SLICK DEAL
Saudis, Russia to Debate Oil Cuts, Pushing Crude Sharply Higher An alliance of oil producers led by Saudi Arabia and Russia is set to debate production cuts of at least 6 million barrels a day Monday and consider inviting U.S. producers to participate, according to officials. Brent crude was 9% higher.
The outcome of the virtual summit between Saudi-led OPEC and 10 nations led by Russia will largely depend on a discussion Friday between the White House and U.S. oil companies.
Saudi Arabia and Russia won’t cut unless they get signals from U.S. producers they will reduce output, the officials said. But they added that official joint curbs would be more difficult to enact in the U.S. because of antitrust laws. (…)
In other media:
- A global cut of 10 million barrels a day is a realistic goal, according to a delegate, who spoke on condition of anonymity. (…) For Saudi Arabia, it’s essential that producers including the Americans join in.
- “It’s too little, too late,” said Ed Morse, head of commodities research at Citigroup Inc. “Cuts are required immediately, and unless they happen, the price is going to go down significantly and force them to happen.”
This Oil Rally Can’t Last Crude prices, ignited by President Trump on Thursday, could plumb new lows
(…) There is a surplus of perhaps 20 million barrels a day today that already is causing strains in the market for storage and shipping. Pipelines and supertankers are sending crude to refiners who really don’t want it because demand for gasoline and jet fuel has cratered.
The priority may soon be simply getting rid of oil, even if prices go well below their recent 18-year low. Analysts at Citigroup expect prices to test $10 this month. Shutting in some fields—effectively, pausing production—just isn’t possible in a matter of weeks, which means that pressure on the physical market will get worse, not better, whatever agreements might be reached. (…)
U.S. output eventually will sputter on its own due to lack of investment in capital-intensive shale fields, but it may keep steady for several weeks even as more companies go bankrupt.
If the crisis continues, as seems likely, the U.S. industry that Mr. Trump appears so eager to bolster will do a large part of the cutting. No shale well can be drilled profitably at these prices and America’s already-creaky infrastructure for moving oil is buckling. The output drop probably will be a lot worse than during the 2014-16 bear market—and the recovery longer.
I have been calling for a “slick” deal. It’s the slang use of slick meaning clever but with a negative connotation, a smart but untrustworthy cheater if you will. Cheating is in OPEC’s ADN and Russia fitted very well in when it created OPEC+ a few years ago. Let’s see what actually comes out today and next Monday.
It actually will not have much impact short term as destroyed world demand has already filled just about every available storage capacity, inland or floating. When will demand come back is anybody’s guess. This Bloomberg chart sums up the problem. The solutions are far from obvious…
Why Canada’s banks have no plans to suspend dividends despite a global trend of cuts
(…) Canadian banks made it through the last financial crisis with dividends intact, and they have built generous capital reserves since then. They have also treated the payouts as more or less sacrosanct: Steady dividends serve as signals of health in a banking system and stopping the payouts can erode confidence. Dividends also provide a flow of income to a wide array of investors, including retirees, at a time when low interest rates have sapped returns on bonds. (…)
Canada’s Office of the Superintendent of Financial Institutions, has told domestic banks not to increase dividends or buy back shares, but has made no effort to reduce payouts. And so far, bank executives are telling investors not to worry. (…)
Toronto-Dominion Bank has “more than adequate capital” to confront the crisis, Mr. Masrani said. He suggested Canadian banks’ conservative appetites for risk, and tendency to avoid some of the most risky lending undertaken by global banks, give them an extra margin of safety.
(…) bankers and regulators are keenly aware that bank stocks are widely held by millions of Canadians, some of whom depend on them as retirement income. Some worry that cutting off dividends could worsen the economic hardship from the crisis.
“About 77 [per cent] to 80 per cent of our shareholders are Canadian, either institutional or retail, so the construct of our shareholder base is very different than would be a European bank,” said Bank of Nova Scotia CEO Brian Porter on Tuesday. Mr. Porter and Bank of Montreal CEO Darryl White both said they have no plans to slash their banks’ dividends. (…)
On average, the banks have a common equity Tier 1 (CET1) ratio of 11.6 per cent – a key measure of a bank’s resilience – or 2.6 per cent above the minimum level set by OSFI. (…)
OSFI has already freed up an estimated $300-billion in lending capacity by lowering the domestic stability buffer, which serves as an extra cushion of capital amassed in good times, by 1.25 percentage points. Officials from the regulator said they have leeway to reduce the buffer further if necessary to free up more capital. (…)
“The biggest challenge is trying to understand how long the crisis is going to be, and then trying to overlay what will be essentially an unprecedented level of government support and trying to understand how this will impact the recovery,” said Mark Hughes, a former chief risk officer at Royal Bank of Canada who now chairs the Global Risk Institute in Toronto. (…)
“The Canadian banks do not have the bad reputation that the European and the U.K. banks have got, so it’s not like the government can lean on them and say, ‘Look, we’ve bailed you out, you’re bad guys, do what we say, you’ve got to rebuild your reputation,'” Mr. Booth said. “So that moral suasion component is missing in Canada.”
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