THE DAILY EDGE: 1 MAY 2020: Whatever It Takes

Coronavirus Pandemic Likely to Last Two Years, Report Says

The coronavirus pandemic is likely to last as long as two years and won’t be controlled until about two-thirds of the world’s population is immune, a group of experts said in a report.

Because of its ability to spread from people who don’t appear to be ill, the virus may be harder to control than influenza, the cause of most pandemics in recent history, according to the report from the Center for Infectious Disease Research and Policy at the University of Minnesota. People may actually be at their most infectious before symptoms appear, according to the report. (…) (Bloomberg)

Hubei province, the epicenter of China’s Covid-19 outbreak, will lower its emergency response to the virus to the second-highest level from May 2, according to CCTV and Xinhua. That comes after Beijing also announced it will lower its municipal emergency response to the coronavirus outbreak to the second-highest level, from the highest level now.

Three-fifths of new coronavirus cases in China show no symptoms

U.K.’s Virus Death Toll Draws Scrutiny The U.K.’s official death count from the new coronavirus is rapidly rising toward that of Italy, Europe’s worst-hit country so far.

PANDEMONIUM

We knew that was coming. Whatever happens, this will be very messy.

Trump threatens new tariffs on China in retaliation for coronavirus

(…) Two U.S. officials, speaking on condition of anonymity, said a range of options against China were under discussion, but cautioned that efforts were in the early stages. Recommendations have not yet reached the level of Trump’s top national security team or the president, one official told Reuters.

“There is a discussion as to how hard to hit China and how to calibrate it properly,” one of the sources said as Washington walks a tightrope in its ties with Beijing while it imports personal protection equipment (PPE) from there and is wary of harming a sensitive trade deal.

Trump made clear, however, that his concerns about China’s role in the origin and spread of the coronavirus were taking priority for now over his efforts to build on an initial trade agreement with Beijing that long dominated his dealings with the world’s second-largest economy. (…) “The virus situation is just not acceptable.” (…)

Asked whether he would consider having the United States stop payment of its debt obligations as a way to punish Beijing, Trump said: “Well, I can do it differently. I can do the same thing, but even for more money, just by putting on tariffs. So, I don’t have to do that.” (…)

A senior Trump administration official, speaking on condition of anonymity, said on Wednesday that an informal “truce” in the war of words that Trump and Xi essentially agreed to in a phone call in late March appeared to be over. (…)

ZeroHedge adds this (ZH emphasis):

(…) Trump made his initial threats from the Rose Garden at the White House Monday after he was pressed by a reporter over a German newspaper report suggesting that China should be issued a $160 billion invoice for the impact on Europe’s economy.

The president responded he had a “much easier” idea:

“We have ways of doing things a lot easier than that,” Trump told the coronavirus press briefing. “Germany’s looking at things, and we’re looking at things, and we’re talking about a lot more money than Germany’s talking about.”

“We haven’t determined the final amount yet. It’s very substantial,” Trump added, suggesting it would be significantly more than the $160 billion floated in German media.

Asked whether he was considering the use of tariffs or even a debt write-offs for China (something which Larry Kudlow vehemently rejected earlier on Thursday), Trump would not offer specifics.

“There are many things I can do,” he said. “We’re looking for what happened.”

Since then various plans have been proposed, but Trump escalated the war of words further, during an Oval Office interview with Reuters  published Wednesday night,  saying that he thinks that China is determined to see him lose the November election based on Beijing’s response to the coronavirus, and that he is considering various ways to punish the Chinese government which he he again blamed for allowing the virus to spread across the world.

“China will do anything they can to have me lose this race,” Trump said in the interview and said he was looking at different options in terms of consequences for Beijing over the virus. “I can do a lot,” he said.

And tonight, Bloomberg reports that, after months of pressure from concerned lawmakers, according to a person familiar with the internal deliberations, the Trump admin is planning an executive order to block a 2017 decision that The Thrift Savings Plan, the federal government’s retirement savings fund, would transfer a massive $50 billion to an international fund which would mirror the MSCI All-Country World Index.

The issue being China’s addition to the index, and thus the fund being forced to allocate significant capital to the Chinese stock markets, at a time when the gloves between the two nations are clearly off.

Needless to say, the optics of the US halting capital from entering China would be staggering and could result in a reversion of China-bound capital flows across all Western countries until the current war of words between Trump and Xi rages. The only problem is that, as we noted yesterday, this particular war of words could last a long time, since there is no longer any impetus to kiss and make up, and if anything, Trump will only escalate the anti-China sentiment into the election (and after), to keep pounding that the collapse resulting from the coronavirus pandemic is not his fault, but rather’s Beijing, even as China pursues a mirror image approach, blaming the US for launching the pandemic.

• WHO ‘not invited’ to join China’s COVID-19 investigations China has refused repeated requests by the World Health Organisation to take part in investigations into the origins of COVID-19, the WHO representative in China has told Sky News.

U.S. Probes University of Texas Links to Chinese Lab The Education Department has asked the University of Texas System to provide documentation of its dealings with the Chinese laboratory U.S. officials are investigating as a potential source of the coronavirus pandemic.

The request for records of gifts or contracts from the Wuhan Institute of Virology and its researcher Shi Zhengli, known for her work on bats, is part of a broader department investigation into possible faulty financial disclosures of foreign money by the Texas group of universities.

The Education Department’s letter, reviewed by The Wall Street Journal, also asks the UT System to share documents regarding potential ties to the ruling Chinese Communist Party and some two dozen Chinese universities and companies, including Huawei Technologies Co. and a unit of China National Petroleum Corp. (…)

The Wuhan lab has come under scrutiny from U.S. officials who accuse Beijing of withholding information about the origins of the outbreak, which was first detected in Wuhan. (…)

The Education Department’s investigation into the UT System’s disclosures is part of a continuing national review begun in 2019 that the department says has prompted universities to report more than $6.5 billion in previously undisclosed foreign funding. Officials have sent letters to at least eight other schools, including Harvard and Yale Universities, who have said they are responding to the inquiries. (…)

The Education Department has accused schools of actively soliciting money from foreign governments, companies and nationals hostile to the U.S. (…)

The NIH added: “Please note, scientific research indicates that there is no evidence that suggests the virus was created in a laboratory.”

Today’s FT front page:

Trump says he is confident Covid-19 came from Wuhan lab US president fails to back up claim thought by scientists to be unlikely

• In Rare Move, U.S. Intelligence Agencies Confirm Investigating if Coronavirus Emerged From Lab Accident No concrete evidence has emerged to support the theory; China has repeatedly denied it

The U.S. intelligence community publicly confirmed it is trying to determine whether the coronavirus may have escaped from a laboratory in Wuhan, the city where the pandemic began.

In an unusual public statement, the Office of the Director of National Intelligence, or ODNI, also said that U.S. intelligence agencies concur with the broad scientific consensus that “the Covid-19 virus was not manmade or genetically modified.”

But ODNI, which coordinates the work of 17 U.S. spy agencies, said U.S. intelligence “will continue to rigorously examine emerging information and intelligence to determine whether the outbreak began through contact with infected animals or if it was the result of an accident at a laboratory in Wuhan.” (…)

President Trump said Thursday that he has seen intelligence that linked the Wuhan Institute of Virology with the origin of the virus. “Yes, I have,” he said in answer to a question at the White House about whether he has seen such intelligence. Asked to elaborate, he said: “I can’t tell you that, I’m not allowed to tell you that.” (…)

In mid-April, Army Gen. Mark Milley, chairman of the Joint Chiefs of Staff, said U.S. intelligence officials had taken a hard look at evidence regarding possible involvement by Chinese laboratories. “And I would just say at this point it’s inconclusive, although the weight of evidence seems to indicate natural. But we don’t know for certain,” he said. (…)

Former U.S. intelligence officials have said that definitively concluding the precise origins of the virus outbreak will be difficult, if not impossible, intelligence tradecraft alone.

To do so would require finding “a smoking gun,” said Glenn Gerstell, former general counsel of the National Security Agency. “I wouldn’t be surprised if we never end up with the actual definitive answer,” he said during an online event sponsored by George Mason University’s Hayden Center.

The WaPO has been on this for several weeks:

Chinese lab conducted extensive research on deadly bat viruses, but there is no evidence of accidental release

(…) On Thursday, the U.S. intelligence community released an assessment formally concluding that the virus behind the coronavirus pandemic originated in China. While asserting that the pathogen was not man-made or genetically altered, the statement pointedly declined to rule out the possibility that the virus had escaped from the complex of laboratories in Wuhan that has been at the forefront of global research into bat-borne viruses linked to multiple epidemics over the past decade. (…)

Many scientists argue that the evidence tilts firmly toward a natural transmission: a still-unknown interaction in late fall that allowed the virus to jump from a bat or another animal to a human. (…)

The Wuhan team leader, renowned virologist Shi Zhengli, contends that the institute never possessed the SARS-cov-2 virus that triggered the pandemic and has infected more than 3 million people worldwide. In a social media post, Shi said she would “bet my life” that the outbreak had “nothing to do with the lab.” (…)

But with each experiment came opportunities for an accidental exposure to dangerous pathogens, experts say. Indeed, such accidents occur dozens of times each year in high-security laboratories around the world, including in the United States. (…)

“Even if a lab is mechanically safe, you can’t rule out human error,” said Lynn Klotz, a senior science fellow at the Center for Arms Control and Non-Proliferation, a Washington nonprofit group, and author of a comprehensive study of lab mishaps. “Accidents happen, and more than 70 percent of the time it’s due to the humans involved.” (…)

While the source of the outbreak ultimately may be unknowable, the claim that the laboratory could not have been involved in the virus’s release “is not credible,” said Richard Ebright, a professor of chemistry and chemical biology at Rutgers University. (…)

“There are far too many examples of lab accidents. Our own CDC and everyone else has had accidents, even with very dangerous agents,” Relman said. “There is simply no way around it, since humans are flawed — inconsistent, distractible — creatures.” (…)

Maureen Miller, an infectious disease epidemiologist who worked with Shi as part of a U.S.-funded viral research program, dismissed the lab-as-origin theory as an “absolute conspiracy theory” and referred to Shi as “brilliant.”

“She is a rigorous scientist,” Miller said. “She is very, very committed to preventing the kind of scenario that is happening right now.”

Concerns about unwarranted scapegoating of Shi and other Chinese scientists have increased following reports that the Trump administration has sought to pressure U.S. intelligence agencies to search for proof of a link between the Wuhan lab and the outbreak. The New York Times reported Thursday that some analysts fear the administration will seek to distort assessments about the virus as a means of blaming China for a pandemic that has already sickened more than 1 million Americans and killed more than 60,000.

On Thursday, President Trump suggested at a briefing that he had evidence of a connection of between the Wuhan lab and the pandemic. “Yes, I have,” Trump said when asked whether he’s seen anything that makes him believe that lab workers were responsible. He did not elaborate.

Policymakers, during private intelligence briefings, have been told that Chinese officials tried to obscure the severity of the virus in its early days, but intelligence agencies saw no direct evidence that China was attempting to cover up a lab accident, according to one U.S. intelligence official familiar with the matter who spoke on the condition of anonymity to discuss administration deliberations.

“What we know is it’s naturally occurring,” a second intelligence official said. “We know that it came from Wuhan. There’s been speculation: Did it come from a market? Did it come from a lab? We just don’t know.’ (…)

But we know that, like many other inquiries/probes involving politics, we will never get a totally black on white conclusion. Enough shades of gray will be spread all over this so that suspicion will linger and politicians and media will use and amplify it any which way they want or need. I fail to say how this will not get very messy.

And it’s not only the lab that is in question. China’s handling of critical information will also get investigated, principally whether its data was always accurate and whether it prevented informing the world that this virus could be transmitted human to human in a timely manner.

The blame game is on and it will be bad. The U.S. is not immune to that game either as Cumberland Advisors’ David Kotok showed yesterday (The Covid-19 Blame Game, Part 1)

More known unknowns…

PANDENOMICS

U.S. Personal Spending & Income Collapse in March

U.S. Chicago Business Barometer Weakens Drastically in April

  

• States are struggling to process a surge in unemployment claims as nearly four million people filed for unemployment benefits last week. The latest report on U.S. jobless claims showed that 12.4% of the U.S. workforce was covered by unemployment benefits in the April 18 week.
• Americans cut back on spending by 7.5% in March, the biggest monthly decline on record back to 1959, and saw personal income fall by 2%, the largest decrease since 2013.
• If lockdowns end this month, Eurozone economic activity would gradually rebound. That would lead to a contraction of 5% this year and growth of 6% next year. If strict lockdowns end this month but containment measures remain, that would result in a contraction of 8% this year and growth of 5% next year, the ECB said. If lockdowns only end in June and containment measures remain for some time, real GDP would stay well below its end-2019 level through the end of 2022.
• Macy’s plans to reopen 68 stores on Monday in states that have loosened restrictions. Meanwhile, J. Crew, the preppy retailer which recently fell on hard times, is preparing to file for bankruptcy protection.
• Traffic Is Back in Chinese Cities, and Energy Demand Is Rebounding

Traffic data over the past seven days in Beijing and Shenzhen — which are home to 34 million people combined — shows that rush-hour congestion was heavier than the same period last year, while in Shanghai it was almost as crowded, according to TomTom International BV. The nation’s oil refiners have kept run rates in April at preoutbreak levels after a recovery that began late last month, even as China’s economic rebound is expected to be gradual.

China’s public transport system is already moving the masses. Taxis, buses and private cars have been running at normal levels in 31 regions and cities since April 4, according to the Ministry of Transport. Crude processing rates by the nation’s refiners are also getting a boost from people operating trucks and returning to construction sites, which is increasing consumption of diesel, according to senior officials at the nation’s top refiners. (…)

State-owned and independent refiners have kept processing rates at 13 million barrels a day so far in April, according to the officials who asked not to be identified because they aren’t authorized to speak publicly. That almost matches the monthly average in 2019 and compares with a daily rate of 9 million in February at the height of demand contraction due to the outbreak. (…)

PetroChina Co. Ltd., the country’s largest oil company, said it expected refinery utilization to recover to about 80% in the second quarter, compared with 75.7% in the first quarter, according to a Citigroup Inc. research note citing a call with company executives. (…)

• Some 42% of U.S. businesses in China had returned to normal operation by mid-April, up from 22% a month earlier, according to a new survey by the American Chamber of Commerce in China. But 67% of the 144 survey respondents said they expect their industry’s growth to stall this year due to the Covid-19 pandemic, up from 58% last month.

PROFIT MATTERS

Global Stocks Sink After Tech Giants Report Earnings Shares slumped after Apple and Amazon reported earnings that highlighted the impact the coronavirus pandemic is having on the world’s biggest companies.

On Thursday, Amazon announced record revenue but disappointed on profits as coronavirus-related costs such as employee testing and higher wages added to expenses. Apple held off on providing guidance for the current quarter for the first time since late 2003. Both stocks have led markets higher in recent weeks.

“The biggest risk to markets from here is if the market starts to question the resilience of the big tech stocks,” said Mike Bell, global market strategist at J.P. Morgan Asset Management. (…)

• Amazon warns coronavirus costs threaten to wipe out surging sales Ecommerce group says it could spend $4bn more in next quarter to keep workers safe and products moving

At today’s pre-opening of 2845, the R20 P/E is 20.1, just about fairly valued…but trailing EPS have just begun their slide. They stood at $157.94 yesterday, down 4.0% from their February peak of $164.56. Quarterly EPS will be down about $7.00 YoY in Q1 but some $15 in Q2 and potentially another $10 in Q3.

Nascar Announces May 17 Return From Coronavirus Nascar took the lead among major American sports in the quest to return from the coronavirus pandemic shutdown.

Drivers have pledged to keep cars within 6 feet of each other.