She notably has invoked her tenure status with the latest tweet attacks:
“I have tenure. Rutgers won’t be firing me for tweets.”
As many of you know, I have long taken the same position on the free speech rights of faculty on social media and public comments. However, schools have been less than consistent in punishing or investigating faculty based on the content of their views. Cooper declaring “F— each and every Trump supporter” obviously would include many students in the university. She blames “white depravity” and claims “when whiteness has a death wish, we are all in for a serious problem.” As previously discussed, it is doubtful that these same attacks directed against African-Americans or other groups would be treated in the same fashion.
This week, Cooper tweeted “F— each and every Trump supporter. You absolutely did this. You are to blame” for the pandemic. She brushed off past criticism and declared “I said what I meant. And I curse cuz I’m grown. I have tenure. Rutgers won’t be firing me for tweets.”
Just know a couple of things: 1.) I report threats to law enforcement and have had committed law enforcement support for many years now. 2.) I have tenure. Rutgers won’t be firing me for tweets. That is all.
Cooper has insisted that the pandemic is part of a racist plot by white conservatives and Trump supporters.
In unhinged screeds, Cooper claims that the pandemic is really “all about a gross necropolitical calculation that it is Black people who are dying disproportionately from COVID.” She added “Not only do white conservatives not care about Black life but my most cynical negative read of the white supremacists among them is that they welcome this mass winnowing of Black folks in order to slow demographic shifts and shore up political power.”
Not only do white conservatives not care about Black life, but my most cynical negative read of the white supremacists among them is that they welcome this massive winnowing of Black folks in order to slow demographic shifts and shore up political power.
In another post, Cooper claimed Trump supporters’ loyalty to the president impaired their judgment about the outbreak:
“They are literally willing to die from this clusterf—ed COVID response rather than admit absolutely anybody other than him [Trump] would have been a better president. And when whiteness has a death wish, we are all in for a serious problem.”
She has previously denounced “white depravity.”
As we have previously discussed (including a story involving an Oregon professor), there remains an uncertain line in what language is protected for teachers in their private lives. The incident also raises what some faculty have complained is a double or at least uncertain standard. We have previously discussed controversies at the University of California and Boston University, where there have been criticism of such a double standard, even in the face of criminal conduct. There were also such an incident at the University of London involving Bahar Mustafa as well as one involving a University of Pennsylvania professor. Some intolerant statements against students are deemed free speech while others are deemed hate speech or the basis for university action. There is a lack of consistency or uniformity in these actions which turn on the specific groups left aggrieved by out-of-school comments.
Again, I believe Cooper’s speech should be protected but the recognition of such free speech values seems to often exclude faculty and students from opposing political or social perspectives. The protection of such speech continues to depend on its content in determining if actions will be taken by the university.
Biden Bumbles Over Tara Reade Answers During Tense MSNBC Interview
Joe Biden’s personnel records from his days in the Senate have come under the microscope after former staffer Tara Reade says she filed a formal sexual assault complaint against him – an allegation he officially denied on Friday.
Biden, who graduated from the University of Delaware and served as Delaware’s senator, transferred the records to the university in 2011 – which announced a change to their expected unsealing shortly before Biden announced his bid for the White House. Meanwhile, Biden has refused to allow a search of the roughly 1,875 boxes of documents and 415 gigabytes of electronic records, as detailed yesterday by Jonathan Turley.
Biden’s excuse? That the records could expose unrelated things he’s said or done which could be ‘taken out of context’ and used against him before the November election.
On Friday, however, Biden stammered through an awkward MSNBC interview in which host Mika Brzezinski pressed him on whether he would allow a narrow search for records only pertaining to Tara Reade.
Brzezinski: Personnel records aside, are you certain there was nothing about Tara Reade in those records – and if so, why not approve a search of her name in those records?
Biden: Approve a search of her name?
Brzezinski: Yes, and reveal anything that might be related to Tara Reade in the University of Delaware records?
Biden: There is nothing. They wouldn’t… They’re not there. And I, I, I… you know, I don’t understand the point you’re trying to make! There are no personnel records by definition.
…
Brzezinski: I’m just talking about her name, not anybody else in those records – a search for that. [awkward silence] Why not do a search for Tara Reade’s name in the University of Delaware records.
Biden: Look, I mean, who does that search?
Brzezinski: Perhaps the University of Delaware?
Watch (University of Delaware question starts at 55 seconds):
I don’t know what’s in Biden’s University of Delaware papers but he really doesn’t want people seeing them.
He won’t even agree to a search of documents just with Tara Reade’s name on them. pic.twitter.com/oavzsdRax2
Biden should have no objection to a search of any reference to any complaint by anyone housed at Delaware. It is like a witness insisting that he is perfectly happy with a search of his farm but then becoming angry when asked if he would allow a search of his house…
In a letter to Gov. Doug Ducey of Arizona, the Association of American Physicians and Surgeons (AAPS) presents a frequently updated table of studies that report results of treating COVID-19 with the anti-malaria drugs chloroquine (CQ) and hydroxychloroquine (HCQ, Plaquenil®).
To date, the total number of reported patients treated with HCQ, with or without zinc and the widely used antibiotic azithromycin, is 2,333, writes AAPS, in observational data from China, France, South Korea, Algeria, and the U.S.
Of these, 2,137 or 91.6 percent improved clinically.
There were 63 deaths, all but 11 in a single retrospective report from the Veterans Administration where the patients were severely ill.
The antiviral properties of these drugs have been studied since 2003. Particularly when combined with zinc, they hinder viral entry into cells and inhibit replication. They may also prevent overreaction by the immune system, which causes the cytokine storm responsible for much of the damage in severe cases, explains AAPS. HCQ is often very helpful in treating autoimmune diseases such as lupus and rheumatoid arthritis.
Additional benefits shown in some studies, AAPS states, is to decrease the number of days when a patient is contagious, reduce the need for ventilators, and shorten the time to clinical recovery.
Peer-reviewed studies published from January through April 20, 2020, provide clear and convincing evidence that HCQ may be beneficial in COVID-19, especially when used early, states AAPS. Unfortunately, although it is perfectly legal to prescribe drugs for new indications not on the label, the Food and Drug Administration (FDA) has recommended that CQ and HCQ should be used for COVID-19 only in hospitalized patients in the setting of a clinical study if available. Most states are making it difficult for physicians to prescribe or pharmacists to dispense these medications.
As the letter to Gov. Ducey notes,
“Many nations, including Turkey and India, are protecting medical workers and contacts of infected persons prophylactically. According to worldometers.info, deaths per million persons from COVID-19 as of Apr 27 are 167 in the U.S., 33 in Turkey, and 0.6 in India.”
Vaccines and results of randomized double-blind controlled trials of new drugs are at best months away. But patients are dying now, while affordable, long-used drugs would be available except for government restrictions, AAPS states.
After Gold & Oil Contract Chaos, CME Group Secures $7 Billion Credit Line “In Case Of Clearing Member Default”
Something unusual is coming…
First we had unprecedented dysfunction in the gold futures markets with dramatic paper and physical price divergences amid virus-inspired geographical shortages for deliverables.
“I’ve never seen that before,” said one gold trader who has been in the market for 30-plus years.
Saxo Bank’s head of commodity strategy, Ole Hansen, observed that a lockdown is occurring in two biggest gold hubs in the world, New York and London, so many traders are working from home. “This has caused a breakdown in the marketplace”, he said.
“There is no price discovery in the market right now,” he said Tuesday morning. “If you need to borrow gold in the OTC [over-the-counter] markets right now, you are going to pay a king’s ransom.”
CNBC: “Across the industry, do you think there is going to be some really serious pain?”
Peterffy: “There is about another half a billion dollars of losses that somebody is sitting on… and I do not know who those folks are.”
So, it is with great interest that we note that CME Group said its Chicago Mercantile Exchange subsidiary entered into an amended credit facility for a $7 billion revolving secured credit facility.
As Bloomberg reports, in a U.S. Securities and Exchange Commission filing, CME it entered into an amendment to its 364-day multi-currency credit facility with Bank of America N.A., as administrative agent, Citibank N.A., as collateral agent and collateral monitoring agent and some of the banks under its existing facility.
The amended facility is for a multi-currency revolving secured credit facility of $7 billion, which is eligible to be increased to $10 billion.
Specifically, the filing says, the new credit facility is “intended to provide temporary liquidity to CME in the event of a clearing member default, a liquidity constraint or depositary default, or in the event of a delay in the payment systems utilized by CME.”
Of course, this is nothing to worry about as we are sure The Fed has their back… right?
Authored by Bloomberg macro strategists Michael Msika and Joe Easton
Equity investors tend to act in anticipation of the next big event, a fact that’s especially apparent in the current rebound. Even amid bleak economic data and earnings reports, European shares posted their best monthly gain since October 2015 and the U.K.’s benchmark FTSE 100 Index finally entered a bull market. The prospect of easing lockdown norms is starting to spur strong gains in some battered sectors.
Since the market bottomed on March 18, the Stoxx Europe 600 is up 22%, but those hammered in the preceding rout have risen a lot more: notably, the travel and leisure sector (46%), energy stocks (41%) and autos (35%).
Strategists including those at Sanford Bernstein & Co. and Barclays Plc had noted earlier that the rebound was not “risk on,” as value and cyclical stocks were getting left behind. Such shares had started to show tentative signs of a comeback as the rally broadened, before stalling.
Amundi SA head of equities Kasper Elmgreen remains cautious after the rally, but says he’s looking for high quality cyclical stocks with exposure to the demand recovery in consumer discretionary and industrials.
Competitive positioning and strong balance sheets are essential in stock picking, he says, adding that quality banks and insurers trading at attractive valuations and supported by central-bank measures fit the bill. He’s also constructive on the luxury sector in China and on leading sports-goods makers trading cheaply, but expects automotive stocks to report sharp declines in 2020 earnings.
Still, it might be a little late to play the bounce. Societe Generale strategist Andrew Lapthorne warns the economic fallout of the pandemic is mounting daily, with rising unemployment, a complete collapse of aggregate demand and the skyrocketing public cost of recovery.
“Given the overall negative undertone from the economic challenges ahead, the dramatic reversal of global markets after the pandemic lows is more puzzling, as it also implies an all clear victory against the silent enemy and a return back to the pre-pandemic normality,” he says.
Looking more specifically at the U.K., locally-exposed shares are once again benefiting from renewed sterling strength, with the FTSE 250 Index and the pound highly correlated. Despite the lockdown, the FTSE 250 has strongly outperformed the FTSE 100 since March 18.
The U.K.’s biggest homebuilders, like Persimmon Plc, Vistry Group Plc and Taylor Wimpey Plc are set to return to building sites in the coming weeks, which is “encouraging news” and implies the firms should start converting their order books into cash, hence further reducing the risks of liquidity crunch scenarios, UBS analysts say.
They see the sector as having sufficient liquidity to withstand at least three months of lockdown or zero-revenue. That said, the country is set to build 35% fewer houses than forecast this year, according to real-estate broker Knight Frank LLP.
As for the British retail sector, it’s up about 28% since March 19, even as questions linger about how such businesses might operate as restrictions ease, with Next Plc warning it expects sales to be disrupted even after the full lockdown has been lifted. Berenberg analysts say there is an opportunity for companies like Next to garner more market share as rivals such as Debenhams, New Look and River Island struggle in the current environment.
Some clothing and other non-food retailers have already succumbed to balance sheet and cash flow constraints, such as Debenhams and Cath Kidston, and it’s not over yet, according to Shore Capital analyst Clive Black. He expects many more independent and chain-based outlets to fail due to cash shortages and weak ongoing demand.
“Short-to-medium term U.K. consumer demand feels worrying to us,” Black says. “It remains to be seen how many businesses re-emerge from the current coronavirus crisis,” he added.
I am deeply uneasy about what’s happening in financial markets.
The Coronavirus has completely turned the global economy on its head. It will create the most profound changes to the way we live and our future prospects – we are all beginning to realise that. There is not going to be a V-Shaped recovery. Many lives will be shattered and ruined in its wake.
Yes, what I saw yesterday confirms two terrible truths we’ve long denied:
1) The system was already rotten to its very core before Coronavirus triggered the coming depression. This was coming and is overdue.
2) Those responsible for that rotten core will likely walk away richer, while the poor working men and women that struggle, scrimp and suffer spending their lives working for them will inevitably get poorer.
What has made me so angry?
Boeing.
Boeing has launched an extremely successful multi-tranche $25 billion bond deal. The issue solves all its immediate funding needs. It enables the company to walk away from difficult bailout discussions. It claims its access to market capital demonstrates it’s soundness – which is utter bollchocks – and that it doesn’t need a government rescue. The issue of moral hazard for government is avoided. Boeing will survive – for time being – as is.
It’s a crock of s**t.
The bond deal was snapped up by investors. It does offer a small increase in yield if its downgraded to junk, and an 5.15% yield on the 10-year tranche. Buyers are unconcerned the company is haemorrhaging money, has been downgraded to the cusp of junk, faces massive lawsuits over the B-737 Max, has comprised on quality and safety, is laying staff off in droves, and is seeing orders cancelled around the globe.
Nope… Investors love it.
They wanted to buy – even though it looks to be priced very aggressively for a company with such obvious crisis emblazoned across it. The brutal reality is investors know Boeing is such a central part of the US Military-Industrial-Aerospace complex, with so many other contractors and jobs dependent upon it, that the US government has no choice but to backstop it. It’s the industrial equivalent of Too-Big-To-Fail.
The get-out-of-jail-card is there in plain sight – The Fed’s QE Infinity programme can buy as much toxic Boeing bonds as the market cares to lob at them. As we know from the Taper-Tantrum a few years back, bond holders have an infinite put back to the Fed. As long as it was investment grade back in March it qualifies for the Fed… No one cares about the economic reality facing the company.
It fills me with great sadness.
What happened to the concept of the free hand of markets ensuring the efficient allocation of capital to good companies? This deal screams MORAL HAZARD – yet the whole street has bought it.
So much for ESG and the importance of socially aware investment and good governance. The Street should hang our heads in shame…
Boeing illustrates everything that was once great but is now rotten about our Western economy:
It was once a good solid plane maker. It built the aircraft that allowed global airlines to develop, grow and innovate new routes and services. Regional travel, tourism and business travel all exploded in the wake of the Boeing aircraft that enabled it. The B-737 regional jet and the B-747 Jumbo really did make the world smaller and brought it to everyone’s door.
Then it bought MacDonald-Douglas. The rival smaller planemaker pulled off the coup of the century, buying Boeing with Boeing’s money as the joke went. Its executives took over. The brilliant Boeing engineers were ousted by McD cost accountants. Cost cutting trumped engineering every time. The company moved to Chicago – away from its Seattle roots.
The last decent plane Boeing made was the innovative, fuel-efficient, composite Dreamliner. It cost $25 bln plus to develop – and it will take decades to recoup the money through clever accounting. (It may never make a real profit.) The plan had then been to develop a successor for the venerable B-737 which airlines and the environmental lobby would have loved: a fuel efficient lightweight city-to-city hopper. It never happened.
Instead the C-Suite cut costs and saved money. Their market was secure, a duopoly with Airbus and 3-4 year order books, happy that airlines had little choice but keep buying whatever crud they offered.
As interest rates fell Boeing borrowed more and more from market, using it to buyback stock. The stock soared. Executives received enormous bonuses and stock option packages. Workers saw salary and conditions cut. Quality fell. The C-Suite decided not to invest in new aircraft development – they simply further extended the B-737, making the once slim thoroughbred of the skies into a fat, bloated unstable and unsafe lump of flying metal. 346 people paid the ultimate price for Boeing compromising safety.
Today Boeing has no aircraft on its books any airline really wants. Its new B-777x is years late and utterly pointless in this new environment. There have been very few new Dreamliner orders – the whole programme may have lost money. Across the globe airlines are retrenching. It could be years before air travel recovers.
Boeing is textbook corporate failure.
Yet because of the perception Governments will now intervene freely in “free markets”, it’s been able to snub a “strings-attached” government rescue, take market money, and is still backstopped.
This really is the end of Capitalism… The rolling raucus sound you hear from the hills in North London is the sound of Karl Marx laughing his head off in Highgate Cemetery.
One day after Shell unexpectedly cut its dividend for the first time since WWII, supermajor Exxon Mobil reported its first quarterly loss in 32 years amid a glut of oil, a global recession, and a pandemic that has forced billions of people to stay indoors instead of driving, destroying petroleum demand.
The company reported a $610 million loss for the quarter ending March 31, equivalent to a 14c loss per share in 1Q versus earnings per share estimates of around 55c Y/Y. First-quarter results are a reminder that the worst has yet to come, as lockdowns only began around mid-month, so the quarter only captured about 15 days or so of demand destruction.
Here are some of the highlights from the 1Q earnings report:
1Q production 4,046 mboe/d, +1.6% y/y, estimate 3,943 (Bloomberg Consensus)
1Q capital expenditure $7.14 billion, +3.7% y/y
1Q production 9,396 mmcfe/d, -5.3% y/y, estimate 8,633
1Q chemical prime product sales 6,237 kt, -7.9% y/y
1Q cash flow from operations and asset sales $6.36 billion, -25% y/y
1Q refinery throughput 4,060 mb/d, +4.5% y/y
Exxon also announced it is “reducing 2020 capital spending by 30 percent and cash operating expenses by 15 percent. Capex is now expected to be approximately $23 billion for the year, down from the previously announced guidance of $33 billion.”
“COVID-19 has significantly impacted near-term demand, resulting in oversupplied markets and unprecedented pressure on commodity prices and margins,” said Darren W. Woods, chairman and chief executive officer.
“While we manage through these challenging times, we are not losing sight of the long-term fundamentals that drive our business. Economic activity will return, and populations and standards of living will increase, which will in turn drive demand for our products and a recovery of the industry.”
We have noted in the last several weeks that a bankruptcy wave in the oil and gas complex has begun. Producers have slashed spending amid collapsing energy demand. The economic downturn has destroyed tens of billions of dollars in value for shale companies, rigs are being taken offline, and thousands of jobs eliminated.
While it did not follow in Shell’s footsteps and cut its dividend, Exxon kept its dividend unchanged for the first time in 13 years earlier this week. The current dividend yield is near its absolute record highs.
But on a relative basis the yield is an extreme outlier…
Exxon shares are widely unchanged after the earnings announcement. Shares doubled over the last 27 sessions from mid-March despite deteriorating fundamentals, mostly the result of a technical bounce after a halving in share price was seen from early January to mid-March.
Futures Tumble, Dollar Surges After Trump Threatens To Restart China Trade War
With most global markets shutdown for May 1 celebration, US equity futures sank after President Donald Trump threatened to block a government retirement fund from investing in Chinese stocks and to slap new tariffs on China over the coronavirus crisis, while Apple and Amazon became the latest companies to warn of more pain in the future. As a result, the Emini wiped out virtually all of the weekly gains in one session.
Late on Thursday, Trump said his trade deal with China was now of secondary importance to the pandemic, as his administration crafted retaliatory measures over the outbreak. The threat confirmed that the global pandemic was now a top political issue for Trump who will seek to bash China as the US heads for the November election, and pulled attention back to the trade war between the world’s two largest economies that has kept global financial markets on tenterhooks for nearly two years.
Also weighing on sentiment was a 2.6% fall in Apple shares in premarket trading after the company said it was impossible to forecast overall results for the current quarter, even as it reported upbeat quarterly results. Amazon tumbled 5% after it warned it could post its first quarterly loss in five years as it was spending at least $4 billion in response to the coronavirus pandemic.
With European markets closed, equities dropped in the U.K., one of the few open markets, and the pound gave back some of this week’s gains as Prime Minister Boris Johnson pledged a “comprehensive plan” to lift the country’s lockdown, with details due next week. Stocks slumped in Tokyo and Sydney while most other Asian markets didn’t trade. While China was closed, China FTSE A50 Index futures, which trade in Singapore, were down over 4% as traders didn’t much like that a new trade war between the US and China may be imminent.
Wall Street fell on Thursday as grim economic data and mixed earnings prompted investors to take profits at the end of the S&P 500’s best month in 33 years, a remarkable run driven by hopes of reopening the economy from crushing virus-induced restrictions.
With global stocks posting their best month since 2011 in April spurred by a slowdown in coronavirus infections and $8 trillion promised in stimulus initiatives, earnings reports and economic data are serving a reminder of lasting pain. In addition to the disappointing earning reports from Amazon and Apple, data Friday showed South Korea’s exports plunged the most since the 2009, while a gauge of Japanese manufacturing did the same.
In FX, the Bloomberg Dollar Spot Index climbed for the first time in six days on the prospect of a renewed trade war, while the yen and Treasuries also gained on haven demand. The offshore yuan was among the biggest decliners in emerging markets, weakening by the most in a month.
Yuan derivatives – the Australian and New Zealand dollars – led losses among Group-of-10 currencies following poor local economic data. The euro rose a third day to a two-week high, extending Thursday’s rally that was fueled by month-end demand.
In rates, Treasuries gained in a bull- flattening move, with 10- and 30-year yields falling by 4 basis points.
Crude dipped on Friday but heading for its first weekly gain in about a month as global production cuts began to take effect; gold rebounded from an earlier slump.
Looking at the day ahead, the calendar is a slightly lighter one thanks to the Labor Day public holiday in numerous countries. Data highlights include April’s manufacturing PMIs from the UK, Canada and the US, as well as April’s ISM manufacturing reading for the US as well. In addition to this, we’ll get the UK’s consumer credit and mortgage approvals for March, along with US construction spending for March too. Earnings releases include ExxonMobil, Chevron, Charter Communications, AbbVie and Honeywell International. Meanwhile, Exxon Mobil reported its first loss in 32 years.
Market Snapshot
S&P 500 futures down 2% to 2,845.50
STOXX Europe 600 down 0.6% to 338.02
MXAP down 1.6% to 145.64
MXAPJ down 1.1% to 473.45
Nikkei down 2.8% to 19,619.35
Topix down 2.2% to 1,431.26
Hang Seng Index up 0.3% to 24,643.59
Shanghai Composite up 1.3% to 2,860.08
Sensex up 3.1% to 33,717.62
Australia S&P/ASX 200 down 5% to 5,245.89
Kospi up 0.7% to 1,947.56
Brent Futures down 1.5% to $26.08/bbl
Gold spot down 0.6% to $1,675.82
U.S. Dollar Index down 0.02% to 99.00
German 10Y yield fell 9.1 bps to -0.586%
Euro up 0.1% to $1.0970
Brent Futures down 1.5% to $26.08/bbl
Italian 10Y yield rose 0.6 bps to 1.589%
Spanish 10Y yield fell 7.6 bps to 0.723%
Top Overnight News from Bloomberg
The euro-area economy could shrink as much as 12% this year and fail to return to its pre-coronavirus size until the end of 2022, according to the European Central Bank
President Donald Trump is exploring blocking a government retirement fund from investing in Chinese equities considered a national security risk, a person familiar with the internal deliberations said
U.K. Prime Minister Boris Johnson pledged a “comprehensive plan” to lift the lockdown that has crippled the economy, as he declared the U.K. has now passed the peak of the coronavirus outbreak. In his first press conference since recovering from Covid-19, Johnson promised to set out details next week on how businesses can get back to work
The European Central Bank’s surprise tweaks to monetary policy amount to an effective interest-rate cut that puts banks on the front line of the euro-area economic recovery
U.K. house prices rose last month before the full extent of the impact of the coronavirus pandemic hit the market, according to Nationwide Building Society
The best month for global equities in almost a decade may be enough to convince investors the light at the end of the coronavirus tunnel isn’t a train, but the debate on what comes next is only just beginning as they adjust their focus to a financial landscape utterly changed by the pandemic
The tone in Asia was subdued owing to the mass closures in the region for Labor Day and following the negative handover from Wall St due to month-end rebalancing and with futures pressured after hours following mega-cap earnings from Amazon and Apple. Amazon shares declined around 5% in extended trade after mixed results in which the Co. missed on EPS but topped revenue forecasts and noted it expects to spend its entire USD 4bln of operating profit on COVID-related expenses, while Apple initially gained after it beat on top and bottom lines, boosted its share buyback by USD 50bln and raised its dividend, although the gains were only brief as the results were clouded by weaker than expected iPhone and iPad sales and after the tech giant refrained from providing a Q3 outlook. ASX 200 (-5.1%) was the laggard with downside led by heavy losses in the commodity related sectors and a slump in the top-weighted financials with selling exacerbated by profit taking after the index had rallied to its highest level in 6 weeks and notched its best month on record for April. Nikkei 225 (-2.8%) also suffered firm losses amid a slew of earnings and after Tokyo Core CPI data turned negative to trigger fears of a return to deflation, while reports also noted that PM Abe is to formally decide to extend the state of emergency due to coronavirus on Monday. As a reminder, markets in mainland China and Hong Kong were shut alongside most of the regional bourses, although China’s tensions with US remained in the spotlight after comments from US President who suggested he has seen evidence the virus had originated from the Wuhan Institute of Virology and that he can do tariffs to respond to China, with sources also later noting the US is considering blocking government retirement savings funds from investing in Chinese equities deemed a national security risk. Finally, 10yr JGBs were weaker amid spillover selling from T-notes which had reversed intraday gains and briefly fell below 139.00 amid heavy supply including Boeing’s USD 25bln 7-tranche offering, while JGB prices were also hampered by weaker demand at the enhanced liquidity auction for 2yr, 5yr, 10yr & 20yr JGBs.
Top Asian News
Macau Casinos See Worst Month Yet as Gaming Revenue Plunges 97%
SUVs Get Parked in the Sea and Reveal Scope of Auto Glut
Stampede to Buy Euros at End-of-Month Fix Rattles FX Trading
Biggest India Carmaker Clocks Zero Local Sales in April
Europe sees tumbleweeds amid mass closures in observance of Labor Day Holiday, as the UK’s FTSE 100 (-2.1%) remains the sole trading major index ahead of its market holiday next Friday. Sentiment remains on the backfoot, Nasdaq and Dow futures relinquished the 8800 and 24000 levels respectively before extending losses, as markets price in an escalation in US-Sino tensions after US President Trump threatened tariffs, whilst negatively perceived earnings from Apple (-3% pre-mkt) and Amazon (-4.5% pre-mkt) add further pressure to US equity futures. Apple beat on top and bottom line, but iPhone, iPad, and Mac sales fell short of forecasts. Amazon missed on EPS but topped revenue forecasts, albeit subscription services disappointed and the group expects to spend the entire USD 4bln of operating profit on virus-related expenses. Back to London, FTSE 100 sees most of its stocks in the red, with heavyweight Shell (-6%) continuing to be weighed on by its dividend cut alongside a broker downgrade and the pullback in the energy complex, BP (-4%) moves lower in tandem. Large-cap miners also reside towards the foot of the UK index as base metals take a hit from sentiment amid the prospect of escalating trade tensions between the world’s two largest economies: with Rio Tinto -3.7%, Glencore -5.3%, BHP -4%. On the flip side, RBS (+3.4%) is among one of the few gainers post-earnings after topping earnings and operating profit forecasts and despite Q1 impairments rising almost ten-fold YY to GBP 802mln from GBP 88mln.
Top European News
Ryanair Cuts 3,000 Jobs, Challenges $33 Billion in State Aid
Boris Johnson Pledges Lockdown Exit Plan With U.K. Past Peak
Intu Drafts in Restructuring Chief as Talks With Creditors Loom
ECB Says Economy Could Stay Below 2019 Level Through 2022
In FX, there was little respite for the Dollar in holiday-thinned volumes at the start of the new month due to Labour Day, but the DXY is clinging to or at least staying within sight of 99.000 by virtue of even more weakness in rival currencies amidst broad risk-off sentiment following US President Trump’s latest accusatory comments regarding COVID-19 and threat of reprisals against China, including more trade tariffs.
GBP – Not the biggest G10 mover by a long chalk, but volatile given that the UK is one of the only European centres open on May 1st. Moreover, some payback after hefty month end gains has ensued, with Cable backing off further from 1.2600+ highs after failing to sustain momentum to test mid-April peaks and a key technical level in the form of the 200 DMA (1.2648 and 1.2654 respectively). Meanwhile, the Pound is also unwinding more upside vs the Euro as the cross rebounds further from sub-0.8700 levels towards 0.8750 and back above the 200 DMA yet again (now around 0.8722) on the usual RHS for fixing dynamic. For the record, an even weaker than prelim manufacturing PMI, collapse in consumer credit and miss in mortgage approvals were all largely brushed aside, along with significantly stronger than forecast Nationwide house prices.
AUD/NZD/CAD/NOK/SEK – The major laggards, and in the case of the Aussie and Kiwi also the notable underperformers as overall aversion is compounded by a bearish research note from Westpac overnight. In short, the bank based its bleak outlook for the Antipodeans on prospects of ‘brutal’ earnings and data in coming weeks, and on that note AIG manufacturing PMI plunged deep below 50, while ANZ consumer confidence dropped to sub-100. Aud/Usd has duly retreated from 0.6500+ to under 0.6450 and Nzd/Usd has lost grip of the 0.6100 handle with Aud/Nzd pivoting 1.0600. Elsewhere, the Loonie has detached further from its close crude correlation, albeit with oil prices recoiling this is also keeping Usd/Cad afloat near 1.4050 vs 1.3850 at one stage on Thursday, pending the possible appointment of a new BoC Governor later today and Canada’s manufacturing PMI. Similarly, the Scandinavian Crowns have been scuppered by the downturn in crude and risk appetite, with Eur/Nok and Eur/Sek both nudging the tops of ranges near 11.3300 and 10.7500 respectively.
JPY/CHF/EUR – All benefiting from the aforementioned ongoing Buck weakness, as the Yen bounces from circa 107.40, Franc eyes 0.9600 and Euro grinds closer to 1.1000 having breached the 55 DMA (1.0949) and yesterday’s best (1.0972) to expose resistance at 1.0991 before the 200 DMA (1.1035).
EM – The ramp up in US vs China vitriol over the coronavirus has obviously taken its toll on the Yuan, as Usd/Cnh extends beyond 7.1300, but the contagion is spreading through the region like the global pandemic itself with Usd/Try up around 7.0400, Usd/Rub back over 75.0000 to name and highlight just a few.
In commodities, WTI and Brent futures gave up earlier mild gains as the positive sentiment seen earlier in the week peters out, whilst a lion’s share of market closures in Asia and Europe keep volumes subdued. Today marks the official inauguration of the OPEC+ output curtailment pact, albeit markets have already priced in the event. “The output cuts while significant may not be enough to fully offset demand destruction in the global market in the short term and the inventory build-up could continue for the rest of 2Q20, though at a slower pace”, ING reaffirms. That being said, reports noted that Iraq could face difficulties in adhering to its obligations under the deal. WTI June trades on either side of USD 19/bbl for a large part of the session before dipping below the psychological USD 18.50/bbl (high USD 20.50/bbl), whilst Brent July also resides closer to the bottom of its current USD 27.67-29.67/bbl intraday band. Spot gold remains on the backfoot sub USD 1700/oz, with some attributing a correction amid a lack of fresh buyers. Copper continues its deterioration throughout the session on the risk-averse tone and absence of regional participants including its largest buyer China – prices eye the 24th Apr low at USD 2.30/lb.
US Event Calendar
9:45am: Markit US Manufacturing PMI, est. 36.7, prior 36.9
10am: Construction Spending MoM, est. -3.5%, prior -1.3%
10am: ISM Manufacturing, est. 36, prior 49.1
Wards Total Vehicle Sales, est. 7m, prior 11.4m
DB’s Jim Reid concludes the overnight wrap
Happy 1st of May to you all. We’ve already published our monthly performance review in what was the best month for the S&P 500 since January 1987. It was on track to be the best since October 1974 until the mild sell off yesterday. See the note in your inboxes for more on an incredibly strong month for asset returns in a period where the world economy practically ground to a standstill. Impressive stuff. Try explaining that to a new graduate. You’d probably want to send them towards a chart of the Fed balance sheet to help try to rationalise it.
Talking of central banks, yesterday’s main news came from the ECB, who in many ways reverted to type. They always pull out the heavy artillery in the heat of the battle but tend to retreat a bit when hostilities calm down. Although they announced that the interest rate on TLTRO III operations from June 2020 to June 2021 would be reduced to 50bps below the refi rate they didn’t increase PEPP (not expected at this stage) and most importantly downplayed the chances of OMT being used. Before we discuss the OMT we should note that for those banks whose net lending is above the lending performance threshold, the interest rate falls to 50bps below the average deposit facility rate, which is itself 50bps below the main refinancing rate. Furthermore, the ECB announced a new series of non-targeted pandemic emergency longer-term refinancing operations, which will start in May 2020.
The conclusion is that its lots of free money for banks, especially if they can lend it out. However the net impact was disappointment for European equities (including banks) as Lagarde downplayed the imminent use of the OMT and argued that the PEPP is the weapon of choice. The main issue with this is that OMT can be used more efficiently to divert from capital keys and help the likes of Italy. They may end up having to do more now with PEPP than they would have with a combination of OMT and PEPP. See Mark Wall’s piece on the meeting here. As a result of the meeting, the main European equity bourses were -2 to -2.25% lower with banks -5.5%.
Core sovereign debt rallied with yields on 10yr bunds falling by -9.1bps to a 7-week low of -0.586%. 10yr spreads widened somewhat in southern Europe however, particularly for Italy, where the spread over bunds was up +9.8bps, while Greece (+7.2bps) and Spain (+1.5pbs) also saw moves wider. The 2yr BTP/Bund spread was actually tighter which perhaps highlights not too much market concern over the ECB message. Over in the US, 10yr Treasury yields were down as much as 4.6bps to 0.58%, less than 5bps away from their all-time record closing low, before spiking higher in the US afternoon session to finish +1.2 bps higher at 0.639%.
Poor economic data along with negative earnings news saw equities give up their gains as we reached month-end, with the S&P 500 falling by -0.92% yesterday, while the VIX index of volatility, which had been trending downward from its highs in mid-March, saw its biggest increase in over a week, up +2.92pts to 34.15pts. Roughly 80% of the stocks in the index were lower on the day. Interestingly the two best performing subsectors in the US were Retailing and Technology Hardware. Both were led higher by their largest respective components, Amazon and Apple, which both reported after the close.
In terms of those earnings yesterday, Apple was down -2.59% after the market closed. This was even after the company saw quarterly earnings rise 1%, as CEO Tim Cook cited a drop in demand in late March/early April before rebounding in recent weeks. Though sentiment shifted more negative as the company declined to offer guidance for the first time in over ten years. Amazon was down -5.09% in after-hours trading after announcing a profit drop of 29% in the first quarter. The company offered a very wide range for operating income in the second quarter of a $1.5 billion gain to a $1.5 billion loss. The company is expecting to spend nearly $4 billion on “Covid-related expenses getting products to customers and keeping employees safe,” according to CEO Jeff Bezos.
Futures on the S&P 500 and NASDAQ are down -1.41% and -1.91% this morning respectively post those results. Those markets that are open in Asia this morning haven’t fared much better with the Nikkei down -2.49% and ASX -3.50%. In FX the dollar index is up a modest +0.12% while 10y Treasuries are down 2.2bps. The only data of note to flag this morning were the April export numbers in South Korea which revealed a larger than expected decline of -24.3% yoy (vs. -23.0% expected). That’s the biggest decline since May 2009.
Back to central banks, the Fed separately announced yesterday that it was expanding the scope and eligibility for its Main Street Lending Program. Businesses with up to 15,000 employees or up to $5bn in annual revenue are now eligible, an increase from before when it was up to 10,000 employees and $2.5bn in revenue. Furthermore, the minimum loan size for certain loans would go down from $1m to $500,000, and there’d also be a new loan option for more leveraged companies where lenders would retain a 15% share on loans.
The central bank moves came against the backdrop of some of the worst GDP stats we’ve seen in many years yesterday. Starting with the overall Euro Area number, Q1 saw the economy contract by -3.8% compared with the previous quarter, in line with expectations and the largest quarterly contraction since the formation of the single currency back in 1999. However as we’ve been saying, given the lockdowns only started at the end of the quarter in March, this actually gives an incomplete picture of the extent to which the economy has shrunk, and we’re not likely to see the largest moves in the data until Q2. Indeed, ECB President Lagarde said in her press conference yesterday that in a severe scenario, their Q2 forecast pointed to a contraction as large as -15%.
Looking at the country-by-country releases where we got them, the French economy saw a quarterly contraction of -5.8% (vs. -4.0% expected), the largest quarterly decline in the data series going back to 1949, and exceeding the -5.3% quarterly decline in Q2 1968 when the country was gripped by social unrest. Following the previous quarterly -0.1% decline, this means the French economy has now experienced two consecutive quarterly contractions, a measure which is often taken to be the definition of a recession. Over in Italy, the economy contracted by -4.7% (vs. -5.4% expected) and on a technical basis went into its 6th recession of the Euro era. This one will only be Germany’s 5th over the same period. Meanwhile the Spanish economy saw a -5.2% (vs. -4.3% expected) contraction.
The only one of the 4 largest Euro member states left to report GDP is Germany now, and given all three of the others above came in worse than the Euro Area average, this implies that Germany could well have done significantly better than the others when we get their data in a couple of weeks (our economists think maybe -1.5%). It’s also noticeable, if unsurprising given the virus struck Europe first, that the Euro Area did much worse than the US. The US number from the previous day of -4.8% was on an annualised basis, meaning that the comparable quarter-on-quarter contraction for the US was “only” -1.2%, much smaller than the -4.8% decline in the Euro Area.
Staying on the ECB and the Euro Area, the flash CPI estimate for April yesterday came in at +0.4%, which the lowest inflation print since September 2016, though still above the +0.1% reading expected. The main reason for the decline was energy prices, which fell by -9.6% compared with a year earlier thanks to the recent plunge in oil, and the core CPI component was at a higher +0.9%. And speaking of oil, yesterday saw yet another rebound in prices, with WTI up +25.10% at $18.84/barrel, bringing its gains over the last two sessions to +54.70%. Brent crude also advanced with a +12.11% increase to $25.27/barrel. There was also news that ConocoPhillips will cut output by over 400k barrels a day in June. Norway also said it will reduce production yesterday. With the Nordic country producing 250k less barrels a day in June and then cutting 134k barrels during the second half of the year.
Looking at yesterday’s other data, the weekly initial jobless claims from the US provided yet another sign of how the economy has continued to slide well into April. Initial claims were at 3.839m in the week to April 25, above the 3.5m consensus expectation, while the previous week’s reading was revised up by further 25k. While this is the 4th week in a row that the number has declined, down from a peak of 6.867m in late March, the total number of claims in the last 6 weeks now stands at over 30m. Given the pre-covid number of nonfarm payrolls in February stood at 152m, we’re looking at around 20% of the labour force having now sought unemployment benefits, so some shocking numbers, and all eyes will be on the jobs report for April coming out a week today, where it’s widely expected we could see the highest unemployment rate for the US since before WWII.
Concluding with the final data points now, and German retail sales in March fell by -5.6%, the biggest monthly decline since January 2007, while the number of jobless claims rose by 373k in April. In the US, personal spending fell by a record -7.5% in March, the largest in data going back to 1959, while personal income was down -2.0%. The MNI Chicago PMI fell further to 35.4, and French consumer spending in March saw a monthly decline of -17.9%, far exceeding the -5.8% reading expected.
To the day ahead now, and the calendar is a slightly lighter one thanks to the Labour Day public holiday in numerous countries. Data highlights include April’s manufacturing PMIs from the UK, Canada and the US, as well as April’s ISM manufacturing reading for the US as well. In addition to this, we’ll get the UK’s consumer credit and mortgage approvals for March, along with US construction spending for March too. Earnings releases include ExxonMobil, Chevron, Charter Communications, AbbVie and Honeywell International.
Joe Biden Officially Denies Tara Reade Sexual Assault Claim
Directly addressing the allegations that have upended his stalled campaign, former VP Joe Biden issued a statement denying sexual assault allegations made by Tara Reade – a former staffer who claims Biden digitally penetrated her against her wishes back in 1993
In the statement, Biden said the alleged assault “never happened” and that his papers at the University of Delaware include no mention of the incident.
The statement begins: “So I want to address allegations by a former staffer that I engaged in misconduct 27 years ago. They aren’t true. This never happened.”
In statement, Biden denies sexual assault allegation and says his papers at the University of Delaware don’t include any such record. Said accuser’s story has been inconsistent. “This never happened.” pic.twitter.com/ifFZ6nJV1m
UDel said yesterday it had no plans to release Biden’s papers.
The statement comes as MSNBC’s “Morning Joe” airs a supposedly “unscripted” interview with Biden over the allegations. However, a clip from the pre-filmed segment portends a flurry of softball questions, answered with the help of a teleprompter.
Here’s a photo of the teleprompter Joe Biden will likely be relying on this morning to answer questions about Tara Reade. pic.twitter.com/HuAgYEJAKh
— Trump War Room – Text TRUMP to 88022 (@TrumpWarRoom) May 1, 2020
Today’s MSNBC “exclusive” with Joe Biden is not a serious, unscripted reckoning.
— Trump War Room – Text TRUMP to 88022 (@TrumpWarRoom) May 1, 2020
Even the NYT is questioning why the major cable news organizations (aside from Fox News) have been reluctant to put Reade herself on the air. She has chosen to give her ‘exclusive’ interview to Fox News (rumor has it Chris Wallace, the network’s most reputable newsman, will conduct the interview).
Texas Lifts Lockdown, Michigan Gov Extends ‘State Of Emergency’ As More States Move To Reopen: Live Updates
After a banner April that saw US stocks notch their best monthly performance since the 1980s even as oil for May delivery slumped into negative territory and millions of jobs evaporated, US futures on are track to open deep in the red on Friday, as President Trump ratchets up the pressure on China and the media squabbles over whether he purportedly claimed to have seen evidence the virus was designed by the Chinese as a ‘bioweapon’ (that’s not even close to what he said) – but, since the Intel Community had released a report a few hours earlier claiming there was no evidence the virus was man-made, the mainstream press was desperate to make the president’s comments fit their narrative.
Since the “Chinese virus” imbroglio, we have been continuously baffled by the degree to which the American media, as well as the American left, has run interference for China. And apparently, we’re not alone in that…
This is a fucking lie
Question: “Have you seen anything at this point that gives you a high degree of confidence that the Wuhan Institute of Virology was the origin of this virus?”
With most of Asia and Europe closed for ‘May Day’, the biggest news overnight comes out of the US and the UK. Following clashes between hundreds of “reopen now” protesters and state police at the Michigan State Capital in Lansing last night, Gov. Gretchen Whitmer managed to extend her badly-hit state’s strict stay-at-home order for another 28 days, even as the Republican-led legislature decided against extending Whitmer’s emergency declaration (so she did it herself).
Elsewhere, Texas officially reopened its economy on Friday as Gov. Greg Abbott ordered restaurants and retailers in the state should be allowed to reopen. His order will override orders from local officials, including in cities like Houston where the state’s outbreak has been centered.
Still, to say that Texas is taking things “back to normal” would be a tremendous exaggeration. Counties with fewer than five active cases of COVID-19 can reopen businesses at 50% capacity, which Abbott on Monday said would apply to nearly half of Texas’ 254 counties. Everywhere else, which is where the vast majority of the state’s roughly 30 million people live, can open back up at 25% capacity.
According to the Hill, Republicans believe Abbott is making the right decision given the economic devastation the pandemic has wrought.
In Texas alone, 1.5 million people have filed for unemployment over the last six weeks, with 254,199 claims coming last week alone. Republicans argue that voters can responsible enough to make their own decisions, and encouraged everyone to continue following ‘social distancing’ principles when in public. However, the governor is also facing pushback from big-city mayors who are overwhelmingly Democratic.
Austin Mayor Steve Adler made the economically devastating but undoubtedly necessary decision to cancel Austin’s SXSW Festival, and later issued a stay at home order for his city. Adler also released regulations that would impose fines on residents not wearing masks in stores. The cities of Dallas, Houston, El Paso, and San Antonio followed suit with their own stay at home orders. The state has fewer than 30k confirmed cases, and fewer than 1k deaths, meaning Texas does not rank among the worst-hit US states.
Texas and Georgia (which is heading into its second weekend of reopening) will be joined by more than a dozen other states, including some blue states, that will allow millions of Americans to return to stores, restaurants and movie theaters this weekend. They include: Ohio, Massachusetts, Minnesota, Arizona and Washington, among others.
While the staggering death toll and insurmountable horror of this outbreak simply can’t be ignored, neither can the fact that roughly one in five working-age Americans have sought unemployment benefits. That hints at some Depression-level unemployment coming down the pike, WaPo reports.
Dems freaked out over VP Pence’s decision to not wear a mask during a visit to the Mayo Clinic (he’s the VP, nobody ever gets within 6 feet of him), and we suspect there will be no shrotage of hand-wringing over President Trump’s trip to Camp David on Friday, his first trip away from the White House since the lockdowns began.
And as the White House’s social distancing guidelines expired on Thursday, leaving states to make all decisions going forward, Dr. Fauci warned some states to avoid “leapfrogging” critical milestones in an effort to open up more quickly, saying a premature reopening would come with “significant risks.”
Authorities around the world were preparing to closely monitor May Day marches as leftists from Greece to Germany vowed to ignore the bans, risking a repeat of the ‘International Women’s Day’ marches in Madrid which helped kick off the outbreak in Spain.
Finally, before we go, another egregious example of China shipping shoddy products has surfaced in the UK, where a group of doctors warned that 250 ventilators brought to the UK from China could cause “significant harm to patients…including death” if used in a hospital setting. The ventilators – like PPE sold to hospitals in Spain by China recently – are apparently defective.
