Russia Sends “Very, Very Large Planeload” Of Masks, Medical Equipment To US
Reporters hounded President Trump during yesterday’s White House press conference about a Monday phone conversation between Trump and Russian President Vladimir Putin, where the two leaders agreed to hold talks about the chaos in the oil market. And in a gesture of goodwill, Russia – which has only recently started to report large numbers of COVID-19 cases – is sending a military transport plane full of “medical equipment and masks” to aid American governors like Andrew Cuomo in their time of need.
Putin offered to send the aid during Monday’s call, while the two leaders discussed how best to respond to the virus, according to Reuters.
Trump’s decision top accept the aid, which was organized by the Russian defense ministry, is likely to be unpopular with the president’s critics who seemingly jump on any sign of warming relations between Trump and Putin, and argue that Moscow uses these shipments as a “propaganda tool”. Some critics even went so far as to speculate that it might be a “spy operation.”
Still, the equipment could help save American lives. Trump announced the “very, very large planeload” of supplies before it was officially confirmed by Moscow.
“Trump gratefully accepted this humanitarian aid,” Kremlin spokesman Dmitry Peskov said Tuesday according to Russia’s Interfax news wire. Trump enthusiastically touted the aid after the call. Russia had agreed to help because the pandemic “affects everyone without exception and is of a global nature.”
Russia’s Rossiya 24 channel aired footage of the plane taking off from a military air base outside Moscow on Wednesday morning, its cargo hold was filled with cardboard boxes and other packages (footage courtesy of RT).
Last week, Moscow also sent some 600 ventilators, as well as masks and teams of medical experts, to Italy, which is struggling with the highest death toll from the virus in the world.
Tucker Carlson exposed during a powerful monologue last night how the World Health Organization helped China cover-up the severity of coronavirus and how the U.S. media turned a blind eye.
The Fox News host noted how World Health Organization Director-General Tedros Adhanom “got his job with Chinese support after he covered up cholera outbreaks in his home country” of Egypt.
Tedros has denied the allegation, which centered around claims he had downplayed cholera epidemics in Ethiopia in 2006, 2009 and 2011 by passing them off as “acute watery diarrhea,” a symptom of cholera.
The United Nations later said that more lives could have been saved if the epidemic had been accurately labeled as cholera.
Carlson then accused Adhanom of setting the standard for corruption within the WHO by congratulating China for its “speedy” response to coronavirus in late January despite widespread evidence that China covered up the outbreak for over a month, lied about its severity and then silenced whistleblowers who tried to warn the world.
“Everything you just heard him say there was a lie,” said Carlson, highlighting an Australian 60 Minutes piece which features an expert explaining how China knew human to human transmission of COVID-19 had happened back in December.
Indeed, as we previously highlighted, on January 14th, the WHO was amplifying Chinese fake news that no human to human transmission of coronavirus had occurred.
Preliminary investigations conducted by the Chinese authorities have found no clear evidence of human-to-human transmission of the novel #coronavirus (2019-nCoV) identified in #Wuhan, #China🇨🇳. pic.twitter.com/Fnl5P877VG
“So the World Health Organization’s leadership tells you that China ‘set the standard’ for the response to the outbreak, apparently that standard includes disappearing doctors who tell the truth about it,” said the Fox News host.
Ai Fen, a doctor at the head of emergency at Wuhan central hospital, asserted that Beijing stopped her from warning the world and subsequently disappeared with her whereabouts being completely unknown.
Pointing out that the U.S. media has completely failed to properly document China’s cover-up of the coronavirus outbreak, Tucker noted how even as late as mid-February officials were seemingly more concerned with political correctness than the spread of the virus.
“In early February, the director of the World Health Organization was still lecturing the public that using terms like ‘Wuhan virus’ was racist,” said Carlson before playing a clip of Adhanom from February 11 in which he asserted that using the wrong name for coronavirus was “stigmatizing.”
“You might think that the World Health Organization, a group that got $58 million of your tax dollars last year might care that a government arrests doctors and lies about deadly new diseases, but no, like so many other organizations they are lapdogs for the powerful and that means their real job is sucking up to the Chinese government,” concluded Carlson.
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Small Businesses Lost Most Jobs Since Financial Crisis, ADP Reports
Despite last week’s mind-numbing explosion in initial jobless claims, expectations were for a rather modest 150k drop in ADP employment in March… and in a shocking turn of events – ADP employment dropped a mere 27k jobs!??
Source: Bloomberg
Both Goods and Services firms saw job losses…
Source: Bloomberg
However, it is very clear where the pain is and will be felt… small businesses:
This was the biggest small business job loss since the financial crisis…
Source: Bloomberg
It’s pretty clear that the survey period was just too early to pick up the nationwide effects of the lockdown.
“It is important to note that the ADP National Employment Report is based on the total number of payroll records for employees who were active on a company’s payroll through the 12th of the month. This is the same time period the Bureau of Labor and Statistics uses for their survey,” said Ahu Yildirmaz, co-head of the ADP Research Institute.
“As such, the March NER does not fully reflect the most recent impact of COVID-19 on the employment situation, including unemployment claims reported on March 26, 2020.”
However, 60% of companies have reported hiring freezes, while over 13% have already begun laying workers off:
And worse still, as Michael Snyder writes, according to a survey that was conducted from March 20th to March 26th by Challenger, Gray & Christmas, almost half of all U.S. companies say that it is likely that they will be conducting layoffs at some point “in the next three months”…
Forty-nine percent of companies told Challenger, Gray & Christmas they are very or somewhat likely to conduct layoffs in the next three months, while 11% reported they have conducted permanent layoffs; another 7% have conducted temporary layoffs.
If that actually happens, can you imagine what that will do to our unemployment rate?
Congress passed and the president signed a $2 trillion “stimulus” bill.
“Not enough!” shrieked politicians. They said the government must do more.
They demanded President Donald Trump reactivate the Defense Production Act, a 1950 law that lets government force companies to make things.
Trump hesitated.
That upset lovers of big government. They demanded the president order companies to make respirators, masks, and other desperately needed medical equipment.
CNN’s Alisyn Camerota joined the media mob asking “What’s the holdup!?” Then a White House press reporter confronted Trump at the White House, asking, “Why not use it now?”
The president surprised me by responding: “We’re a country not based on nationalizing our business. Call a person over in Venezuela, ask them, ‘how did nationalization of their businesses work out?’ Not too well.”
No, it didn’t.
Venezuela was once one of the richest countries in Latin America. Now it’s one of the poorest.
That’s because government dictating production leads to less production.
Although Venezuela has more oil in the ground than any other country, once the socialists nationalized the oil industry, production declined. Today, Venezuelans struggle to buy gasoline.
When government orders companies to do things, companies don’t innovate. They’re less able to adjust quickly to market demand. That’s the topic of my new video.
Today, hospitals need more ventilators. But the government doesn’t need to order companies to make more. The private sector is already on it.
Automakers slowed car production and are gearing up their factories to produce ventilators. Other businesses are, too. That’s what businesses do when conditions change; they pivot.
Distillers that once made gin and vodka now make hand sanitizer. The federal government had to waive regulations to allow them to sell it.
Some give it away. It’s not just charity; it’s “goodwill.” They hope customers will remember the good deed, and that’ll lead to profit in the future.
The best catalyst to spur production is simple pursuit of profit. It’s what gets companies to produce new things instantly. Unlike governments, businesses have no guaranteed income. To survive, let alone grow, they must constantly innovate to make sure more money comes in than goes out.
The socialists call that “greed.”
Without question, some tycoons are greedy. They pursue profit to the point that they have more money than they will ever need.
That’s fine. That greed for success drives them to get me what I need.
I assume it’s what inspired Ford to start using 3D printers to make face masks.
The profit motive delivers the goods. Higher prices tell companies what products are most urgently needed.
When our government failed to produce enough coronavirus test kits, private companies filled the gap. Some offered convenient tests you could use at home.
But the government didn’t like it, saying the test hadn’t been approved. The tests were withdrawn.
Government’s rules often make it harder for private actors to help people. In a crisis, America’s unsung heroes are people who overcome that.
Many truck drivers wanted to work overtime to help, but federal law said they must not work more than 11 hours a day. Finally, the government suspended the regulation.
We ought to suspend a lot of these rules permanently. Allow Americans to make our own choices about when we want to work.
In this crisis, businesses are trying all sorts of new things. Supermarkets started offering special “senior hours” so older people can safely get supplies we need.
Musicians are livestreaming concerts.
Restaurants are switching to takeout and delivery.
People have lost jobs, but if businesses are free to adapt, they’ll create many new jobs.
Because demand for deliveries has increased. Amazon is hiring 100,000 new workers. Walmart is hiring 150,000.
The free market adjusts. We don’t need “production acts” to tell us what to do.
COPYRIGHT 2020 BY JFS PRODUCTIONS INC. DISTRIBUTED BY CREATORS.COM
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via IFTTT
Congress passed and the president signed a $2 trillion “stimulus” bill.
“Not enough!” shrieked politicians. They said the government must do more.
They demanded President Donald Trump reactivate the Defense Production Act, a 1950 law that lets government force companies to make things.
Trump hesitated.
That upset lovers of big government. They demanded the president order companies to make respirators, masks, and other desperately needed medical equipment.
CNN’s Alisyn Camerota joined the media mob asking “What’s the holdup!?” Then a White House press reporter confronted Trump at the White House, asking, “Why not use it now?”
The president surprised me by responding: “We’re a country not based on nationalizing our business. Call a person over in Venezuela, ask them, ‘how did nationalization of their businesses work out?’ Not too well.”
No, it didn’t.
Venezuela was once one of the richest countries in Latin America. Now it’s one of the poorest.
That’s because government dictating production leads to less production.
Although Venezuela has more oil in the ground than any other country, once the socialists nationalized the oil industry, production declined. Today, Venezuelans struggle to buy gasoline.
When government orders companies to do things, companies don’t innovate. They’re less able to adjust quickly to market demand. That’s the topic of my new video.
Today, hospitals need more ventilators. But the government doesn’t need to order companies to make more. The private sector is already on it.
Automakers slowed car production and are gearing up their factories to produce ventilators. Other businesses are, too. That’s what businesses do when conditions change; they pivot.
Distillers that once made gin and vodka now make hand sanitizer. The federal government had to waive regulations to allow them to sell it.
Some give it away. It’s not just charity; it’s “goodwill.” They hope customers will remember the good deed, and that’ll lead to profit in the future.
The best catalyst to spur production is simple pursuit of profit. It’s what gets companies to produce new things instantly. Unlike governments, businesses have no guaranteed income. To survive, let alone grow, they must constantly innovate to make sure more money comes in than goes out.
The socialists call that “greed.”
Without question, some tycoons are greedy. They pursue profit to the point that they have more money than they will ever need.
That’s fine. That greed for success drives them to get me what I need.
I assume it’s what inspired Ford to start using 3D printers to make face masks.
The profit motive delivers the goods. Higher prices tell companies what products are most urgently needed.
When our government failed to produce enough coronavirus test kits, private companies filled the gap. Some offered convenient tests you could use at home.
But the government didn’t like it, saying the test hadn’t been approved. The tests were withdrawn.
Government’s rules often make it harder for private actors to help people. In a crisis, America’s unsung heroes are people who overcome that.
Many truck drivers wanted to work overtime to help, but federal law said they must not work more than 11 hours a day. Finally, the government suspended the regulation.
We ought to suspend a lot of these rules permanently. Allow Americans to make our own choices about when we want to work.
In this crisis, businesses are trying all sorts of new things. Supermarkets started offering special “senior hours” so older people can safely get supplies we need.
Musicians are livestreaming concerts.
Restaurants are switching to takeout and delivery.
People have lost jobs, but if businesses are free to adapt, they’ll create many new jobs.
Because demand for deliveries has increased. Amazon is hiring 100,000 new workers. Walmart is hiring 150,000.
The free market adjusts. We don’t need “production acts” to tell us what to do.
COPYRIGHT 2020 BY JFS PRODUCTIONS INC. DISTRIBUTED BY CREATORS.COM
from Latest – Reason.com https://ift.tt/3bF35Ph
via IFTTT
Futures Tumble As Bear Market Rally Ends; Gundlach, Marks Expect New Lows
With the only question on traders’ mind whether the March 20 liquidation cascade was the market low, the market itself may be ready to give us the answer, because on the first day of the new month and new quarter – when the speculation of pension fund buying is now gone for another 90 days – US equity futures tumbled along with stocks in Europe and Asia as investors were spooked by a warning from President Trump who said a “painful” two weeks lay ahead, as the latest US coronavirus figures are set to surpass 200,000 today sparking new fears about the pandemic’s impact on corporate profits and dividends. Amid the renewed rush for safe havens, the dollar climbed alongside with Treasuries.
As Bloomberg notes, stocks are beginning the new quarter with more declines, hot on the heels of the worst quarter for global shares since 2008. Investors disappointed with the loss of dividend income could spark a fresh wave of selling, knowing that analysts are dashing to update earnings forecasts to take into account the looming global recession and the slump in stock prices.
“Markets are looking at global equities in a new light, one with no buyback support and no dividends,” said Chris Weston, head of research at Pepperstone Financial Pty Ltd. The earnings season is likely to trigger a decline in consensus S&P 500 profit expectations which “are far too high relative to dividend futures,” he said.
Not helping sentiment were two investing icons, as both Oaktree Capital co-founder Howard Marks and DoubleLine Capital founder Jeffrey Gundlach said the S&P 500 Index is likely to reach new lows in April, with economic uncertainty further riling investors: “I think we’re going to get something that resembles that panicky feeling again during the month of April,” Gundlach said Tuesday during a webcast on the market and economic impact of the coronavirus pandemic. “We will get back to a better place, but it’s just not going to bounce back in a V-shape back to January of 2020.” And in a note to clients Tuesday, Marks said assets on Friday were priced “fairly” for the optimistic case, but “didn’t give enough scope for the possibility of worsening news.”
With the bear market rally already running on fumes, it got a roundhouse punch to the head as European stocks plunged after major banks including HSBC Holdings and Standard Chartered halted dividends and share buybacks. Meanwhile, the euro extended its drop as PMI readings from the single-currency region painted a bleak picture, with Italy’s posting a record drop. But it wasn’t just Italy: in the euro zone, Markit’s final March manufacturing PMI sank to lowest since mid-2012, when the currency union’s debt crisis was raging, and was well below the mark separating growth from contraction.
Earlier in the session, Asian stocks also tumbled, led by industrials and IT. Stocks in Japan hit session lows in the final hour of trading, closing down almost 4% as the BOJ appears to have given up and drastically reduced the amount of ETFs it bought today.
Most markets in the region were down, with India’s S&P BSE Sensex Index dropping 4.3% and South Korea’s Kospi Index falling 3.9%, while Australia’s S&P/ASX 200 gained 3.6%. Hong Kong shares also dropped. Chinese equities outperformed as a private reading on the country’s manufacturing sector beat expectations, rebounding in March in a number that can only be described as “gloriously fake.”
A bunch of Asian manufacturing PMIs released today also failed to boost sentiment, as they illustrate the abrupt slump in economic activity, deteriorating employment outlook and declining forward outlook as lockdowns are ramped up and in some cases extended. Asia’s factory outlook has not only suffered the extent of China’s lockdown but is now being dealt a second wave of headwinds as demand from Europe and the US collapses.
Jibun Bank Japan March Manufacturing PMI 44.8 vs 47.8 in Feb.
Markit South Korea March Manufacturing PMI 44.2 vs 48.7 in Feb.
Markit Taiwan March Manufacturing PMI 50.4 vs 49.9 in Feb.
Markit Thai March Manufacturing PMI 46.7 vs 49.5 in Feb.
Markit Indonesia March Manufacturing PMI 45.3 vs 51.9 in Feb.
Markit Vietnam March Manufacturing PMI 41.9 vs 49 in Feb.
Markit Malaysia March Manufacturing PMI 48.4 vs 48.5 in Feb.
Markit Philippines March Manufacturing PMI 39.7 vs 52.3 in Feb.
Markit Myanmar March Manufacturing PMI 45.3 vs 49.8 in Feb.
The exception, the Australian AIG manufacturing PMI, which rebounded back to expansionary levels. However, before getting too excited, the accompanying analysis from AI Group poured cold water on the rebound, stating the result was “almost entirely due to a huge surge in demand for…food, toilet paper, cleaning products and other household essentials”. So a direct result of the fear induced panic buying and hoarding from Australian consumers.
As such, with every passing day economists are becoming less convinced about the potential for a V-shaped recovery in growth. Factories around the world suffered one of their grimmest months on record in March, as the coronavirus led to mass shutdowns and wreaked havoc on supply chains. China’s reading, however, turned back into growth territory in March, offering a ray of hope that the world’s second-biggest economy may be on its way to recovery.
“In the U.S., the data remains fairly worrying and the peak may well be a few weeks on,” Bob Parker, an investment committee member at Quilvest Wealth Management, told Bloomberg TV. “The economic data is clearly starting to improve in March in China after a very weak January and February.”
In FX, the violent dollar rally that seemed to abate at the end of March returned, as haven demand increased after Trump warned of a “painful” two weeks ahead due to the virus; The greenback advanced against its G-10 peers aside from Norway’s krone; the euro fell a third day versus the dollar and extended its slide as London came into the market. The yen was marginally stronger, taking its rally into a sixth day also supported by speculation the coronavirus outbreak will weigh on Japanese investment overseas even as the nation’s new fiscal year begins. Australia’s bond yield curve bull flattened as the central bank extended its QE purchases to maturities further out the curve. N.Z. yields rose as the nation almost doubled its 2019-20 debt issuance.
In rates, US Treasury 10-year yields fell 6bps to 0.61% underpinned with the 10-year driving gains as S&P futures drift lower. Treasury yields lower by 3-7 bps across the curve as Bunds extended gains on haven buying, paring their underperformance against Treasuries. Italian bonds fell, underperforming euro-area peers, amid long-end selling and thin liquidity, while several banks warned it is only a matter of time before Italy loses its investment grade rating.
Elsewhere, West Texas oil fluctuated around $20 a barrel after President Donald Trump’s pledge to meet with feuding producers Saudi Arabia and Russia to support the market failed to bolster prices substantially.
Market Snapshot
S&P 500 futures down 3.2% to 2,487.50
STOXX Europe 600 down 3% to 310.51
MXAP down 2.1% to 133.92
MXAPJ down 1.4% to 430.33
Nikkei down 4.5% to 18,065.41
Topix down 3.7% to 1,351.08
Hang Seng Index down 2.2% to 23,085.79
Shanghai Composite down 0.6% to 2,734.52
Sensex down 4.5% to 28,131.45
Australia S&P/ASX 200 up 3.6% to 5,258.64
Kospi down 3.9% to 1,685.46
German 10Y yield fell 2.0 bps to -0.491%
Euro down 0.8% to $1.0939
Italian 10Y yield rose 4.4 bps to 1.351%
Spanish 10Y yield rose 3.8 bps to 0.715%
Brent futures at $24.95/bbl
Gold spot up 1.1% to $1,594.16
U.S. Dollar Index up 0.6% to 99.68
Top Overnight News
China reported 130 people over the past day who were infected with the novel coronavirus but don’t have symptoms, a sign that the group of people who can spread the virus without being detected is sizable
The premium to borrow dollars in some money markets has vanished, thanks to the Federal Reserve’s beefed-up swap lines. Three-month dollar-yen cross-currency basis hit a record on Tuesday — this time in positive territory — before extending on Wednesday. That means yen floating-rate funding is now more expensive than the U.S. variety. It was at a record discount just two weeks ago
Italy will extend its nationwide lockdown to April 13, as relaxing the rules too early would negate efforts to counter the spread of the coronavirus, the government told parliament Wednesday
Companies raised a record of at least $752 billion in bond markets around the world last quarter, to build cash buffers as the coronavirus pandemic darkens business outlooks
Asian equity markets traded mixed with sentiment cautious after Wall St wrapped up the worst quarterly performance in the S&P 500 since 2008 and biggest quarterly loss on record for the DJIA, as risk appetite remained centred on the ongoing coronavirus pandemic in which the US, UK and Spain all experienced their highest daily death tolls to date. ASX 200 (+3.6%) and Nikkei 225 (-4.5%) were mixed with outperformance in Australia led by the energy sector after oil prices found mild reprieve overnight and as financials also benefitted from recent regulatory concessions, while the Japanese benchmark faltered on the weight of the detrimental currency flows and after negative Tankan numbers which showed the lowest reading in the Large Manufacturing Index in 7 years. Elsewhere, Hang Seng (-2.2%) and Shanghai Comp. (-0.6%) diverged with the mainland underpinned by the surprise expansion in Chinese Caixin Manufacturing PMI and recent comments by China’s State Council which pledged further support measures including targeted RRR cuts. However, the mood in Hong Kong was less productive after a record slump in Retail Sales and with hefty losses seen in HSBC and Standard Chartered after they scrapped dividend and share repurchase plans on the directive of UK authorities to provide an extra cushion amid the coronavirus fallout. Finally, 10yr JGBs were slightly higher amid the negative risk appetite in Japan and after the BoJ recently raised the frequency of its purchase intentions for this month, although upside was capped by resistance ahead of 153.00 and due to a reserved Rinban operation in which the BoJ reduced its purchase amount for 3yr-5yr bonds.
Top Asian News
Indonesia Slashes Growth Forecast as Virus Pandemic Takes Toll
Singapore Banks Offer to Defer Mortgage, SME Loan Payments
Central Bank Funding of India Debt ‘Inevitable,’ Ex- Chief Says
Chinese Airlines Confident About Winning War Against Virus
The fading of month/quarter-end factors and the quietened stimulus news-flow have prompted global equitys to resume the sell-off, with Europe (Eurostoxx 50 -3.2%) following the negative lead from Wall Street and Asia overnight. Core markets see slightly more pronounced losses than peripheries, with particular underperformance seen in the UK’s FTSE 100 (-3.7%). The index is pressured by a slew of banks posting losses between 5-10% after agreeing to scrap a total of ~GBP 7.5bln in dividends and suspending share buybacks upon the order of the UK government. The BoE also stated that they are prepared to look into using their supervisory powers in the event the commitments are not adhered to; thus, HSBC (-8.5 %), Standard Chartered (-7.0%), Lloyds (-5.5%), Barclays (-6.1%) and RBS (-6.4%) are all on the backfoot. Unsurprisingly, the Financials sector is the laggard with Banks the underperformers in the sector breakdown. Energy follows a close second amid the rotting prices in the complex after yesterday’s mild reprieve. Travel & Leisure holds its place as one of the heavier-hit sectors due to the ongoing demand decline. In terms of individual movers Pirelli (-2.2%) failed to hold onto gains spurred by Italian brake maker Brembo purchasing a 2.43% stake in the company, as upside was potentially shaved by Continental’s (-5.0%) guidance withdrawal and bleak assessment of the auto and tire divisions – with material changes and disruptions seen in significant portions of its business – Nokian (-12.3%) and Michelin (-0.5%) also reside in the red, although the latter is somewhat cushioned by a broker upgrade at Barclays. Finally, Adidas (-2.9%) declines after suspending its EUR 1bln share buyback to conserve cash in light of retail store closures in Europe and North America.
Top European News
HSBC, StanChart Tumble After Regulators Push to Axe Payouts
ECB’s Stournaras Tells EU to Get Real or Risk New Debt Crisis
Italy Says Lockdown Will Be Extended, Warns of Long Battle
U.K. Manufacturing Shrinks More Than Expected as Virus Hit
In FX, the Dollar has regained momentum after Tuesday’s late tumble amidst dwindling demand for portfolio rebalancing and a 7th liquidity providing repo facility from the Fed, with widespread rebounds against G10 counterparts pushing the DXY up from sub-99.000 lows through 99.500 again. However, risk sentiment remains fragile to say the least and prone to further abrupt swings, while looming US economic indicators are destined to reveal more COVID-19 contagion that could scupper the latest Greenback revival. On that note, ADP will be viewed with added interest along with jobs components from the manufacturing PMI and ISM as proxies for the monthly BLS report on Friday and ahead of tomorrow’s weekly claims that many believe may top last Thursday’s 3.3 mn or so record breaking number.
AUD/NZD/CAD – In keeping with yesterday’s price action, the Aussie and Kiwi only received temporary overnight traction from another Chinese PMI beat and headline print back above the key 50.0 level (albeit just in the case of Caixin’s manufacturing index) before recoiling from around 0.6160 and just under 0.6000 respectively vs their US peer to almost 0.6050 and sub-0.5900 before paring some losses (latter circa chart support). Meanwhile, the Loonie also has declining crude prices to contend with and has fallen below 1.4200 ahead of Canada’s manufacturing PMI that could feasibly lose 50.0 status.
GBP/CHF/EUR – Also succumbing to the Buck’s bounce and renewed risk aversion, as Cable retreats from 1.2400, the Franc from near 0.9600 and Euro recoils from 1.1000+ towards 1.0900, with little or no reaction to UK, Swiss or Eurozone manufacturing PMIs irrespective of outcomes vs expectations.
JPY/SEK/NOK – In contrast to other majors, the Yen retains an element of safe-haven premium between 107.94-26 parameters and is well within striking distance of decent option expiries spaced equidistantly from 108.00 to 107.00 (2 bn at the top, 1.4 bn at 107.50 and 1 bn at the bottom). Meanwhile, the Norwegian Krona and its Swedish peer to a lesser extent have largely shrugged off sharp declines in manufacturing PMIs into contraction territory, and the former also the aforementioned downturn in oil, as Eur/Nok continues to trade off increased Norges Bank currency action below 11.4000 and Eur/Sek is capped ahead of 11.0000.
EM – No such luck for the Hungarian Forint after a horrendous plunge in the manufacturing PMI to 29.1 from 50.3 and added dire news in the breakdown as new orders sunk. Hence, Eur/Huf has advanced to fresh all time peaks approaching 364.00.
In commodities, WTI and Brent front-month futures resume the decline following the prior session’s mild reprieve – whilst divergence is seen between the energy benchmarks. Brent underperforms as it sees renewed pressure from further OPEC roadblocks after members failed to agree on an emergency meeting to deal with the price rot. OPEC’s President has been pushing for a meeting of OPEC’s Economic Commission Board – an OPEC body that does not set policy but makes recommendations. Sources noted that Saudi, UAE, Kuwait, and Nigeria pushed for no such meeting. The meeting itself could be agreed to by a simple majority of the 13 members, although the absence of Saudi would mean the meeting has no power to come to a consensus even if agreed upon as the Kingdom accounts for around 33% of total OPEC output. As a reminder, prior sources noted that Saudi opted for the next meeting to take place on the scheduled June date. Furthermore, as the OPEC+ production pact expired last night, the Kingdom is readying to ramp up its supply levels above 12mln BPD from ~10mln BPD in March, a move confirmed by an industry official. Russia is reportedly ditching its plans to raise production by 300k BPD (with scope for it to be raised to 500k BPD) amid the supply glut, albeit the rift with Saudi remains. Brent futures briefly dipped below USD 25/bbl, having slipped from yesterday’s USD 27.90/bbl high. Meanwhile, WTI fares modestly better amid a seemingly growing alliance between US and Russia after sources suggested a US-Saudi partnership has been put on hold, possibly after Saudi refused US’ request to ditch production hikes. The US and Russian Energy Ministers, after President Trump and President Putin’s call, agreed to continue the dialogue among major producers and keep tabs on the market volatility. Furthermore, sources State-side said the Trump Admin is mulling leasing SPR storage to energy companies. The plan could be announced as soon as today and comes after the Admin failed to secure funding from Congress to purchase cheap oil to fill the SPR’s 77mln barrels of free capacity. The idea of the revised plan is to tackle the risk of overwhelming commercial storage from the growing supply glut, oil will be stored for sale later once the crisis subsides. Elsewhere, the weekly Private Inventory data only adds to the bearish fire after a larger-than-expected build of 10.5mln barrels vs. Exp. 4mln barrels – traders will be eyeing today’s DoEs for confirmation. In terms of metals, spot gold recoups some of the prior day’s losses after the downside was exacerbated heading into the US cash close. The yellow metal dipped below USD 1600/oz and its 21 DMA at USD 1589/oz. Prices currently hover in-between those levels. Copper prices largely move in tandem with the overall risk appetite, albeit to a lesser extent. The red metal remains north of USD 2/lb but off best levels.
US Event Calendar
7am: MBA Mortgage Applications, prior -29.4%
8:15am: ADP Employment Change, est. -150,000, prior 183,000
9:45am: Markit US Manufacturing PMI, est. 48, prior 49.2
10am: Construction Spending MoM, est. 0.6%, prior 1.8%
10am: ISM Manufacturing, est. 44.5, prior 50.1
Wards Total Vehicle Sales, est. 12m, prior 16.8m
DB’s Jim Reid concludes the overnight wrap
Happy April Fool’s Day although I suspect in 2020 we will not see the usual list of implausible or fake stories given the mood of the globe. Ten years ago on this foolish day I met my wife after a brief period of internet dating email exchanges. Her profile showed her doing the splits which I admired and she liked the music I sent her of my band. Given that this didn’t happen very often I had to make sure I followed up on it. The rest is history. How are we celebrating in a covid-19 world? By social distancing which to be fair has been strictly practiced in our household since we managed three kids in two years.
As it’s a new month and quarter we have just published our usual monthly performance review which this month needs a fold out version to capture some of the falls on the graphs in the document. We also include Q1 and YTD data. In addition we add sector performance charts for the S&P 500 and Stoxx 600 for March (with YTD figures added) and also a list of worst and best performers over this tumultuous last month. See the report out at a similar time to this.
Two other reports to point out from my team and I are firstly where DB’s new economic forecasts for 2020 appear in the worst years on record using up to 800 years of GDP data? DB expects -4% to -9% 2020 GDP for the six main developed market countries but do these numbers make the top ten of worst years on record for each? Click here to find out. Secondly we put out a document entitled “The exit strategy” where we look at the most likely dates that large western economies will reopen after lockdowns and what might happen next. See here for more.
In terms of new cases, as we show in our new Corona Crisis Daily, Italy and Spain continue to see their curves flatten. See the new daily for more on this including lots of interesting graphs and tables.
We’re straight to China now where this morning the Caixin PMI printed at 50.1 (vs. 45.0 expected and 40.3 last month). That backs up the better than expected state PMI releases we saw yesterday however other readings in Asia clearly trail China. Japan’s final manufacturing PMI printed unrevised at 44.8 while South Korea’s reading of 44.2 (vs. 48.7 last month) was the lowest since January 2009. In South East Asia the drop in PMIs was sharper with the Philippines reading dropping to 39.7 (vs. 52.3 last month), the lowest since records began in 2016, while Vietnam slipped to 41.9 (vs. 49.0 last month) and Indonesia recorded 45.3 (vs. 51.9 last month). One bright spot though was Taiwan which rose to 50.4 (vs. 49.9 last month) partly as supplier delivery times increased rather than improvement in orders. So, the message from the PMIs is clear that even as China is showing signs of stabilization the economies elsewhere are continuing to falter.
Asian markets are mixed on the back of that with the Australia’s ASX (+1.50%) and Shanghai Comp (+0.30%) pulling ahead at the expense of the Nikkei (-1.49%), Hang Seng (-0.92%) and Kospi (-0.60%) which are all down. Meanwhile, yields on 10y USTs are down -3.3bps to 0.637% and Brent crude oil prices are trading down -2.01%.
Elsewhere, President Trump warned overnight that it’s “going to be a painful two weeks” for Americans while adding, “Our strength will be tested, our endurance will be tried.” Deborah Birx, the top public-health official coordinating the coronavirus task force, said that as many as 200,000 Americans are projected to die in the outbreak, even with another 30 days of the most stringent public-health restrictions. S&P futures are trading down -1.74% this morning on the back of the news. Elsewhere, California and Texas are planning cuts to their jail populations with early releases to limit the virus from spreading through overcrowded prison systems. In other news, Japanese PM Shinzo Abe’s party has proposed a JPY 60tn ($555bn) package to help Japan’s households and businesses survive the coronavirus pandemic. The stimulus is worth more than 10% of GDP and if agreed on will be the biggest stimulus on record.
After the latest China PMI numbers, one of the main highlights today will be the release of manufacturing PMIs for March from Europe and the US ahead of services on Friday. We have had a few flash readings already last week, and they showed a collapse across the board but more in services than manufacturing. The final numbers don’t often change much from the flash but given the severity of the lockdowns in the second half of the month this will be one to watch. We’ll also get a first look at Italy and Spain which given their more savage impact from the virus, these will be a big focus. We’ll also get the ISM manufacturing reading from the US later on, where the consensus on Bloomberg is looking for a decline to 44.5, which would be the lowest since May 2009 but this is only the beginning of the slump for the US.
US markets ended the quarter on a softer note after a decent bounce over the last week. They fell just over -2% after London markets closed with the S&P 500 closing down -1.60%. Prior to the late sell-off the STOXX 600 closed up +1.65%. Energy stocks advanced on both sides of the Atlantic following Monday’s rout in oil prices, though oil itself ‘only’ stabilised at multi-year lows, with Brent Crude nearly unchanged. In fact, energy was the only sector to finish higher in the US, while in Europe only Telecoms and Banks were down on the day. In a further sign that volatility in markets is continuing to ebb and also just how volatile March was, the S&P’s move yesterday was actually its third smallest absolute move all month. March 2020 will go down as having only seen one move of less than 1% in either direction. Meanwhile the VIX index fell back -3.5pts to 53.5pts, its lowest level since March 12 and putting it over a third lower than its closing level just over two weeks back. The volatility index averaged over 57pts for the month, over nearly 3x the 20-year average of 19.6pts.
There was various news on the US policy front yesterday, with President Trump floating the prospect in a tweet of further fiscal stimulus down the line, saying that “With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our country! Phase 4”. Given that the $2 trillion “Phase 3” package was already far larger than the fiscal stimulus in 2009 this is ambitious and will likely be difficult to get political momentum at this stage. However, House Speaker Pelosi and Senate Minority Leader Schumer have also called for additional stimulus in recent days and so there would be bipartisan support for some kind of phase 4 bill, if Trump can get other Republicans – especially fiscally conservative ones – on board with additional government spending. Further outbreaks around the country during an election year for many senators could see them support the additional legislation.
Meanwhile the Federal Reserve announced that they were establishing a temporary repurchase agreement facility for foreign and international monetary authorities (FIMA Repo Facility). This will enable other central banks or international monetary authorities who have a FIMA account to temporarily exchange US Treasuries for dollars, something that will further help ease the dollar shortage we’ve seen recently.
In spite of the vague prospect of further fiscal stimulus, 10yr Treasury yields actually fell by -5.7bps yesterday. It was a rather different story in Europe however, where sovereign debt sold off across the board and peripheral spreads widened for a 3rd consecutive day. 10yr bund yields were up +2.4bps by the end of the session, while the spread of Italian yields over bunds was up a further +2.6bps to finish just under 200bps. It hit a recent low of 129bps back on 12 February.
Economic data releases yesterday further demonstrated the impact of the coronavirus. The Conference Board’s consumer confidence indicator from the US fell to 120.0 in March (vs. 110.0 expected), which was the largest monthly decline in the reading since August 2011. The expectations reading also saw a notable fall, down to 88.2, which is its lowest level since October 2016, before President Trump had been elected. Over in Hong Kong meanwhile, retail sales volumes in February fell by a larger-than-expected -46.7% yoy (vs. -37.5% expected), and down from a -23.1% decline in January. In Germany, there were 470,000 requests by companies from the country’s kurzarbeit scheme, where the government helps companies by subsidising workers’ wages.
In terms of the other data out, the flash estimate of Euro Area inflation for March fell to 0.7% (vs. 0.8% expected), while the MNI Chicago PMI for the US in March held up at a better-than-expected 47.8 (vs. 40.0 expected).
To the day ahead now, and the highlight will be the aforementioned manufacturing PMI releases. Other data out includes the ISM manufacturing index from the US for March, along with construction spending for February and weekly MBA mortgage applications. Over in Europe we’ll get German retail sales for February, as well as the Euro Area and Italian unemployment rate for February too. Finally tonight, Boston Fed President Rosengren will be giving a virtual talk on the economic effects of Covid-19.
The shutdown of the American economy by government decree should end. The lasting and far-reaching harms caused by this authoritarian precedent far outweigh those caused by the COVID-19 virus. The American people – individuals, families, businesses – must decide for themselves how and when to reopen society and return to their daily lives.
Neither the Trump administration nor Congress has the legal authority to shut down American life absent at least baseline due process. As Judge Andrew Napolitano recently wrote, business closures, restrictions on assembly and movement, and quarantines are not constitutionally permissible under some magic “emergency” doctrine. At a minimum, the federal government must show potential imminent harm by specific infected individuals at some form of hearing or trial.
These due process requirements are not suspended.
State and local officials may claim, or even possess, lawful police powers to shut down their communities. We offer no analysis of such powers or claims under the myriad of state constitutions and authorizing legislation. But they should resist exercising these powers. The governor of Virginia, in particular, deserves admonition for unilaterally imposing a lengthy period of virtual house arrest.
We do not know, and cannot yet know, how many Americans will become sick or die from the virus. We do know that predictions regarding infection and death rates are highly unreliable. Even actual deaths attributable to COVID-19 are not so easy to count, as Italy has discovered. Age, general health, and comorbidity are difficult variables to assess, and people may die “with” the virus but not “from” it. It is also very difficult to assess the lethality of the virus relative to previously known types of flu and colds.
To date, COVID-19 deaths in the US are far fewer than deaths in ordinary flu seasons or from past pandemics such as the H1N1 virus. This understanding is critically important to put the virus, and the government response to it, in perspective. Even during past pandemics, depressions, and world wars, Americans went to work.
In 1850, French economist Frédéric Bastiat helped the world understand the “seen and unseen costs” of state policies. It is simple to see how quarantines and lockdowns will slow the spread of COVID-19. It is critical, but not so simple, to see the costs and harms caused by the economic shutdown.
Only then can we rationally understand the tradeoffs involved.
How many Americans suffering from other illnesses cannot see a doctor now? How many Americans will lose their jobs, their life savings, their retirement prospects, and their incalculable feeling of self-worth? How many will succumb to depression, drug or alcohol abuse, and suicide? How many will lose their homes, divorce their spouses, or suffer abuse? How many will never recover in their careers? How many small businesses, including the vital ones of doctors, dentists, and veterinarians, will vanish from your community? How many young people will “fail to launch”?
Worse still, will grocery stores and gas stations remain open and stocked? Will crime spike? Will the American social fabric, already thin from politics, tear apart?
These questions are not rhetorical. All of these things happened, to a degree, following the Great Recession of 2008. They will happen again—very soon—if we fail to act immediately. Tomorrow, on April 1, millions of Americans will not pay rent or mortgages. Millions of small businesses will shutter, just as many large employers such as Macy’s, Kohl’s, airlines, and hotels already have. Millions of service workers are unemployed already, but many more jobs will be lost. The effects will cascade.
There is no conflict between humanitarian and economic concerns; in fact they are flipsides of the same coin. A poorer America will be a much less healthy America, one more vulnerable to future illness and disease. Technology, modern medicine, and market actors can address a virus; already we see entrepreneurs producing cheaper ventilators and doctors using cheap generic drugs with very promising results.
This local, bottom-up approach is the only effective way to confront the virus. The federal government, as we see now and have in the past, is comically incapable of competence in times of crisis.
On a fundamental level, freedom really is more important than security—or, in this case, an illusion of security. We all demonstrate this in our personal lives every day, from flying to driving to riding bicycles, to consuming unhealthy food and drink simply because we like it. Security has never been the sole or even primary goal for a country born in rebellion.
Government cannot decide what aspects of our lives are essential or nonessential. The American people cannot simply sit at home and wait for government checks written on funds that government does not have.
With the slate cleared of month/quarter end flows and pension fund rebalancing, Asia equity markets begin mixed. At the time of writing, ASX 200 +1.71%, Nikkei 225 -1.14%, KOSPI +0.40% and US futures heading lower on light volumes in the Asia session.
This after declines across the board on Wall Street as stocks slumped into the Q1 finish line. The S&P 500’s 38.2% Fibonacci retracement at 2650.89 is proving a tough nut to crack with the bear market rally meeting some temporary resistance around this level. The quarter finishing on a dour note, now the S&P 500’s worst quarter since 2008 and the DJIA’s worst quarter since 1987, with the month of March being the most volatile month ever for the S&P 500.
Following overnight declines, stocks began trading cautiously in the Asia session and the White House coronavirus briefing added fuel to that fire. Taking the positives, the good news is the administration are no longer hoping for an Easter resumption and have heeded the advice of medical professionals with respect to containment measures in the attempt to flatten the COVID-19 infection curve. However, unfortunately, we are still in the early stages of the infection cycle in the US and the briefing confirmed this notion. Clearly, examining modelling estimates and they are just that (estimates), relative to the current death toll of almost 4000 vs. the models projections of 100,000 – 240,000 it is unlikely that we have seen the worst in the US yet. President Trump corroborating this, warning that the country faces a “painful two weeks” ahead.
A host of Asia manufacturing PMI’s released today have done little to buoy sentiment, as they illustrate the abrupt slump in economic activity, deteriorating employment outlook and declining forward outlook as lockdowns are ramped up and in some cases extended. Asia’s factory outlook has not only suffered the extent of China’s lockdown but is now being dealt a second wave of headwinds as demand from Europe and the US collapses.
Jibun Bank Japan March Manufacturing PMI 44.8 vs 47.8 in Feb.
Markit South Korea March Manufacturing PMI 44.2 vs 48.7 in Feb.
Markit Taiwan March Manufacturing PMI 50.4 vs 49.9 in Feb.
Markit Thai March Manufacturing PMI 46.7 vs 49.5 in Feb.
Markit Indonesia March Manufacturing PMI 45.3 vs 51.9 in Feb.
Markit Vietnam March Manufacturing PMI 41.9 vs 49 in Feb.
Markit Malaysia March Manufacturing PMI 48.4 vs 48.5 in Feb.
Markit Philippines March Manufacturing PMI 39.7 vs 52.3 in Feb.
Markit Myanmar March Manufacturing PMI 45.3 vs 49.8 in Feb.
The exception, the Australian AIG manufacturing PMI, which rebounded back to expansionary levels. However, before getting too excited, the accompanying analysis from AI Group poured cold water on the rebound, stating the result was “almost entirely due to a huge surge in demand for…food, toilet paper, cleaning products and other household essentials”. So a direct result of the fear induced panic buying and hoarding from Australian consumers.
Also a dampener in the Asia session the news that both Standard Chartered and HSBC will suspend dividend payments. This pressuring the Hang Seng lower. Reminding investors that in the current environment for some companies, elevated dividend yields will not be sustainable and investors should maintain a highly selective approach when picking high yielding stocks for their portfolios. Over the coming months as company earnings are pressured, many dividend payments will be suspended or cut. This as company balance sheets are hit by the simultaneous demand and supply shock the COVID-19 crisis brings. And in this scenario companies value a strong balance sheet over maintaining payout ratios. It will be more important to maintain liquidity and stay solvent whilst revenues and operating incomes are hit. Another factor at play with respect to reduced dividends, the impending regulatory pressure emerging as governments globally weigh suspending the payment of dividends, and company buybacks for those companies seeking bailouts. Why privatise gains, but socialise losses for taxpayer to bear the brunt.
Another story to watch, with China being the first country to come through the peak of the COVID-19 crisis, and the first to stabilise the contagion, there will be important notes to be gleaned from the post COVID-19 picture. How quickly the economy is able to resume normal activity levels and the toll the virus outbreak takes on consumers will likely offer clarity to the trends we can expect to see emerging in Europe and the US post lockdown. As we noted last week, there are signs of weakness in China’s consumer credit market which could become the reality in the US and Europe over the coming months as the jump in unemployment cascades into consumer credit market. As Bloomberg notesa worrying trend is emerging with respect to consumer behaviour, even as lockdowns are lifted consumers are reluctant to head out and many are still concerned about their financial situation which will likely keep pressure on the marginal propensity to spend. This sort of lasting shock to consumer activity and sentiment will clog the transmission of fiscal stimulus measures as fearful consumers pocket cash and save in favour of spending.
Spanish COVID-19 Cases Pass 100k, Japan Closes Border To US & UK Citizens: Live Updates
Summary:
Iran reports 138 deaths on Wednesday
Hong Kong closes bars, karaoke lounges, beauty salons and other public areas as new cases jump
Japan closes borders to travelers from 73 countries, including UK and US
US case total nears 200k
Italian finance minister says government agrees with business lobby’s projection for 6% GDP contraction
Spanish cases top 100k
UK pubs hatch plan to become grocers
Chinese provinces report 56 ‘asymptomatic’ cases
* * *
Just as the rate of new infections finally appears to have plateaued in Italy, Spain and France are reporting enough new cases to steal the spotlight. On Wednesday, the big story was Spain: Health Officials in Madrid reported.
Once again, health officials reported a “record” number of new deaths after 864 people died on Tuesday. It marked the fifth straight day of Spanish authorities reporting 800 or more deaths. So far, 9,053 people have died after contracting the virus.
According to the Spanish government, 102,136 Spaniards have contracted the coronavirus in Spain, after another 8% jump on Tuesday. OF the confirmed cases 22,647 people have reportedly recovered.
US total cases 188,639 (prev. 188,530), death toll 4,059 (prev. 4,053).
ITALY total cases (prev. 105,792), death toll (prev. 12,428).
SPAIN total cases 102,136 (prev. 95,923), death toll 9,053 (prev. 8,464).
CHINA total cases 81,554 (prev. 81,518), death toll 3,312 (prev. 3,305).
GERMANY total cases 72,383 (prev. 71,808), death toll 788 (prev. 775).
FRANCE total cases (prev. 52,128), death toll (prev. 3,523).
UK total cases (prev. 25,150), death toll (prev. 1,789).
SWITZERLAND total cases (prev. 16,605), death toll (prev. 433).
NETHERLANDS total cases (prev. 12,595), death toll (prev. 1,039).
SOUTH KOREA total cases 9,887 (prev. 9,786), death toll 165 (prev. 162).
Boris Johnson has been granted what one critic described as “eye watering” new powers to lead his country through the pandemic. But the private sector also appears to be dreaming up impressive new initiatives, including providing pubs with the means to set up a click-and-collect service for foodstuffs like bread, eggs and milk, in effect transforming them into neighborhood grocers. Those living nearby can simply place an order online, then pop round the shop to pick up their goods.
Italian Finance Minister Roberto Gualtieri said Wednesday that estimates of a fall in GDP of at least 6% by Confindustria, Italy’s business lobby, would likely be confirmed by Rome’s own forecasts set to be published later this month. If this rate of growth comes to pass, it would exceed the 5.5 % contraction the country suffered in 2009.
As we noted yesterday, health officials in Beijing have ordered local officials to begin reporting ‘asymptomatic’ cases that apparently left out of China’s numbers. Beijing announced ~1,500 such cases as of yesterday. On Wednesday, health officials in Liaoning Province were the first out the gate, reporting 52 such cases on Tuesday. Hunan Province followed by reporting 4 such infections, all of which were “imported”, according to Nikkei.
Across China, 130 asymptomatic cases were confirmed on Wednesday so far.
Across the world in Asia, Japan announced that it will close its borders to foreigners from 73 different countries, including the US and UK, and require all other arrivals to isolate themselves for two weeks in its latest measures to control the coronavirus as several Asian countries and territories see a resurgence in cases. Similarly, Hong Kong on Wednesday ordered karaoke lounges, beauty salons, massage parlors, nightclubs and mahjong clubs to temporarily close after officials announced a nearly fourfold increase in cases to 766 over the past two weeks.
Authorities in Iran reported 138 new deaths on Wednesday as the official Iranian death toll surpassed 3,000. Authorities were encouraging people to stay at home on the last day of Persian New Year celebrations, known as Nowruz, on Wednesday while they look into using new technologies to track cases and help combat the outbreak.
