Coronavirus Incidents, Deaths Continue to Rise as Countries Race for Vaccine

Posted on 01/29/2020 6:30 AM

USMCA signing today | FOMC announcement | House transportation bill | CBO estimates


In today's updates:


* Confirmed coronavirus infections, deaths continue to increase
* Race for coronavirus vaccine
U.S. nixed idea of Commerce Secretary Wilbur Ross visiting China
* Trump to sign USMCA legislation today at White House
* CBO ag baseline updates forecast PLC to be safety net program of choice ahead
* Indonesia to deploy palm oil export tax in February
* Transportation bill to be unveiled today in House
* House hearing to assess funding and financing infrastructure investments
* U.S. and India are nearing a limited trade
* Harvard professor accused of lying about China ties
* Fed expected to hold rates steady
* CBO sees years of $1 trillion deficits


Markets: U.S. stock futures were pointing to a higher open despite ongoing coronavirus incidents and deaths. The Federal Reserve concludes its policy meeting today with interest rates expected to remain on hold and officials likely discussing possible changes to how they manage the central bank's key overnight borrowing rate.


Tim Hortons has removed Beyond Meat products from its shops in Ontario and British Columbia, after eliminating the meatless items from all of Canada in September except the two provinces. "The product was not embraced by our guests as we thought it would be," said a spokeswoman for Tim Hortons. While plant-based fast food has been gaining in popularity, some are questioning its environmental and health benefits.



— Coronavirus update:

  • The confirmed infections continue to increase as 840 new cases were confirmed in Hubei province, where the outbreak was discovered, while Germany and Vietnam have patients who had contact with people linked to Wuhan. The number of confirmed cases of the rapidly spreading coronavirus infection in mainland China has reached over 6,055, health authorities said on Wednesday — a total surpassing the cases China had in the 2002-03 SARS epidemic that killed almost 800 people worldwide. The death toll from the new coronavirus had climbed to 132.
  • The fatality rate is currently estimated at around 2%. The case fatality rate for seasonal flu is less than 0.01% while the fatality rate for the severe acute respiratory syndrome (SARS) was 9.6% and 34.4% for the Middle East respiratory syndrome (MERS).
  • Wuhan coronavirus (2019-nCoV) has now been confirmed in 18 countries outside of China, with China reporting just over 6,000 cases and 132 deaths. Chinese respiratory expert Zhong Nanshan said Tuesday he expected the peak for the Wuhan coronavirus would come in one week to around 10 days, adding that it was “very difficult” to determine when it will reach a climax, according to Xinhua. China’s The National Health Commission said in its daily report that 1,239 patients remained in critical conditions, and 9,239 people were suspected of being infected with the virus as of the end of Tuesday, the People’s Daily reported. British Airways has cancelled all flights to and from mainland China, but said it will continue flights to Hong Kong. The U.K., New Zealand and the U.S. are all advising against nonessential travel to China. The U.S. has also expanded coronavirus screenings at 20 airports this week.
  • The World Health Organization (WHO) Tuesday released interim clinical care guidance for hospitalized patients and mildly ill patients at home suspected of having the virus. They also have launched a Global 2019-nCoV Clinical Data Platform to allow members to contribute anonymized clinical data in order to inform the public health clinical response and have convened a bi-weekly call with clinical exports around the world to better understand the situation.
  • Race for a vaccine. China has handed over the coronavirus genome to Russia as efforts to develop a vaccine continued, Russian state media reported today. The U.S. said on Tuesday that it was developing a vaccine, but that it would take three months to start initial trials and three further months to gather data.
  • U.S. nixed the idea of Commerce Secretary Wilbur Ross visiting China as the coronavirus outbreak continues, the Financial Times reports. Link/paywall. It was being considered within the administration to coincide with the bringing into effect, in mid-February, of the Phase 1 deal which was signed Jan. 15 by President Trump and Liu He, China’s vice-premier. “Secretary Ross is excited to return to China when the timing is right,” a commerce department spokesperson told the Financial Times.
  • Starbucks said it was temporarily closing more than half of its stores in China because of the coronavirus outbreak. The Seattle-based company said the closures in its second-largest market would have an effect on the fiscal second-quarter and full-year financial results.
  • Perspective: China is now a much larger portion of the world's economy than during the SARS outbreak.
  • China on Monday stopped allowing tour groups to leave the country. That's going to ripple through the global economy: Chinese visitors are now the most lucrative group for many countries. Nearly 168 million residents of China went outside the country in 2018, according to the U.N. World Tourism Organization, and spent some $277 billion.

    China Tourism

— Trump to sign USMCA legislation today at White House. President Donald Trump will sign the implementing legislation for the U.S.-Mexico-Canada Agreement (USMCA) at the White House today despite some initial conjecture the event would be delayed. Trump took to Twitter earlier this week to note the deal after a social media post sent out from the press office of Sen. Chuck Grassley (R-Iowa) on the signing of the deal by Grassley, the President pro tempore of the Senate. “Thank you to Chuck & all. USMCA is going to be GREAT!” Trump tweeted. 


— CBO ag baseline updates forecast PLC to be safety net program of choice ahead. U.S. government outlays for the safety net programs are expected to be centered on the Price Loss Coverage (PLC) program in fiscal year (FY) 2021 and beyond, according to the Congressional Budget Office. CBO expects PLC outlays at $2.03 billion in FY 2019 and $2.23 billion in FY 2020. For FY 2021, those outlays are expected to move up to $5.24 billion and top $7 billion in FY 2022 and 2023, moving below that mark for through FY 2030, but not being any smaller than $5.08 billion in FY 2030. The FY 2020-2030 total is pegged at $62.98 billion.


     Outlays under the Ag Risk Coverage (ARC) program are put at $1.06 billion in FY 2019, falling to $750 million in FY 2020 and remaining in a range of $351 million (FY 2024) and $494 million (FY 2030) for a total of $5.2 billion over FY 2020-2030.


     As expected, the CBO update does not forecast another Market Facilitation Program (MFP) effort ahead. They estimate the 2018 MFP payments were $8.57 billion in FY 2019 with another $5.11 billion for the 2019 MFP effort. For FY 2020, CBO forecasts $10 million in outlays from the 2018 MFP with $10 billion under the 2019 MFP program.


— Indonesia to deploy palm oil export tax in February. Indonesia will put an export tax of $18 per tonne on crude palm oil from February, the first such action since May 2017. The tax comes as crude palm oil reference prices have risen to $839.7 per tonne for February. “At this moment, the reference price of crude palm oil has increased to more than $750,” said Wisnu Warshana, trade ministry general director. “Because of that, authorities must impose a tax of $18 for the period of February 2020.”


— Transportation bill in House. House Transportation and Infrastructure Chairman Peter DeFazio (D-Ore.) will push for a “transformative” infrastructure bill worth $760 billion over five years measure that will aim to eliminate carbon emissions from transportation, encourage the government to build carbon-neutral buildings, make renewable fuels more available to airlines and increase transit options, including rail. The plan includes major highway and transit initiatives and provisions for broadband and inland waterways. DeFazio this morning will present the language as a framework to House Democrats, with tentative plans to publicly roll out that framework later today. The House Ways and Mean Committee has scheduled a hearing to examine options for paying for a massive infrastructure package at 1:30 p.m. ET today. Link to draft of measure.


     The bill includes calling for transit options to give people an alternative to airlines and automobiles. It will encourage building infrastructure with what DeFazio calls “more climate-friendly” materials, including nanotechnology additives that can help concrete absorb carbon. And it includes building more resilient infrastructure, such as bridges designed to survive extreme weather events.


     GOP response. House Transportation and Infrastructure ranking member Sam Graves (R-Mo.) released a list of GOP principles for the bill, urging Democrats to incorporate their priorities into a broader bill. The top item on the list — addressing the long-term sustainability of the Highway Trust Fund — is expected to be the biggest source of contention. It will also be the topic of the Ways and Means hearing. Graves has endorsed a mechanism that would allow highway users to pay based on vehicle miles traveled. On Monday, he highlighted a report by the state of Washington recommending it move away from fuel taxes to a vehicle miles traveled system to pay for the state’s highways, saying “the report clearly shows that transitioning to a VMT system is a more equitable way to charge drivers for the roads they use, and that we are in fact capable of beginning that transition now.”


— Other items of note:

  • U.S. and India are nearing a limited trade deal that could be finalized by the end of February, including new access for American farm goods to the Indian market, including poultry, pork and dairy products, cherries, hay and distillers dried grains. The Trump administration last year revoked India’s status in the Generalized System of Preferences, a program that cuts duties on products from developing nations. India is seeking to restore those trade benefits as part of a limited deal with Washington. In exchange, the U.S. wants equivalent access for American ag products and medical devices. U.S. Trade Representative Robert Lighthizer is expected to travel to New Delhi early next month  and potentially meet with Indian Commerce Minister Piyush Goyal on Feb. 10. President Trump is expected to visit India the week of Feb. 23.
  • Harvard professor accused of lying about China ties. Charles Lieber, the chairman of the university’s chemistry department, was arrested on charges of lying about receiving millions in Chinese funding. Link to details from the Wall Street Journal. Dr. Lieber, who specializes in nanoscale electronics, is not accused of sharing sensitive information with Chinese officials. But he was charged with hiding how much money Chinese funders were paying him. (It was tens of thousands of dollars a year, according to prosecutors.) He was ensnared in a two-year push by the Justice Department to find individuals at U.S. universities working with the Chinese government. Massachusetts, with its many universities, is a “target-rich” environment, according to the special agent in charge of the FBI’s Boston field office.
  • A House panel today will discuss legislation to crack down on non-milk products being labeled with dairy terms like almond milk and vegan butter. Ahead of the hearing, the Plant Based Foods Association sent a letter to Energy and Commerce Committee leaders blasting the proposed changes as “unnecessary, confusing and costly.” Link to letter.

— Markets. The Dow on Tuesday gained 187.05 points, 0.66%, at 28,772.85. The Nasdaq rose 130.37 points, 1.43%, at 9,269.68. The S&P 500 advanced 32.61 points, 1.01%, at 3,276.24.


     Fed likely to hold rates steady. After three rate cuts last year, Fed officials signaled comfort with their stance. Their latest meeting concludes today after long-term Treasury yields fell on fears over the viral outbreak in China. The Federal Open Market Committee (FOMC) meeting conclusion today is expected to see the Fed announce no change in the target range for the Fed funds rate — currently at 1.5% to 1.75%. The CME FedWatch tool signaled odds for a steady rate decision at 89.5% with a 10.5% chance the Fed will increase the range to 1.75% to 2%t. The tool also suggests that the Fed may lower rates at least once before the end of 2020. Attention will be on how the Fed addresses the Wuhan coronavirus situation and its potential to impact the global economy. Focus will also be on the Fed’s plans for its repurchase agreement (repos) they have used to flood markets with cash to prevent a spike in overnight lending rates. Other watch points will be on the Fed’s characterization of the U.S. economy and their assessment of the situation relative to the Phase 1 trade deal with China. Trade uncertainty has been a common theme for the Fed and how they assess the situation now will be potentially important. There will be four new voters on the FOMC this year — Minneapolis Fed’s Neel Kashkari, Philadelphia Fed’s Patrick Harker, Dallas Fed’s Robert Kaplan and Cleveland Fed’s Loretta Mester. Kashkari and Harker are seen as being doves and were against the rate increases by the Fed. Kaplan tends to be more middle-ground in his views while Mester is clearly on the hawkish side of Fed policy. The post-meeting presser from Fed Chair Jerome Powell remains a key in terms of how he explains the Fed’s views and decisions.


     Deficit widens, economic growth slows in new CBO outlook. The Congressional Budget Office projects higher deficits for this year and the coming decade, with a fiscal 2020 deficit of $1.015 trillion — $8 billion higher than the agency estimated last August. The fiscal 2019 deficit was $984 billion. Over the next decade, the cumulative deficit outlined in the agency's latest budget and economic outlook is estimated at $12.4 trillion, $160 billion more than the earlier projection. The largest factor in the 10-year deficit increase was the repeal of several health care taxes in fiscal 2020 appropriations legislation. CBO said the repeals were among legislative changes that increased projected deficits by $505 billion. Under the new estimates, the deficit is projected to fall slightly to $1 trillion in fiscal 2021 and then commence a steady rise to $1.7 trillion in 2030. CBO Director Phillip L. Swagel said despite the current strong economy, rising deficits show a “worrisome trajectory” for the budget. “Not since World War II has the country seen deficits during times of low unemployment that are as large as those that we project — nor, in the past century, has it experienced large deficits for as long as we project,” he said. CBO has long warned that rising deficits and debt are “unsustainable” and may eventually lead to a “debt crisis.” Swagel said no crisis is imminent. “We’re not saying that there’s an imminent, urgent problem,” he said. “The challenge is over time.”


     Debt Perspective


     CBO economic forecasts. In its economic forecast, the CBO projects gross domestic product will grow by 2.2% in calendar 2020, and at an average rate of 1.7% over the next decade. That represents a slowdown from 2.5% in 2018 and an estimated 2.4% this year, the agency said. The 2020 growth figure is slightly higher than what the CBO forecast in August, however.


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