Global Equities Rise Amid Some Hope on Covid-19 Outbreak

Posted on 04/06/2020 6:31 AM

Oil prices decline as OPEC+ talks delayed until Thursday | Pelosi punts on transportation

 


In Today’s Updates


 

* Ag markets continue to reel from Covid-19, other factors
* OPEC’s meeting is delayed as tensions resurface between Saudi Arabia and Russia
* Tiger at the Bronx Zoo tested positive for Covid-19
* In letters to USDA Sec. Perdue, Farm Bureau, biofuel groups talk aid
* Pelosi punts transportation funding/reform to later
* Big interest in SBA programs amid expected kinks with usually impatient Americans
* Europe’s four worst-hit countries reported declines in the pace of coronavirus deaths
* Wall Street Journal in editorial blasts World Health Organization's close ties to China
* Airlines ordered to refund cost of canceled flights
* Iran announces “low-risk” economic activity will restart from next Saturday
* Big Tobacco joins hunt for vaccine
* Boris Johnson hospitalized; Queen Elizabeth II rallied Britons
* Supreme Court postpones oral arguments scheduled for its April sitting
* China edging toward what could be its first credit downturn in decades

 


MARKET FOCUS


 

Equities: Global stocks rallied today as some commentators have turned less gloomy, and that alone is saying a lot. Meanwhile, a slowdown in the growth rate of new U.S. coronavirus cases may help put a floor under stocks and dampen volatility, according to JPMorgan Chase & Co. Anyone having the stomach to watch CNN would not get that assessment, however. There were 71,418 cases of Covid-19 confirmed worldwide on Sunday, the lowest daily rise for six days. Stock futures tied to the S&P 500 rose 3.9%. U.S. stock futures were nearly 'limit-up' at one point overnight after indexes slipped lower on Friday following the end of a record U.S. job growth streak.

 

Funds have dramatically shortened their exposure to commodities. Meanwhile, U.S. hog futures have hit a 17-1/2 year low, and cattle futures have sunk on Covid-19 concerns and issues. Milk futures continue under pressure as farmer dump milk. Link to Bloomberg item.

 

     dumped milk

 

OPEC+ Talks delayed until Thursday. Oil prices are giving up some of last week’s major rally after a virtual gathering of the OPEC+ alliance that was originally scheduled for today was postponed to Thursday as Saudi Arabia and Russia traded verbiage over who was to blame for the collapse in oil prices. Meanwhile, President Trump has suggested he could put crude import tariffs in place to "protect our tens of thousands of energy workers." Some of the world's biggest oil companies have raised more than $32 billion in recent weeks to ensure they have the cash to deal with the economic effects of the coronavirus, the Financial Times reports. Exxon Mobil, Royal Dutch Shell, Equinor, Total and BP have sold debt to raise dollars or euros since mid-March, while some have obtained new multibillion-dollar credit facilities. They're also paring capex, reducing costs, pausing stock buybacks and delaying project approvals.

 

Oil prices decline. Brent crude, the international oil benchmark, fell 3% to $33 per barrel while U.S. benchmark West Texas Intermediate dropped 2.6% to $27.60 a barrel. In earlier trading, Brent crude as down 12%. Whiting Petroleum Corp. became the first U.S. shale company to file for bankruptcy after last month’s oil-price collapse.

 

     Slump bump

 

At least one-quarter of the U.S. economy has suddenly gone idle. An analysis conducted for the Wall Street Journal by Moody’s Analytics offers a comprehensive lookat how much of the world’s largest economy has shut down in the past three weeks. Forty-one states have ordered at least some businesses to close to reduce the spread of the coronavirus, according to Moody’s. While 8 in 10 U.S. counties are under lockdown orders, they represent nearly 96% of national output. Link for details.

 

    Moody blues

 

St. Louis Federal Reserve President James Bullard does not believe the U.S. economy or job market is in "free fall" despite a 32% unemployment projection made in late March. "In some ways, the uptake on the unemployment insurance program is a good thing because it means you're getting the transfers to the people that are being disrupted by this health-ordered shutdown," he said told CBS's Face the Nation. "There's nothing wrong with the economy itself."

 

A tiger at the Bronx Zoo tested positive for Covid-19, and other big cats there appear ill. “This is the first instance of a tiger being infected with Covid-19,” according to USDA, which noted that although only one tiger had been tested, the virus appeared to have infected other animals as well. “Several lions and tigers at the zoo showed symptoms of respiratory illness,” according to a statement by USDA. Public health officials say they believe that the large cats caught the virus from a zoo employee. The tiger appeared visibly sick by March 27. In a statement, USDA suggested that those infected with the virus should, “out of an abundance of caution,” avoid contact with their pets and other animals. The Centers for Disease Control and Prevention has said that it is “aware of a very small number of pets outside the U.S reported to be infected” but that it does not have evidence that pets can spread the coronavirus.

 


POLICY FOCUS


 

Ag and biofuel lobbyists are doing what they do best: asking for funding or how to spend what's already been announced. At least two letters have been sent to USDA Secretary Sonny Perdue, one from the American Farm Bureau Federation (link) and another one, finally, from the biofuel sector (link). Meanwhile, Farm Bureau on Friday reversed its previous statement and now says the ag sector qualifies for the Paycheck Protection Program (PPP).

 

It looks like transportation reform/funding is taking still another back seat with House Speaker Nancy Pelosi (D-Calif.) on Friday adjusting her agenda for Phase 4 of the Covid-19 coming package. “While I’m very much in favor of doing what we need to do to meet the needs of clean water, more broadband and the rest of that, that may have to be for a bill beyond this,” Pelosi said Friday on CNBC. “I think right now we need a fourth bipartisan bill — and I think the bill could be very much like the bill we just passed.”

 

     Pelosi promised to continue working “on an infrastructure package for recovery that addresses some of the critical impacts and vulnerabilities in America that have been laid bare by the coronavirus.” In a letter to House lawmakers this weekend, Pelosi said communities in the U.S. “cannot afford to wait” for the next coronavirus stimulus and “it is my hope that we will craft this legislation and bring it to the floor later this month.

 

     President Donald Trump continues to push for infrastructure in the fourth Covid-19 aid plan, saying Friday, "We'll be looking at an infrastructure package for our country, which will be so important." Trump also talked Sunday about infrastructure in the aid plan.

 

     The Washington Post reports the White House has been pitching “a payroll tax cut, a capital gains tax cut, creating 50-year Treasury bonds to lock in low interest rates, and a waiver that would clear businesses of liability from employees who contract the coronavirus on the job. Link for details.

 

To no one's surprise, some major lenders are struggling to process small-business loan applications, making business owners frustrated. Whenever Congress via taxpayers offers $349 billion in various loan programs, the lines are expected to be long, and anxious about getting the application process completed quickly.

 

     Banks have been overwhelmed by inquiries in the early days of a $349 billion program, and borrowers say that many lenders are limiting the crisis loans to a narrow subset of existing customers.

 

Airlines ordered to refund cost of canceled flights. Airlines must fully refund airfare to passengers whose flights have been canceled during the outbreak of Covid-19, the U.S. Transportation Department ordered on Friday. The department is receiving a growing number of complaints from people who say airlines have refused to pay refunds after flights were canceled, the agency said in a press release and an enforcement notice.

 

     The directive applies to domestic and foreign airlines for flights to, within, or from the U.S. People are also protected when an airline “makes a significant schedule change and the passenger chooses not to accept the alternative offered by the carrier,” according to the department. “The Aviation Enforcement Office will monitor airlines’ refund policies and practices and take enforcement action as necessary,” the notice said.

 

Coronavirus update:

  • Summary: Europe’s four worst-hit countries reported declines in the pace of coronavirus deaths. Italy recorded its lowest daily number in two and a half weeks while Spain’s toll declined for a third straight day and fatalities also dropped in the U.K. and France. In the U.S., New York reported its first decline in daily deaths. Andrew Cuomo, the state’s governor, warned it was too soon to tell if the number of cases had peaked in New York. The U.S. surgeon general earlier warned that the coming weeks would prove to be “our Pearl Harbor.” U.S. health officials are telling us to brace for a challenging week, as infections are expected to hit a peak in many cities, including New York, Detroit, and New Orleans.
     
  • WSJ editorial: WHO’s bows to Beijing have harmed the global response to the pandemic. “The coronavirus pandemic will offer many lessons in what to do better to save more lives and do less economic harm the next time. But there’s already one way to ensure future pandemics are less deadly: Reform or defund the World Health Organization (WHO),” says the Wall Street Journal in its lead editorial. Last week Sen. Rick Scott (R-Fla.) called for a congressional investigation into the United Nations agency’s “role in helping Communist China cover up information regarding the threat of the Coronavirus.” The WSJ adds, “The rot at WHO goes beyond canoodling with Beijing, but that’s a good place to start.” Enough said. Link to editorial/
     
  • House Speaker Nancy Pelosi (D-Calif.) announced that she was creating a special House committee to oversee the implementation of the $2 trillion coronavirus relief package.
     
  • Boris Johnson hospitalized. The British prime minister, 55, who had remained in isolation since he said he had coronavirus on March 27, was taken to a hospital as a "precautionary" measure because his symptoms have persisted. Meanwhile, Queen Elizabeth II rallied Britons in the midst of the coronavirus pandemic, which has infected at least 40,000 in the country. Her remarks were pre-recorded from Windsor Castle, where she is sequestering herself.
     
  • Hassan Rouhani, Iran’s president, announced that “low-risk” economic activity will restart from next Saturday, even though the country is still struggling to control the coronavirus. Iran has been hit harder than anywhere else in the Middle East: according to its health ministry, almost 60,000 people have been infected, and 3,603 have died of the virus.
     
  • Big Tobacco joins hunt for vaccine. British American Tobacco (BAT) is developing a potential vaccine grown in tobacco plants, while Medicago, a biotech firm partly owned by Philip Morris, is pursuing a similar effort, the Wall Street Journal reports (link). The success of BAT's approach will depend on whether its product elicits the appropriate immune response to protect against future infection with the new coronavirus, said Beate Kampmann, director of the London School of Hygiene and Tropical Medicine’s Vaccine Center. "What's promising is the scalability," she added.
     
  • Bottom line: Experts say the biggest and perhaps only way to get America back to work is to totally and aggressively use the Defense Production Act to produce enough fast, 15-minute tests so the majority of Americans can be tested for the virus. If not, it will take into July for that to occur.

Other items of note:

  • The Supreme Court of the United States postponed the oral arguments scheduled for its April sitting. The court was scheduled to hear eight cases from April 20 to April 29.
     
  • South Dakota Gov. Kristi Noem (R) signed legislation allowing local governments to delay any elections scheduled between April 14 to May 26 to any Tuesday in June. The law does not apply to the state’s upcoming June 2 presidential and downballot primaries.

Markets. The Dow on Friday fell 360;93 points, 1.69%, at 21,052.53. The Nasdaq fell 114.23 points, 1.53%, at 7,373.08. The S&P 500 declined 38.25 points, 1.51%, at 2,488.65.

 

     China is edging toward what could be its first credit downturn in decades. In recent weeks, executives at some Chinese banks and online lending platforms said more consumers have fallen behind on their credit-card and loan payments, which could snowball into higher defaults in the coming months. Some lenders have reduced loan originations as a result, despite regulators’ calls to keep credit flowing across the economy. The development could foreshadow what is in store for U.S. lenders in the coming months, the Wall Street Journal noted (link).

 

     Loan pileup


 

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