China continues to release pork from reserves | U.S., U.K. trade talks; EU next month
In today's updates:
* Equity markets stabilized after a tough Monday; U.S. stock futures are up
Markets: Key equity indexes in mainland China were mixed. The Shanghai Composite Index ended 0.6% lower at 3,013.05, while the Shenzhen Component Index rose 0.7% at 11,856.08. The CSI 300 gauge on large-caps fell 0.22% to 4,123.85. Elsewhere in Asia, stocks fell in Tokyo, which had been on holiday Monday, as well as Sydney, Manila and Jakarta. Japan’s Nikkei 225 of large cap stocks fell 3.3%, while Australia’s ASX 200 closed down 1.6%. South Korea’s Kospi Index of all shares on the main board rose 1.2%, after falling nearly 4% Monday. Markets in Europe mostly rose today.
Gold prices climbed for the eighth straight session to a seven-year high on Monday. Treasurys and gold are widely viewed as haven assets.
— Coronavirus update:
- China reports 508 new Covid-19 cases, only nine outside Hubei province. China today reported 508 new cases of coronavirus infections, but only nine of these occurred outside Hubei province, the central Chinese province where the epidemic began. China’s National Health Commission said 71 new deaths were reported as of Monday, bringing the total death toll to 2,663. Mainland China reported 77,658 confirmed cases and 27,323 recovered cases since the outbreak started in December. Meanwhile, China made it illegal to trade or eat wild animals. The WHO says 70% of global disease-causing pathogens discovered in the past 50 years came from animals.
- South Korea, Italy and Iran are in focus after seeing a spike in infections and deaths. South Korea said it has 60 new cases, bringing its total number of infected people to 893, Reuters reported. That is the largest in the world outside China. Eight people have died there. South Korea announced new containment measures, including a mass testing of 200,000 church members. So far, the illness that began in China has killed 2,700 people worldwide and sickened 80,000. New countries reported infections: Iraq, Afghanistan, Kuwait, Bahrain and Oman.
- Taiwan’s parliament cleared a T$60 billion ($2 billion) package to address the coronavirus situation, including small business loans, subsidies for tour agencies, tax cuts for tour bus drivers and more. "Although there are waves after waves of challenges, as long as everyone is united, Taiwan will definitely pass this test," President Tsai Ing-wen told reporters, after signing the package into law at the presidential office.
- WHO: Virus's global spread may not be contained. The number of new coronavirus cases in China is declining, but it isn’t yet clear whether the outbreak can be stopped from spreading globally, the World Health Organization (WHO) said.
- Virus economic impacts continue. Some economists are predicting that the epidemic could cause China’s GDP to shrink up to 10% year-over-year in the first quarter. The American Chamber of Commerce in Vietnam reported last week that more than half of its manufacturers were struggling to source supplies. Goldman Sachs projects a 0.8 percentage point hit to U.S. annualized growth in the current quarter from reduced tourism, exports and supply chain disruptions, with most of that reversed by year-end. But “risks...are skewed towards a larger hit because a change in the news flow could lead to increased risk aversion — less travel, commuting or shopping.”
- How the Federal Reserve sizes up coronavirus. The Federal Reserve is still in wait-and-see mode. Officials said it was too soon to know how the fallout from the coronavirus would ripple through the U.S. economy and whether it would force a return to interest-rate cuts later this year. Cleveland Fed President Loretta Mester said she was comfortable with the central bank’s current interest-rate posture and was closely watching the impact of the coronavirus outbreak on global growth. “We don’t want to overreact to the volatility in the markets,” Mester said. Minneapolis Fed President Neel Kashkari: “We’re in a good place right now, even with these market developments.”
- Japanese Health Minister Katsunobu Kato said it was too early to talk about cancelling the Tokyo Olympics due to start on July 24. The country has 850 cases of coronavirus and four deaths, most of them linked to a cruise ship.
- Reuters reports China has stepped up fuel exports as a way to try and temper impacts from reduced domestic demand, with shipments well above year-ago levels. Refined oil product demand is seen falling 35.7% in the first quarter compared with year ago, which translates into a surplus of 27.08 million tonnes in the domestic market, according to the research institute for the China National Petroleum Corporation (CNPC). Eikon Refinitiv data show China gasoil exports at 1.178 million tonnes so far this month and could hit 2.2 million tonnes for the entire month compared with 1.335 million tonnes in January.
- Drugmaker ships first experimental vaccine for human tests. Moderna has shipped the first batch of the company’s rapidly developed coronavirus vaccine to researchers at the National Institute of Allergy and Infectious Diseases. Link to WSJ article for details.
- White House unveils $2.5 billion emergency coronavirus plan amid Democratic lawmaker criticism. The White House on Monday sent lawmakers an urgent $2.5 billion plan to address the deadly coronavirus outbreak. There are at least 53 confirmed cases in the U.S., mostly former passengers of the Diamond Princess cruise ship in Japan who are now in quarantine. The requested money would go toward developing a vaccine (around $1 billion) and stockpiling protective gear, among other efforts, with the option of the administration using the money in 2021. The Trump administration had already tapped into an emergency infectious disease rapid response fund and is seeking the immediate transfer of more than $130 million from other HHS accounts.
House Speaker Nancy Pelosi (D-Calif.) criticized the White House’s coronavirus budget request. The speaker of the House said that the $2.5 billion plan was “long overdue” and “completely inadequate.” Pelosi also indicated that the House will propose a better funding package “that fully addresses the scale and seriousness” of the coronavirus outbreak. Meanwhile, Senate Minority Leader Chuck Schumer (D-N.Y.) blasted President Trump on Monday “for lack of leadership” on the virus, yet the U.S. has so far had no deaths and only 35 known infections.
- China's steel inventories are rising:
— China continues to release pork from reserves. China will auction 20,000 tonnes of pork from state-owned reserves Feb. 27, according to a notice from the China Reserve Merchandise Reserve Management Center.
Meanwhile, China’s CCTV reported the country would release another 10,000 tonnes from state reserves in Hubei province.
The efforts reflect China’s bid to make sure that pork supplies remain ample despite impacts from the COVID-19 situation which has interrupted hog marketings and driven up pork prices.
— U.S., U.K. trade talks on tap; EU trade chief in Washington next month. U.S. Trade Representative Bob Lighthizer will meet his British counterpart in London on Thursday as part of the goal in reaching a trade accord by year end. The U.K. plans to publish its negotiating objectives next week. Lighthizer’s meeting with International Trade Secretary Liz Truss comes on the same day London releases its position on separate talks with the EU toward a post-Brexit trade arrangement.
Meanwhile, EU Trade Commissioner Phil Hogan will be in Washington next month just a few days before March 18, his target date for striking a separate trade agreement with the Trump administration.
— Other items of note:
- Democratic Party will hold the 10th of 12 scheduled presidential primary debates tonight in Charleston, S.C. Seven candidates have qualified to participate: Biden, Michael Bloomberg, Buttigieg, Klobuchar, Sanders, Tom Steyer, and Warren. South Carolina holds its presidential primary four days later on Feb. 29. Joe Biden retains a small lead in South Carolina’s polls. James Clyburn of South Carolina, a 14-term congressman and the House majority whip, plans to endorse Biden.
- Delegate count. With both California and Texas — the two most populous states — holding their primaries on Super Tuesday, approximately 40% of the U.S. population has a primary event on March 3. So far, 101 delegates have been pledged to five Democratic presidential candidates: Sen. Bernie Sanders (45), Pete Buttigieg (26), Joe Biden (15), Sen. Elizabeth Warren (8), and Amy Klobuchar (7).
- In a push to sell food, Amazon opens cashierless supermarket. The e-commerce giant is rolling out its checkout-free “Go” technology in a large grocery store and plans to license the cashierless system to other retailers. The automated grocery shop is four times larger than the one trialed by the company in 2018. Amazon uses hundreds of cameras and smart shelves to track what customers are buying before they checkout using an app. The 10,400 sq. ft. location has been five years in the making, and will stock roughly 5,000 items, including fresh produce, meats, bakery treats and alcohol. It will source some items similar to Whole Foods, which it paid $13.7 billion for in 2017.
- Just what the U.S. dairy industry doesn't need. The dairy industry is deep in a multiyear slump. U.S. consumers for decades have been drinking less and less milk, but consumption of other dairy products is rising. Now comes a dairy sector profile in the New York Times that says, “Milk and Juice Are Not as Needed as You Might Think... There are reasons to question an expert panel’s recommendations for children.” Link to article. Meanwhile, Agricultural Economic Insights did a deep dive on the dairy sector (link).
— Markets. The Dow on Monday plummeted 1,031.61 points, 3.56%, at 27,960.80. The Nasdaq dropped 355.31 points, 3.71%, at 9,221.28. The S&P 500 fell 111.86 points, 3.35%, at 3,225.89.
Monday’s rush out of equities went into U.S. Treasurys, with the yield on the 10-year note falling to a near-record low of 1.38%.
Bank of America's U.S. rates forecasts:
Saudi Energy Minister Prince Abdulaziz bin Salman said that OPEC and its allies have not yet decided to modify or extend their agreement to cut oil output. That comes despite a warning from the International Energy Agency that this quarter would see the first drop in global oil demand for a decade. A barrel of West Texas Intermediate for April delivery was trading this morning at $51.20. "We do communicate with each other and we did not run out of ideas," the Saudi Energy Minister said at the ICCUS conference. Crude tumbled more than 5% at its session low on Monday, falling into bear market territory as the number of coronavirus cases surged outside of China.