Baltic Dry Index. 627 +11 Brent Crude 37.82 Spot Gold 1663
Covid-19 Pandemic
underway, but not according to the WHO.
Coronavirus Cases 11/3/20
China 119,927 Deaths 4,327
(Maybe.)
The Great Depression, like most other periods of severe
unemployment, was produced by government mismanagement rather than by any
inherent instability of the private economy.
Milton Friedman
Well that didn’t
take too long. After a half hearted bounce yesterday following “Black Monday’s”
disaster in most markets, the unrelentingly bad news for the global economy
from the still growing coronavirus crisis, brought reality back today in Asian
markets, and promises a large dose of the same in Europe and America later.
Italy, France,
Germany and Spain are all likely entering recession. If they do, GB and the
rest of Europe will quickly follow.
China is still
struggling to get the economy up and running again, with no reliable figures
available on their success or failure.
The USA is so far
behind the curve in testing for coronavirus, that the published official
figures are, to intents and purposes, useless.
If America loses control of the coronavirus crisis like Italy, expect
something closer to the 1930s slump than the 2008-2009 Great Recession.
Until America gets
serious about testing, this is no time to be foolhardy in our all too
vulnerable casino markets.
Below, we are
living in historic times.
Stocks fall as U.S. virus response disappoints investors
March 11, 2020 /
12:53 AM
TOKYO (Reuters) - Asian shares and Wall
Street futures fell on Wednesday as growing scepticism about Washington’s
stimulus package to fight the coronavirus outbreak knocked the steam out of an
earlier rally.
Markets had been recovering from a brutal global selloff on Monday that was triggered by the double shock of an oil price crash and the worsening outbreak.
Those gains looked short-lived in early Asian trade, with U.S. stock futures ESc1 falling 2.2% and MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS down 0.29%.
Australian shares were down 2.02%, while Japan's Nikkei stock index .N225 slid 1.28%.
Earlier this week, U.S. President Donald Trump said he would take “major steps” to ease economic strains caused by the spread of the flu-like virus. Headlines focused on discussions of payroll tax cut, which helped lift market sentiment.
However, the lack of major announcements since then has left some investors unimpressed.
“We were promised something substantive from the Trump administration, and if it hasn’t come yet at this hour, then it looks like it is being delayed,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“That’s why markets have a negative tone. From a global investor’s perspective, there are still a lot of downside risks.”
On Wall Street, all three major indexes jumped nearly 5% on Tuesday, one day after U.S. equities markets suffered their biggest one-day losses since the 2008 financial crisis.
The dollar gave up gains and fell against the yen JPY=EBS, the Swiss franc CHF=EBS and the euro EUR=EBS as uncertainty set in.
Benchmark U.S. 10-year Treasury yields US10T=RR were last at 0.7068%, more than double Monday’s record low yield of 0.3180%.
More
Italy in coronavirus lockdown as deaths soar and economy fades
March 10, 2020 /
9:14 AM / Updated an hour ago
ROME (Reuters) - Shops and restaurants
closed, hundreds of flights were cancelled and streets emptied across Italy on
Tuesday, the first day of an unprecedented, nationwide lockdown imposed to slow
Europe’s worst outbreak of coronavirus.
Just hours after the dramatic new restrictions came into force, health
authorities announced the death toll had jumped by 168 to 631, the largest rise
in absolute numbers since the contagion came to light on Feb. 21.
The total number of confirmed cases rose at a much slower rate than
recently seen, hitting 10,149 against a previous 9,172, but officials warned
that the region at the epicentre, Lombardy, had provided incomplete data.
---- Prime Minister Giuseppe Conte unexpectedly expanded the so-called red zone to the entire country on Monday night, introducing the most severe controls on a Western nation since World War Two.
The move shocked many small businesses, which feared for their future.
“It looks like an apocalypse has struck, there is no one around,” said
Mario Monfreda, who runs Larys restaurant in a smart Rome residential area.
Under the government order, all bars and restaurants will now have to close at
6.00 p.m.
“It is a total disaster. This will reduce us to nothing ... More people
are going to die as a result of the economic crisis that this lockdown is going
to cause than the virus itself.”
However, the prosperous northern region of Lombardy, centred on Italy’s
financial capital Milan, called on the government to introduce even more
stringent measures.
---- While Lombardy accounts for 74% of all the fatalities, the disease has now touched all of the country and the government is worried that if it worsens, the health system in the less developed south will collapse, causing deaths to spike.
ECONOMIC HIT
Rome landmarks including the Trevi Fountain, the Pantheon and the Spanish Steps were largely empty on Tuesday, while the Vatican closed St. Peter’s Square and St. Peter’s Basilica to tourists. Police told holidaymakers to return to their hotels.
----
A former Treasury chief economist predicted that the lockdown
measures were reducing Italy’s economic output by around 10-15%, with the
tourism and transport sectors down about 90% on their normal levels.
More
Energy, service sectors brace for debt restructuring wave
March 11, 2020 / 5:07
AM
NEW YORK (Reuters)
- Plunging oil prices and the economic fallout from the global coronavirus
outbreak are setting the stage for a potential wave of debt restructurings and
bankruptcies, especially in the energy and services sectors, according to
company advisers and analysts.
Oil prices dropped by a third over the weekend after Saudi Arabia discounted its crude and signalled it would raise output, fuelling concerns about the survival of heavily indebted oil and gas exploration and production companies.
Credit investors pulled money out of the riskiest energy bonds, widening the spread of U.S. junk-rated energy debt over safer Treasuries to the highest since March 2016, the ICE/BofAML U.S. high yield energy index .MERH0EN showed.
Oasis Petroleum Inc (OAS.O), Chesapeake Energy Corp (CHK.N) and Whiting Petroleum Corp (WLL.N) were among those hardest hit, with their stocks and bonds losing as much as half their value. The companies did not immediately respond to requests for comment.
---- Debt-laden
companies in service sectors hit by reduced tourism and discretionary spending,
such as airlines, cruise lines, movie theatres, gaming companies and hotel
chains, are particularly vulnerable, according to Fitch Ratings and
restructuring experts.
---- The U.S. corporate default rate tracked by Moody’s Investors Service rose to 4.2% in the fourth quarter of 2019, its highest level since early 2017, when an oil market rout forced a slew of energy companies to seek bankruptcy protection.
About 30% of companies with a risky credit profile have a rating of B-,
or highly speculative, compared to 20% at the end of 2015, according to Nick
Kraemer, head of ratings performance analytics at S&P Global Ratings.
“There are a lot of companies out there already maxed out and highly levered,
and with credit markets seizing up, people are saying this is finally it,” said
Chris Donoho, global head of law firm Hogan Lovells LLP’s restructuring
practice.
More
Virus Going Global Means China’s Factories Will Get Hit Again
Mar 10, 2020
03:51 PM
(Bloomberg) — Just as China’s factories get back on their feet after
being laid low by the coronavirus, a drop in demand from their biggest trading
partners around the world is coming back to give them another hit.
Manufacturing firms across China told Bloomberg News that they are close
to being able to resume full production as domestic infections slow to a
trickle, but are now facing canceled orders and fewer opportunities to gain new
customers as the virus grips elsewhere.
“We are actually more worried about the development of the epidemic in
Europe and the U.S., which will affect their domestic consumption,” said Mark
Ma, owner of Shenzhen-based Seabay International Freight Forwarding Ltd. The
company relies on those regions for 80% of its business, with about one-third
of the goods it handles being sold on Amazon. “China’s manufacturers have no
big problems taking orders and producing, the main problem now is how the
epidemic is contained overseas.”
Weaker demand from developed markets is now posing a fresh risk to
China’s restart, with the world’s second-largest economy already facing its
first quarterly contraction in decades and the weakest year since the early
1990s.
That could feed a global vicious cycle, which in a worst-case scenario,
adds to recessions in the U.S., the euro area and Japan to chop some $2.7
trillion off global output, according to Bloomberg Economics.
“The feedback loop is emerging,” said Trinh Nguyen, Hong Kong-based
senior economist at Natixis. “As China recovers and resumes its supply chains,
it will be hit by demand shocks from its own subdued demand and an increasingly
infected world.”
Almost 81% of 2,552 Chinese companies involved in trade have resumed
operations, according to a customs administration survey released on Saturday.
Export data for January and February published at the weekend gave a taste
however of what may lie ahead: Sales abroad dropped more than expected, by
17.2% in dollar terms.
More
Airlines strive to stave off calamity as coronavirus locks down Italy
March 10, 2020 /
12:36 PM
SEOUL/SYDNEY (Reuters) - Airlines around the world
sank deeper into crisis on Tuesday as the worsening coronavirus epidemic and
Italy’s lockdown hammered passenger numbers, forced the cancellation of
thousands of flights and led to the delaying of plane orders.
Some carriers face calamity, with Korean Air Lines (003490.KS) warning the virus outbreak could threaten its survival after it scrapped more than 80% of its international capacity, grounding 100 of its 145 passenger aircraft.
“The situation can get worse at any time and we cannot even predict how long it will last,” Woo Kee-hong, the president of South Korea’s biggest airline said in a memo to staff that summed up the turmoil facing the industry.
“But if the situation continues for a longer period, we may reach the threshold where we cannot guarantee the company’s survival.”
Australia’s Qantas Airways (QAN.AX) said it would also cut its international capacity, by nearly 25% over the next six months, and delay an order for Airbus (AIR.PA) A350 planes due to a plunge in demand that industry chiefs estimate could hit airlines’ revenue by up to $113 billion (£86.71 billion) this year.
Qantas said it could no longer provide guidance on the financial impact of the coronavirus, which it had estimated on Feb. 20 could hit underlying earnings (EBIT) by up to about $98 million this financial year. Its CEO and chairman will take no salary, managers will receive no bonuses and all staff are being encouraged to take paid or unpaid leave.
The unprecedented lockdown of the whole of Italy, which is convulsed by Europe’s worst coronavirus outbreak, has heaped fresh disaster on global airlines.
Norwegian Air (NWC.OL), IAG-owned (ICAG.L) British Airways, Ryanair (RYA.I) easyJet (EZJ.L), Wizz Air (WIZZ.L) and El Al Israel Airlines (ELAL.TA) were among carriers to axe flights to and from the country, where there have been more than 9,000 virus infections and over 460 deaths.
Aviation analyst Mark Simpson, at Goodbody, said another major concern for the travel industry was whether the coronavirus epidemic would worsen markedly in European holiday hub Spain, which has reported more than 1,200 cases.
“A similar outbreak in Spain would pull IAG into the fold, the holiday groups like TUI and DART (Jet2),” he said. “IAG would be much more exposed due to its ownership of Vueling, Iberia and the soon to be completed Air Europa.”
More
Norwegian Air Shuttle canceling 3,000 flights, temporarily laying off workers due to coronavirus
Published: March 10, 2020 at 8:25 a.m. ET
Norwegian Air Shuttle ASA NAS, -2.536% said Tuesday that it will cancel 3,000 flights
between mid-March and mid-June, cutting about 15% of total capacity for the
period, due to coronavirus. The company is also taking other measures,
including temporarily laying off workers, as a result of reduced demand due to
the outbreak.
Customers impacted by the canceled flights will be
notified, and the company says it's in talks with unions about the layoffs.
"We encourage authorities to immediately implement measures to imminently
reduce the financial burden on airlines in order to protect crucial
infrastructure and jobs," said Jacob Schram, chief executive of the
airline, in a statement. Shares of Norwegian Air have plummeted 82.5% over the
past year while the S&P 500 index SPX, -7.59% is up 0.1% for the period.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, has the Bank of Japan, just run out of road and talent? Will the
coronavirus crisis kill the BOJ?
Well maybe, it all comes down to how long is a short piece of string. If
the coronavirus crisis lingers throughout the summer and starts picking up again
next autumn and winter, all the zombie firms on central bank life support will
start to fail. Extend and pretend only works with companies that are still in
business.
Bank of Japan credibility at risk as its stock portfolio on verge of losses
March 10, 2020 /
10:54 AM
TOKYO (Reuters) - The Bank of Japan may be
close to losses on its 29 trillion yen ($279 billion) stock portfolio, analysts
say, raising concerns about its credibility and the sustainability of its
hyper-easy monetary policy.
The Nikkei average .N225 fell to as low as 18,891, its lowest since April 2017, before ending up 0.86% at 19,867.
The precipitous fall spooked investors as the Nikkei dropped below 19,500, a level that market players consider as the average cost of the BOJ’s massive stock purchase since 2013.
Responding to questions in parliament, BOJ Governor Haruhiko Kuroda said the average cost of its exchange-traded fund (ETF) purchases was equivalent to around 19,500 in the Nikkei.
“A consistent drop of the market below this level would put into question not just BOJ’s credibility but actually undermine its capital base,” said Jesper Koll, a senior adviser to WisdomTree.
The BOJ’s total net assets were 3.810 trillion yen ($36.6 billion) as of
September, an amount that can be wiped out if Japanese stocks fall a further
14%. The BOJ’s before-tax net income in the last financial year was 1.074
trillion yen.
“If stock prices fall another 20%, which is by no means unrealistic
given that the Nikkei had fallen 30% from its peak in 2016, the BOJ will suffer
a loss of almost 6 trillion yen,” said Norihiro Fujito, chief investment
strategist at Mitsubishi UFJ Morgan Stanley Securities.
“There has been some discussion about the side-effects of the BOJ’s
buying, including its impact on market liquidity or corporate governance. But
for me the biggest issue of all is this - what to do with losses if that
happens,” he said.
The BOJ did not immediately respond to a request for comment.
Unlike commercial banks, a central bank is not a profit organisation and does not have capital requirements.
Historically, central banks have had negative net worth without major economic consequences, including the Bundesbank of then-West Germany in 1977-79, analysts say.
PUBLIC SUPPORT AT RISK
Still, some analysts say mounting losses at the BOJ could erode public support for the its aggressive asset purchases, which has been central to Prime Minister Shinzo Abe’s economic policy.“Coupled with likely huge losses we can expect in the government pension investments, this could become a political issue,” said Hidenori Suezawa, analyst at SMBC Nikko Securities.
“After all, few people have complained because there were profits. It will be a different story if the public has to bear the cost.”
The cost is not limited to mark-to-market losses, said Shingo Ide, chief equity strategist at NLI Research Institute. According to his estimates, as the BOJ’s ETF portfolio balloons, the BOJ pays about 45 billion yen a year in fees.
“The BOJ will be asked to examine whether it had to spend that much money and if all of its buying was necessary,” he said. “The fact that the BOJ is almost suffering losses on its ETFs shows you can’t support the stock market by monetary policy.”
More
Technology Update.
With events happening
fast in the development of solar power and graphene, I’ve added this section.
Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy
mankind’s future from the 21st century onwards?
Solar Power Breakthroughs Are Coming So Fast We've Stopped Paying Attention
9 March 2020.
Two new records were announced for perovskite-silicon solar cell efficiency last Thursday. The news didn't get much attention, perhaps because solar power records are being broken so fast no one sticks out. The sheer speed with which advances are being made in the solar sector hides the rate of change from anyone not paying close attention, leading to a lack of recognition of how fast energy generation could be about to change.
Silicon cells dominate the solar industry, but the high temperatures required to produce them mean their stunning fall in price can't go on forever. Perovskite cells have almost unlimited potential but with some challenges still to address. Tandem cells, where a perovskite layer captures blue light and silicon the longer wavelengths, could be a bridge.
"Adding a layer of perovskite crystals on top of textured silicon to create a tandem solar cell is a great way to enhance its performance," Dr Yi Hou, of Toronto University, said in a statement. "But the current industry standard is based on wafers... that were not designed with this approach in mind."
Where others have polished the silicon smooth, adding costs, Hou made the perovskite thicker so it can ride over the silicon's bumps. Hou announced in Science this approach has been validated by the Fraunhofer Institute for Solar Research, which provides independent verification of solar engineers' claims. Hou's tandem cell achieved 25.7 percent efficiency and maintained almost all of this after prolonged exposure to temperatures of up to 85ºC (185ºF).
The same edition also included a paper reporting on another silicon-perovskite tandem cell, this time with 27 percent efficiency. This value hasn't been independently verified yet, and the cells have only been tested to 60ºC (140ºF) so it may not prove as robust as Hou's version. In this case, the improvements were achieved by finding a way to combine iodine, bromine, and chlorine in the perovskite lattice to capture more photons. Differences in atomic size have prevented previous cells from effectively using more than two of these at once.
These papers are just the cutting edge of a solar swarm. The same week saw the announcement of at least three other manufacturing techniques designed to raise the efficiency with which we capture the sunlight. None claim quite the efficiency of the two Science announcements, but all are well above the current industry range of 15-21 percent.
One of these technologies bounces back some photons that initially pass through the cell for recapture, and is newly released to the mass market rather than being stuck at the laboratory stage. Another uses thin films that allow cells to attach to curved surfaces. A third avoids a costly step in existing solar production.
None of these may prove transformative on their own, but the combination could make solar unbeatable.
As we learned after President Herbert Hoover signed the
Smoot-Hawley tariff at the outset of the Great Depression, vibrant
international trade is a key component to economic recovery; hindering trade is
a recipe for disaster.
Asa Hutchinson
The Monthly Coppock Indicators finished February
DJIA: 25,409 +75 Down. NASDAQ: 8,567 +171 Up.
SP500: 2,954 +133 Up.
In current circumstances,
this is no time to be blindly following technical signals.
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