Economic News From Last Week

June 29 – CNBC (William Feurer): 

“The coronavirus is spreading too rapidly and too broadly for the U.S. to bring it under control, Dr. Anne Schuchat, principal deputy director of the Centers for Disease Control and Prevention, said… 

‘We’re not in the situation of New Zealand or Singapore or Korea where a new case is rapidly identified and all the contacts are traced and people are isolated who are sick and people who are exposed are quarantined and they can keep things under control… We have way too much virus across the country for that right now, so it’s very discouraging.’”

June 26 – Reuters (Julie Steenhuysen): 

“Scientists are only starting to grasp the vast array of health problems caused by the novel coronavirus, some of which may have lingering effects on patients and health systems for years to come, according to doctors and infectious disease experts… ‘We thought this was only a respiratory virus. Turns out, it goes after the pancreas. It goes after the heart. It goes after the liver, the brain, the kidney and other organs. We didn’t appreciate that in the beginning,’ said Dr. Eric Topol, a cardiologist and director of the Scripps Research Translational Institute…”

July 1 – Wall Street Journal (Ian Lovett): 

“On Wednesday, Gov. Gavin Newsom announced a slew of new restrictions… California reopened too quickly. Nearly 6,000 people tested positive for the new coronavirus in California Tuesday, and more than 7,000 on Monday, the highest total during the pandemic and a 45% increase over the previous week. Hospitalizations are up more than 50% from two weeks ago. The percentage of tests coming back positive was 6% on Tuesday, up more than a full percentage point from two weeks earlier.”

July 2 – Associated Press (Adam Beam and Kathleen Ronayne): 

“California Gov. Gavin Newsom shut down bars, wineries, museums, movie theaters and inside restaurant dining across most of the state for three weeks amid troubling increases in coronavirus cases and hospitalizations. The order affects Los Angeles and 18 other counties where nearly three-quarters of the state’s roughly 40 million people live. The impacted counties are those seeing the most serious uptick in infections, and include almost all of Southern California, though not San Diego, which is faring better.”

June 28 – Bloomberg (Liz Capo McCormick):

 “The world’s biggest bond market is holding firm in its conviction that the revival of the American economy from the devastation of the pandemic will be slow and fragmented. Benchmark 10-year Treasury yields at 0.64% are barely changed from the end of March. Investors have pounced on any sell-off as a buying opportunity, keeping yields in check after they slid 125 bps in the first quarter. The result is that Treasuries are up about 9% in 2020, on pace for the best first-half performance in the Bloomberg Barclays U.S. Treasury index since 1995. The grim outlook among debt investors has mostly contrasted with the view in stocks.”

July 1 – Bloomberg (Reed Stevenson):

 “Tesla Inc. displaced Toyota Motor Corp. as the world’s most valuable automaker, underscoring investor enthusiasm for a company trying to transform an industry that’s relied on internal combustion engines for more than 130 years. Shares of Tesla, which have more than doubled since the start of the year, climbed as much as 3.5% in intraday trading Wednesday, giving it a market capitalization of $207.2 billion, surpassing Toyota’s $201.9 billion.”

June 30 – Financial Times (Ortenca Aliaj, James Fontanella-Khan, and Kaye Wiggins):

“Coronavirus brought an end to one of the longest waves in mergers and acquisitions history as global dealmaking dropped to its lowest levels in more than a decade during the second quarter of 2020. Companies have struck just $485bn worth of deals since the beginning of April, down more than 50% from the same period last year when close to $1tn deals were agreed, according to… Refinitiv. The fall in activity was particularly sharp in the US, where overall acquisitions collapsed almost 90 per cent from a year ago, to $75bn.”

June 30 – Wall Street Journal (Rochelle Toplensky): 

“Asset write-downs keep coming from the world’s largest oil-and-gas companies… Royal Dutch Shell said… that it would make impairments of up to $22 billion in its second-quarter results to reflect lower oil and gas prices and refining margins. Its London-listed peer BP estimated an up to $17.5 billion hit earlier this month for the same reason. At the start of 2020, the industry had long-term expectations of $75 to $90 a barrel of crude. Even before the pandemic, that looked too optimistic, and Chevron announced an $10 billion-$11 billion write-down last December.”

July 1 – Bloomberg (Nick Wadhams and Jenny Leonard): 

“The U.S. is preparing to roll out long-delayed sanctions to punish senior Chinese officials over human-rights abuses against Muslims in Xinjiang, two people familiar with the matter said, and Secretary of State Michael Pompeo vowed any measures would be ‘harsh.’ The sanctions, part of a toughening of the Trump administration’s stance toward Beijing, are likely to target Communist Party officials responsible for the internment and persecution of minorities in Xinjiang…”

June 29 – Bloomberg (Jennifer A. Dlouhy and Todd Shields): 

“The U.S. and China are moving beyond bellicose trade threats to exchanging regulatory punches that threaten a wide range of industries including technology, energy and air travel. The two countries have blacklisted each other’s companies, barred flights and expelled journalists. The unfolding skirmish is starting to make companies nervous the trading landscape could shift out from under them. ‘There are many industries where U.S. companies have made long-term bets on China’s future because the market is so promising and so big,’ said Myron Brilliant, the U.S. Chamber of Commerce’s head of international affairs. Now, they’re ‘recognizing the risk.’”

July 1 – Financial Times (James Politi): 

“A senior Federal Reserve official has warned that a wave of business failures owing to the pandemic could still trigger a financial crisis, as he justified the central bank’s continuing efforts to prop up capital markets. ‘We’re still in the middle of the crisis here,’ James Bullard, president of the Federal Reserve Bank of St Louis, said… ‘Even though we got past the initial wave of the March-April timeframe the disease is still quite capable of surprising us,’ he said. ‘Without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and [that] could feed into a financial crisis.’”

June 28 – Reuters (Howard Schneider): 

“The U.S. Federal Reserve added $428 million in bonds of individual companies through mid-June, making investments in familiar household names like Walmart and AT&T as well as a utility subsidiary of billionaire Warren Buffett’s Berkshire Hathaway holding company. The bond purchases are the first direct moves by the Fed to buy the bonds of individual companies under new programs set up to nurse the economy through the coronavirus pandemic. The Fed also added $5.3 billion corporate bond exchange traded funds.”

June 30 – Wall Street Journal (Laura Noonan, Colby Smith and James Politi): “US bank executives say they have seen minimal interest in a $600bn programme designed to help midsized companies through the Covid-19 pandemic, raising questions about whether the federal response to the crisis is helping key parts of the American economy. Senior executives at some of the biggest US lenders told the Financial Times they had more people working on the Main Street Lending Program than they had borrowers interested in taking money from it. The banks have typically seen fewer than 200 serious expressions of interest each since the programme — which is 95% funded by the Federal Reserve — was launched a fortnight ago.”

June 29 – CNBC (Yun Li): 

“Nearly half of the population is still out of a job showing just how far the U.S. labor market has to heal in the wake of the coronavirus. The employment-population ratio — the number of employed people as a percentage of the U.S. adult population — plunged to 52.8% in May, meaning 47.2% of Americans are jobless, according to Bureau of Labor Statistics. As the coronavirus-induced shutdowns tore through the labor market, the share of population employed dropped sharply from a recent high of 61.2% in January, farther away from a post-war record of 64.7% in 2000. This ratio is a broader look at the employment picture. It takes into account adults not in the labor force and captures those who were discouraged about the prospects of finding a job…”

June 29 – Wall Street Journal (AnnaMaria Andriotis): 

“Banks have pulled back sharply on lending to U.S. consumers during the coronavirus crisis. One reason: They can’t tell who is creditworthy anymore. Millions of Americans are out of work and behind on their debts. But, in many cases, the missed payments aren’t reflected in their credit scores, nor are they uniformly recorded on borrowers’ credit reports. The confusion stems from a provision in the government’s coronavirus stimulus package. The law says lenders that allow borrowers to defer their debt payments can’t report these payments as late to credit-reporting companies. From March 1 through the end of May, Americans deferred debt payments on more than 100 million accounts… The credit blind spot has further clouded the outlook for lenders.”

June 30 – Bloomberg (Emmy Lucas): 

“It’s crunch time for U.S. states as they face their worst fiscal crisis in decades brought on by the Covid-19 pandemic that’s decimated tax collections. Eleven states have yet to enact a budget for the fiscal year that begins Wednesday. And for those that have, they’ve been forced to slash spending, lay off workers and count on billions of dollars in potential federal aid that remains bogged down in Washington… The financial crisis amid the pandemic is forcing states and cities to make tough choices even as they seek help from Washington. Moody’s Analytics has projected that state and local governments will need at least $500 billion in additional federal aid over the next two years to avoid major economic damage.”

June 29 – Bloomberg (David Wethe): 

“Chesapeake Energy Corp., which filed for bankruptcy protection on Sunday, is just the latest in a long list of casualties. More than 200 North American oil and gas producers, owing over $130 billion in debt, have filed for bankruptcy since the beginning of 2015… This month alone, seven oil and gas companies have gone under, tying December 2015… The shale boom spearheaded by the likes of Chesapeake a decade ago was fueled by debt. Profitability and shareholder returns have been consistently disappointing… The rate of default on high-yield energy debt stood at 11%, Fitch Ratings said…, the highest level since April 2017.”

July 1 – Reuters (Arunima Kumar and Shariq Khan): 

“Lenders have tightened the screws on shale producers by wiping away 20% of the credit that has helped fuel the industry’s boom. Twice every year, oil and gas producers negotiate how much credit they should get from banks based on the value of their reserves in the ground. Those loans, called RBLs, are the industry’s key financing tool. So far in the spring season of redeterminations, the total borrowing base for three dozen publicly listed North American oil companies has been slashed by $7.5 billion…”

July 2 – CNBC (Robert Frank): 

“Manhattan apartment sales in the second quarter saw their biggest decline in three decades — and the worst quarter on record — as the real estate lockdown and urban flight after the Covid-19 crisis put a freeze on the market. The total number of sales in the second quarter fell by 54%, the largest percentage decline in 30 years, according to… Miller Samuel and Douglas Elliman. The median sales price fell 18% to $1 million, the biggest decline in a decade. There were only 1,147 sales in the quarter — the lowest number on record…”

June 29 – Reuters (Yawen Chen and Ryan Woo):

 “China’s factory activity expanded at a stronger pace in June after the government lifted lockdowns and stepped up investment, but persistent weakness in export orders suggests the coronavirus crisis will remain a drag on the economy for some time. The official manufacturing Purchasing Manager’s Index (PMI) came in at 50.9 in June, compared with May’s 50.6… But export orders continued to contract, albeit at a slower pace, with a sub-index standing at 42.6 compared to 35.3 in May…”

June 30 – Reuters (Jamie McGeever):

 “Brazil’s national debt and public-sector deficit surged to record highs in May…, reflecting the squeeze on finances from a second full month of social isolation and quarantine to curb the novel coronavirus pandemic. The deterioration in the public accounts supports Treasury Secretary Mansueto Almeida’s comments… that debt will likely exceed 95% of gross domestic product this year and the primary budget deficit is on course to top 11% of GDP. Economy Minister Paulo Guedes went further…, warning that the debt and primary deficit could rise above 100% and 15% of GDP…”

June 29 – Reuters (Tetsushi Kajimoto): 

“Japan’s industrial output fell for a fourth straight month in May to the lowest level since the global financial crisis and the jobless rate hit a three-year high, underscoring the broad economic pain caused by the coronavirus. The world’s third-largest economy is bracing for its worst postwar recession… Ministry of Economy, Trade and Industry (METI) data… showed that factory output fell 8.4% month-on-month in May…”

June 28 – Reuters (Daniel Leussink and Yoshifumi Takemoto): 

“Retail sales in Japan tumbled at a double-digit pace for the second straight month in May as the coronavirus pandemic and lockdown measures delivered a heavy blow to consumer confidence and economic recovery prospects… Retail sales fell 12.3% in May from a year earlier…”