Market comment 2020

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In China, nearly half of men smoke cigarettes compared to roughly 2% of women, which could be one reason for the higher death rate among males.

 Coronavirus fatality rates vary wildly depending on age, gender and medical history — some patients fare much worse than others - MarketWatch

• Good link with many facts
  
• Useful tips and facts about transmission
  

The Centers for Disease Control and Prevention (CDC) initially declined to test a California patient for coronavirus because of narrow testing criteria, delaying the identification of a new possibly pivotal case, according to officials at the hospital treating the patient. UC Davis Medical Center wrote in a memo to staff that the patient was transferred from another hospital on Feb. 19 with a suspected viral infection. The hospital requested coronavirus testing, but the CDC initially declined because the patient, who had not recently traveled to countries with outbreaks or been in contact with someone with the virus, did not meet the testing criteria. It was not until Sunday that the CDC agreed to do a test, and the results then came back on Wednesday as positive.

 CDC declined to test new coronavirus patient for days, California hospital says | TheHill

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The way to tell whether the discounting has been fully reached is when the market stops reacting negatively to every bad headline, which has yet to happen. But once it happens, the market can truly bottom and begin to recover when some of the expected negative events fail to materialize, even though it may rally in the face of other “bad” news it already discounted. What is preventing this from happening? Two things. The first is a disbelief or lack of urgency about the scope of the coronavirus problem. 

This lack of panic takes many forms, with the most common being the refrain that this is “just the flu.” Seasoned market watchers should be reminded of similar dismissals in late 2007 that “subprime is only 2% of mortgage market.” One exception is the Chinese government, which did not shut down its economy and quarantine hundreds of millions of people because they are needlessly panicking. Those actions signal a seriousness that the rest of the world should not dismiss. 

The second is the Federal Reserve. The foundation of the post-crisis period has been that accommodative monetary policy rides to the rescue of every market decline. So, a parallel discussion that is going on is whether the Fed will cut interest rates at its next monetary policy meeting that ends on March 18. Data compiled by Bloomberg show the probability of a reduction in the Fed’s target rate at that meeting is slightly better than even money. In other words, hope is at a fever pitch that easier monetary policy can help stabilize markets. But, again, the coronavirus is not a problem that easy money, either via lower rates or additional asset purchases, can fix.  Such actions will, at best, only temporarily support markets, but they won’t prevent them from reaching a true bottom.

 How to Tell When Markets Finally Reach a Bottom

The disturbing coronavirus driven selloff across global stock markets this week may be the tip of the iceberg for one simple reason. Stocks have yet to price in a mild — or somewhat bruising — recession in the U.S. as coronavirus infection cases pile up and bring consumer activity and businesses to a standstill. Up until now, equity strategists Yahoo Finance have talked with, say the stock market’s six-day drubbing largely reflects de-leveraging by hedge funds and speculators on momentum names (see Microsoft, Apple, etc.). That suggests there could be another shoe to drop in stocks soon as (1) more strategists severely slash S&P 500 earnings growth targets as Goldman Sachs did Thursday; and (2) investors digest what is likely to be terrible global macroeconomic data in the weeks and months to come.

 Coronavirus just sent the Dow crashing 1,100 points and it could get worse

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Only a week ago market pundits were still telling investors to fade the panic from the COVID-19 outbreak. But Tracy Chen didn’t share in the optimism. The fund manager for Brandywine Global said an array of “alternative” datasets which offered frequent updates of how swiftly Chinese workers were returning to the factory floor painted a more dire picture of the world’s second largest economy. Based on such sources, hopes for China to see a V-shaped recovery — a sharp rebound of economic growth after a first-quarter slowdown — are going to be dashed, said market participants. 

“One third are still getting back, one third is getting quarantined, and another third is at home because there’s no demand,” said Chen. Investors have employed high-frequency data like traffic congestion and coal consumption that isn’t offered by government statistics agencies to get a pulse on China’s economy, as official data releases can take longer to be published.

 How investors are using ‘alternative’ data to track China’s recovery from coronaviru - MarketWatch

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Tomoaki Shishido, senior economist at Nomura Securities in Tokyo, said the Fed would not even have to wait for data to make up its mind: We don’t even need to wait for economic data to see how badly the economy is being hit. You can tell that the sales of airlines and hotels are already falling by a half or something like that. It is fair to say the impact of the coronavirus will be clearly much bigger than the US-China trade war. So the Fed does not have a reason to take a wait-and-see stance next month.

 (1) Coronavirus latest updates: US stocks suffer biggest one-day fall, Australian market dives | World news | The Guardian

Adding to the misery: Japan and China say patients have tested positive for the virus a second time after reportedly recovering fully from an initial infection (Reuters). Scientists suggest it is possible COVID-19 can go dormant in some patients and re-emerge. More research is needed.

 The Hill's Morning Report - Presented by Facebook - Trump on US coronavirus risks: 'We're very, very ready for this' | TheHill

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The reaction doesn’t make sense to Tom Porcelli, chief U.S. economist at RBC Capital Markets, which is one of the primary dealers of U.S. Treasury securities. “What do rate cuts at the front-end do exactly to shift the trajectory of the core short-term problems stemming from COVID-19? It boggles the mind. Cutting now when Fed funds is already sitting 100 basis points below neutral further cements the dangerous precedent already set that the only independent variable in the policy reaction function that matters is what the S&P 500 is doing of late,” he says.

 Major bank economist says the coronavirus market reaction ‘boggles the mind’ - MarketWatch

Stocks climbed a lot in 2019. In many cases, prices rose faster than what was justified by companies’ growth. For example, Apple (NASDAQ:AAPL) grew its revenue and operating income by almost 16% in 2018, whereas in 2019 its revenues declined by 2% and its operating income fell by almost 10%. Yet Apple’s stock rose an astonishing 90% in 2019!

 It's Time To Shield Your Portfolio: A Message From Seeking Alpha's Founder | Seeking Alpha

• Indeed..
  

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Leland Miller is CEO of the China Beige Book, a research firm that collects data from surveys of thousands of Chinese companies and industry participants to construct a report on the economy that’s more granular — and possibly more candid — than the notoriously opaque Chinese government data. China Beige Book just released to clients a “flash,” or preliminary, set of data for the first quarter this year, documenting the first effects of the COVID-19 epidemic, and Miller spoke with MarketWatch about what they’ve learned. “The situation on the ground is materially worse than what has come out in the media,” he said in an interview.

 The situation in China is even worse than you think, says this analyst with a history of accurate calls - MarketWatch

• Pretty credible source..
  

“There is a real danger in the public believing they had failed,” Adalja said. “This is a respiratory spread virus with efficient community spread and as such it’s not containable. It is not as if the containment failed, it was never going to be successful.”

 Here’s why the U.S. government’s effort to contain the coronavirus outbreak ‘was never going to be successful’ - MarketWatch

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The GMB union has warned that workers in the gig economy could be at a disadvantage if they have to self-isolate. Mick Rix, GMB national officer, said: "The threat of coronavirus is a huge problem for employers and worker across the UK. "But workers in the so-called gig economy, or on zero-hours contracts, are left abandoned and penniless if they have to self-isolate. "Once again the bogus self-employment model is screwing over the disadvantaged.

 Coronavirus outbreak 'getting bigger' - WHO - BBC News

Scott Minerd of financial services firm Guggenheim Partners told Bloomberg TV that the coronavirus outbreak “is possibly the worst thing I’ve ever seen in my career”, a time-span which includes the 1987 crash and the collapse of Lehman Brothers. “This has the potential to reel into something extremely serious,” Minerd warned. “It’s very hard to imagine a scenario where you can actually contain this, and so that’s the thing that to me is very frightening.”

 Coronavirus fears trigger biggest one-day fall on US stock market | Business | The Guardian

The problem is that testing in the US has been limited so far, with only a small number of labs available to assess the results, flaws in the manufacturing of the earliest kits sent out to states, and out-of-date criteria for testing people. (Until Friday, most tests focused on people who’d been to China recently or those with known Covid-19 exposure.)

On February 14, the agency also announced it would start testing for the virus in people who hadn’t returned from China across five US cities — New York, Chicago, Los Angeles, San Francisco, and Seattle. But “that effort has not yet begun,” ProPublica reported, due to the lack of reliable tests.

Until early February, only two countries in Africa — Senegal and South Africa — had the lab capacity to screen for the disease. While China has had more capacity than the US, with the ability to distribute as many as 1.65 million tests per week, according to the World Health Organization, that’s still been “entirely insufficient,” Lawrence Gostin, director of the O’Neill Institute for National and Global Health Law at Georgetown University, told Vox. “Lack of testing kits has angered doctors and patients in China,” he added, leading them to lean on things like CT scans and lung X-rays to diagnose patients.

 Preparing for coronavirus in the US: Why the US needs better testing, and fast - Vox

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The prospect of large-scale epidemics in places like India, sub-Saharan Africa, or Central America is terrifying because the relatively low death rate currently observed among Covid-19 cases is contingent on the availability of respirators and other medical devices to treat acute cases. The disease could be significantly more lethal in countries that are less generously endowed with hospital infrastructure, and in the context of a global outbreak, rich countries are unlikely to offer much help.

It is also possible that the virus will continue to spread only very slowly. And while Trump’s proclamation that warm weather will stop coronavirus is wildly premature, it’s at least plausible. There is unquestionably a happy scenario in which we pass through several scary weeks but infections don’t get out of control, the virus starts to recede in April, and a vaccine is available next winter. The crashing market says that investors are increasingly unwilling to bet on that happening, and scientifically speaking that appears to be the right bet.

 The coronavirus stock market crash, explained - Vox

At least 210 people in Iran have died as a result of the new coronavirus disease, sources in the country's health system have told BBC Persian. Most of the victims are from the capital, Tehran, and the city of Qom, where cases of Covid-19 first emerged. The figure is six times higher than the official death toll of 34 given by the health ministry earlier on Friday. Ministry spokesman Kianoush Jahanpour insisted it was being transparent and accused the BBC of spreading lies. It comes after a member of parliament for Qom accused the authorities of a cover-up and the US expressed concern that they may not be sharing information.

 Coronavirus: Iran's deaths at least 210, hospital sources say - BBC News

A federal rule that could have helped protect health-care workers from coronavirus has been stuck in regulatory limbo since the start of the Trump administration. An Occupational Safety and Health Administration rule in the works since 2010 was designed to ensure that employers have in place comprehensive programs to protect health-care workers against infectious diseases. Without such standards, compliance with Centers for Disease Control and Prevention guidelines on infection control can’t be easily enforced. Although OSHA has a rule protecting workers from blood-borne pathogens (and says some provisions of that standard could help limit the spread of pathogens by other means), it has no overarching standard for diseases not spread via blood. With the start of the current administration, the rule was removed from OSHA’s active rule-making agenda and relegated to a list of “long-term actions” with no date for moving forward. “Putting it on the long-term agenda essentially means you’re not going to do it,” said Dr. David Michaels, head of OSHA from 2009 to January 2017 and now a professor at the George Washington University School of Public Health.

 Trump administration has dragged its feet on safety regulations that would protect health-care workers against coronavirus - MarketWatch

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Italy’s tourism industry has been dealt its final blow, the head of its hotel federation has lamented, after the US advised its citizens to reconsider travelling to the country. Hotel reservation cancellations have already reached about 90% in Rome, while Venice has seen bookings plummet after regional officials cancelled the final two days of carnival celebrations this week in an unprecedented move in modern times.

 Coronavirus news: South Korea reports 'critical moment' after 813 new cases – live updates | World news | The Guardian

The worst-case scenario is looking increasingly likely. We’ve now seen cases on six continents, apparently “silent” – that is, at least partly asymptomatic – chains of human-to-human transmission both inside and outside China, with additional countries reporting cases within the last week – bringing the total to 47 – and new, accelerating outbreaks in Iran, Italy and South Korea..

Fewer than one in three countries are close to being prepared to confront an epidemic, which leaves the vast majority of the world’s population vulnerable. That in turn leaves us all vulnerable because we’re only as safe as the least safe place. We need to invest more in preparedness, and we need our leaders to take a greater interest in it – that’s all leaders, in both the public and private sectors – from the grass roots to the grass tops..

The US ranks high on the GHS index, but is still unprepared for a severe pandemic, should one happen. Malfunctioning coronavirus tests have frustrated public health labs and delayed outbreak monitoring. Supplies of masks, suits and other protective material for health workers are running low in the midst of a moderately severe flu season. Since the creation of a much-needed public health emergency preparedness fund in the aftermath of 9/11, its budget and the public health functions it supports have been steadily reduced. This is the mentality that left the world vulnerable to the devastating 2014 outbreak of Ebola in west Africa – that is, close the fire department and cancel the fire insurance as nobody’s house or factory has burned down lately. It’s time we learned that the bugs never stop mutating and crossing over to humans.

 Epidemics expert Jonathan Quick: ‘The worst-case scenario for coronavirus is likely’ | World news | The Guardian

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It is only a matter of time before havoc in China starts to show up in US profit warnings. Refinitiv says 30pc of semiconductor earnings within the S&P 500 come from China, 14.3pc of technology equipment, 13.9pc of consumer services, 11pc of household products, and 5.6pc of cars and components. The exposure of the German car industry is enormous in relative terms. Roughly a quarter of its sales come from China, amounting to 5.2m vehicles or €600m each working day, according to  Germany’s Centre for Automotive Research.

 Chinese financial shock gathers steam as world holds its breath on coronavirus