32% Unemployment
The World
Economists at the St. Louis Fed project the economic freeze forced by the coronavirus ultimately will put 47 million Americans out of work, sending the unemployment rate spiking to 32.1 percent. That’s worse than the 30 percent jobless rate St. Louis Fed President James Bullard predicted just last week — and more than seven points worse than the highest unemployment rate the country saw during the Great Depression. The economists arrived at the number by an admittedly “back-of-the-envelope” method: averaging two different data sets, one that pegs 66.8 million jobs at high risk of being eliminated, and another that found 27.3 million workers are in jobs requiring a high degree of contact (think hairstylists and flight attendants.) Significantly, the estimate doesn’t account for the impact of the $2.2 fiscal stimulus just signed into law. (The Finance 202)
A multiyear boom in mergers and acquisitions activity came to a halt by the end of March, as the fallout from the coronavirus pandemic ravaged corporate share prices and redirected the focus of executives towards saving their own companies instead of trying to buy others. Deal activity last week totalled just $12.5bn, the lowest weekly total since the nadir of the financial crisis in April 2009. The overall value of deals in the first quarter fell 28 per cent from a year ago to $698bn, the weakest year-opening period since 2016. (Financial Times)
Workers in a variety of occupations across the country are protesting what they see as inadequate safety measures and insufficient pay for the risks they are confronting. On Monday, a contingent of workers who fulfill orders for the grocery delivery service Instacart stayed off the job, demanding greater pay and better access to paid leave and disinfectant. A group of workers walked off the job at an Amazon warehouse in Staten Island on Monday, and a sickout called by Whole Foods Market workers is set for Tuesday. (New York Times)
Walmart said Tuesday it will begin temperature checks for all employees before they start their shifts. The world’s largest retailer is also making masks and gloves available for employees who want to wear them. The new steps come as grocery workers increasingly become worried about being at the frontlines of the coronavirus pandemic. (Dallas News)
China’s manufacturing sector is recovering as restrictions imposed to curb the spread of the novel coronavirus are gradually lifted, according to official data released Tuesday, even as widespread skepticism about China’s accounting of the crisis persists. The country’s official manufacturing purchasing managers’ index, a survey of firms to gauge sector sentiment month to month, jumped to 52 out of 100 in March, up from a record-low 35.7 in February, according to the National Bureau of Statistics. A reading above 50 signals an expansion, while a figure below that level implies a contraction. (Washington Post)
Huawei Technologies reported that revenue grew 19.1 per cent year on year to a record 858.8 billion yuan (US$121 billion) last year but said that Trump Administration curbs on its ability to do business outside China are biting and that its 2020 outlook amid the US sanctions and global coronavirus pandemic “will only get more complicated.” (South China Morning Post)
The coronavirus pandemic could seriously disrupt global food supply chains and send prices soaring, especially for those economies with vulnerable supply structures, if major producing countries increase export restrictions, international agencies and food experts have warned. China is expected to be shielded from severe supply shortages as the country has been relying on its own output of rice and wheat to feed its 1.4 billion people, but its reliance on imports for certain crops, such as soybeans, could send food price soaring and add further misery to domestic consumers. The United Nations Food and Agriculture (FAO) said last week that it had “already seen signs that pressures due to lockdowns are beginning to impact supply chains, such as the slowdown in the shipping industry. Disruptions, particularly in the area of logistics, could materialise in the coming months.” (South China Morning Post)
In the UK, gaps are starting to appear in the fruit and vegetables aisles. The outbreak is hampering the movement of fresh produce across borders, exacerbated by a lack of manual labour. Britain imports significantly more fruit and vegetables than it sends to other countries. It heavily relies on Spain for almost a fifth of the goods, the Netherlands (11pc) and South Africa (5pc). And although supermarkets say that produce is still coming in, supply difficulties are arising. (The Telegraph)
As the novel coronavirus causes turmoil in property markets, some of the most risk-hungry real-estate lenders are starting to come under pressure. The shares of some commercial mortgage real-estate investment trusts trade at prices that indicate investors are concerned about their financial health, despite a rebound last week. These publicly traded REITs and private real-estate debt funds issue high-yield debt such as construction loans. Typically managed by private-equity firms, they often fund their deals with the help of credit facilities from banks. Funding debt investments with bank loans has allowed REITs and debt funds to juice up their profits, but it puts them at risk at a time when real-estate lending markets are freezing up. The danger is that developers stop making payments on their loans while banks demand more cash collateral for credit facilities, squeezing REITs and debt funds from two sides, analysts say. (Wall Street Journal)
Finance
Lenders on both sides of the Atlantic have upwards of 100 open credit lines to vehicles known as collateralised loan obligations, which are among the biggest sources of funds for businesses that do not have top-quality credit ratings, according to people familiar with the arrangements – billions of dollars of debt linked to companies most exposed to an economic downturn. Funds such as the debt-investing arms of private equity powerhouses Blackstone and Carlyle are the biggest managers of these CLOs, which have made great strides since the last financial crisis as traditional lenders retreated from making riskier loans. Investment banks still have exposure, however, as they provide so-called “warehouse lines” to CLO managers that help them build portfolios of loans. Such assets have plummeted in value this month, due to growing doubts over the ability of heavily indebted companies to withstand big hits to the economy. (Financial Times)
The Federal Reserve said it would launch a temporary lending facility that will allow foreign central banks with accounts at the Fed to convert their holdings of Treasuries into dollars, its latest bid to alleviate strains in global markets. The program will allow foreign central banks and other international monetary authorities who maintain accounts at the New York Fed to enter a lending arrangement called a repurchase agreement, or repo, in which borrowers temporarily exchange their Treasury securities for U.S. dollars. (Wall Street Journal)
China should drop 2020 GDP target as pandemic stokes uncertainty, says central bank adviser. Central bank adviser Ma Jun says China should not set an economic growth target this year due to damage caused by the coronavirus pandemic. Even GDP growth of between 4-5 per cent will be difficult as the pandemic spreads in the US and Europe, Ma says. (South China Morning Post)
Private equity fundraising in the U.S. surged over the past decade, with annual figures climbing from less than $60 Billion in 2010 to a record $301 Billion in 2019. But now that the coronavirus outbreak has reduced travel, dealmaking has slowed, and limited partners have begun to worry about the economy, the fundraising market could be in line for its first serious decline since the last financial crisis (PitchBook)
Dealmaking grinds to a halt on coronavirus impact (Financial Times)
Technology
Harsh measures, including stay-at-home orders and restaurant closures, are contributing to rapid drops in the numbers of fevers — a signal symptom of most coronavirus infections — recorded in states across the country, according to intriguing new data produced by a medical technology firm. (New York Times)
Zoom, the videoconferencing app whose traffic has surged during the coronavirus pandemic, is under scrutiny by the office of New York’s attorney general, Letitia James, for its data privacy and security practices. On Monday, the office sent Zoom a letter asking what, if any, new security measures the company has put in place to handle increased traffic on its network and to detect hackers, according to a copy reviewed by The New York Times. Meanwhile, Zoom Video Communications Inc., which owns the videoconferencing service that’s quickly become a staple of pandemic-lockdown life, has been sued for illegally disclosing private user information, according to a lawsuit filed in California. (New York Times & Bloomberg News)
Smart Links
Monks are making hand sanitizer. (The Telegraph)
Kids’ daily screen time surges over 50% (Axios)
Coronavirus is being used to suppress press freedoms globally. (Axios)
The borderless nature of gaming is allowing esports to thrive (Quartz)