The World
The world economy is on the precipice of its worst crisis since World War II. As the newly updated Brookings-FT TIGER (Tracking Indexes for the Global Economic Recovery) makes clear, economic activity, financial markets, and private-sector confidence are all cratering. And if international cooperation remains at its current level, a far more severe collapse is yet to come. To be sure, the current extraordinarily sharp downturn could prove to be relatively brief, with economic activity snapping back to previous levels once the COVID-19 contagion curve is flattened. But there is good reason to worry that the world economy is heading into a deep, protracted recession. A rapid recovery seems highly unlikely. Demand has been ravaged, there have been extensive disruptions to manufacturing supply chains, and a financial crisis is already underway. Moreover, the current shock is simultaneous and universal. No economy is immune, and no country will be able to lead an export-driven recovery. Today’s collapse has increased deflationary and financial risks in the advanced economies, and struck a significant blow to commodity exporters. On top of it all, oil prices are plunging even more than they otherwise would, because Saudi Arabia and Russia are flooding the market. (Brookings & Financial Times)
Oil prices came under pressure in early trading on Monday on doubts that a record US-backed Opec deal to cut supply would be enough to rescue a market ravaged by the coronavirus pandemic. Opec and its allies, including Russia, on Sunday signed off on a deal to cut almost 10 per cent of global supplies, winning backing from the US and other G20 countries for additional measures to prop up a market where demand has fallen by as much as a third. “The cuts are still not big enough to avoid a huge global stock build in the second quarter,” said analysts at Facts Global Energy, a consultancy, even as they said the size of the deal had slightly exceeded their expectations. Meanwhile, Texas oil regulators will meet Tuesday to consider the state’s first output cut since 1970s. (Financial Times, Dallas Morning News)
Public health experts on Sunday debated the question of when to reopen portions of the U.S. economy, shuttered because of the coronavirus pandemic, with several Trump administration officials cautioning that a target date of May 1 — floated by President Trump, among others — may not be realistic. Any hopes that U.S. infections are nearing their peak must be measured against concerns among governments elsewhere that have appeared to bring outbreaks under control, only to face second and third rounds of infections as they and their neighbors began reopening their economies, global health and economic experts say. “We’re looking around the world. As they relax the economic controls, the virus flares back up again,” Federal Reserve Bank of Minneapolis President Neel Kashkari said Sunday on CBS’s “Face the Nation.” (Washington Post, Wall Street Journal)
Britain’s finance minister has told colleagues the economy could shrink by up to 30% this quarter because of the coronavirus lockdown, a newspaper reported, as the soaring death toll gave little hope restrictions would soon be lifted. The Times newspaper reported that Rishi Sunak, the finance minister, had discussed with colleagues the possibility that Gross Domestic Product would shrink by 25 to 30 percent between April and June. (Reuters)
China has imposed restrictions on the publication of academic research on the origins of the novel coronavirus, according to a central government directive and online notices published by two Chinese universities, that have since been removed from the web. Under the new policy, all academic papers on Covid-19 will be subject to extra vetting before being submitted for publication. Studies on the origin of the virus will receive extra scrutiny and must be approved by central government officials, according to the now-deleted posts. (CNN)
Quality issues exist in China’s new coronavirus-induced boom industry: Surging international demand for personal protective equipment has lured new players into the lucrative industry, but not all entrants can meet the standards required in the country and overseas. Meanwhile, a surge of Chinese people returning from Russia, which is now experiencing its own spike in infections, has fueled the largest increase in reported new cases in China in more than a month. Further, China has scaled up land border control measures for the prevention and control of the novel coronavirus disease (COVID-19). (South China Morning Post, New York Times, Xinhua)
Boris Johnson says thank you — “It Could Have Gone Either Way”:
The coronavirus pandemic is stoking long-simmering tensions between China and the island democracy of Taiwan, underscoring differences between their political systems and deepening resentment toward Beijing. In recent weeks, Beijing and Taipei have escalated rhetoric accusing one another of exploiting the pandemic for political ends, even as they compete to provide medical supplies and expertise to coronavirus-hit countries in what observers are calling “mask diplomacy.” That Taiwan achieved this despite its exclusion from the World Health Organization—at Beijing’s behest—has reinforced confidence among many Taiwanese in standing up to what they see as China’s bullying practices against them. (Wall Street Journal)
Iran has been struck by one of the most severe coronavirus outbreaks in the world, but the voices of Iranians affected by the pandemic have remained largely unheard outside the country’s borders. The scale of their suffering has been obscured by often upbeat stories about survivors in Iran’s official media and by an inscrutable government many suspect is underplaying the toll. Aided by Iranian hospital records obtained by The Washington Post, however, reporters were able to contact covid-19 survivors and the families of victims. They recounted tales of valiant medical workers, overtaxed hospitals and a government that had been far too slow to raise the alarm. (Washington Post)
As leaders seize powers to fight coronavirus, fear grows for democracy: France and Bolivia have postponed elections. Peru handed its president broad new legislative authority. Israel sharply ramped up the reach of its surveillance state. While leaders around the world fight the spread of the coronavirus, they’re amassing sweeping new powers. As legislatures limit or suspend activities in the name of social distancing, many of the norms that define democracy — elections, deliberation and debate, checks and balances — have been put on indefinite hold. (Washington Post)
Amazon.com Inc said on Monday it plans to hire 75,000 more people for jobs ranging from warehouse staff to delivery drivers as demand for online orders surged. The e-commerce giant now expects to spend over $500 million globally to increase wages for the workers during the pandemic, it said, up from a previous estimate of $350 million. The new hiring are in addition to the 100,000 warehouse and delivery workers it hired recently to deal with the demand surge. (Reuters)
Companies try to slow product shipments from overseas, as ‘slow steaming’ options for imports gain popularity while coronavirus lockdowns sap demand. (Financial Times)
There’s been a spike in coronavirus cases at meat plants in the U.S. Meanwhile, Smithfield Foods, the world’s biggest pork processor, said on Sunday it will shut a U.S. plant indefinitely due to a rash of coronavirus cases among employees and warned the country was moving “perilously close to the edge” in supplies for grocers.
Slaughterhouse shutdowns are disrupting the U.S. food supply chain, crimping availability of meat at retail stores and leaving farmers without outlets for their livestock. (Los Angeles Times, Reuters)
Walt Disney World Resort will furlough 43,000 union workers while its theme parks remain closed as authorities restrict large gatherings due to the coronavirus pandemic, according to the Service Trades Council Union. Disney confirmed it reached an agreement to maintain health insurance and other benefits during the furlough, which will begin April 19. Disney will pay 100% of health insurance costs for workers currently covered for the duration of the furlough up to 12 months. Meanwhile, Bob Iger is fighting for Disney’s life. (CNBC, New York Times)
The U.S. Supreme Court, changing its practices due to the coronavirus pandemic, announced on Monday that it will hear arguments by teleconference in May - a highly unusual step - in cases including a closely watched dispute over whether President Donald Trump’s tax and financial records should be disclosed.
The court also will hear arguments by teleconference in a case over the complex U.S. presidential election system focusing on whether Electoral College electors are free to break their pledges to back the candidate who wins their state’s popular vote. (Reuters)
Gilead Sciences Inc.’s experimental drug for patients with severe Covid-19 infections showed promise in an early analysis, raising tentative hope that the first treatment for the novel virus may be on the horizon. In this cohort of patients hospitalized for severe Covid-19 who were treated with compassionate-use remdesivir, clinical improvement was observed in 36 of 53 patients (68%). (Bloomberg, New England Journal of Medicine)
Finance
With the first quarter in the books, big companies are preparing to disclose to investors early indications of the economic toll of the coronavirus pandemic. The respiratory illness has effectively shut down the U.S. economy, spurring a wave of layoffs and furloughs that resulted in a record 17 million unemployment claims in a span of three weeks. It also set off a scramble by companies to conserve cash.
The Wall Street Journal, with help from data tracker MyLogIQ, analyzed public filings for companies in the S&P Composite 1500 Index—which covers about 90% of U.S. market capitalization—to assess the impact thus far. Among the findings: Almost 300 companies withdrew their financial guidance. About 175 companies suspended stock buybacks or cut their dividend. One hundred firms that together employ some three million people said they would furlough workers. (Wall Street Journal)
State and local tax revenue is falling, particularly in areas heavily reliant on sales taxes, while spending is up due to added unemployment and medical obligations.
Arizona had been projecting a $1 billion surplus by the end of its fiscal year in June, but now expects a $1.1 billion deficit for the year ending June 2021. The most critical cases may be Florida and Louisiana, which both are in the top 10 for sales tax dependency and have rainy day funds that represent less than 5% of annual expenditures. There also will be shortfalls in cities, counties, and towns — many of which haven't yet debated or approved fiscal 2021 budgets because of bylaws that didn't anticipate governance-via-Zoom. (Axios)
Chart from Axios:
JPMorgan Chase, the country’s largest lender by assets, is raising borrowing standards this week for most new home loans as the bank moves to mitigate lending risk stemming from the novel coronavirus disruption. From Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value. (CNBC)
The names of businesses that collectively will receive hundreds of billions of dollars in coronavirus relief from the federal government may not be disclosed publicly, an omission that critics say could make the massive spending program vulnerable to fraud and favoritism. The $2.2 trillion Cares Act requires that the names of recipients of some forms of federal aid be published, but those requirements do not extend to significant portions of the relief. Chief among the omissions is the $349 billion expected to be doled out to small companies in chunks as large as $10 million. A potentially even larger gap involves the trillions going out to businesses under the auspices of the Federal Reserve. (Washington Post)
Henry M. Paulson Jr., former U.S. treasury secretary, chairman of the Paulson Institute and co-chairman of the Aspen Economic Strategy Group, offers 7 principles for a post-coronavirus economy. (Washington Post)
Our economic model should protect those most in need.
State-of-the-art infrastructure is essential to economic competitiveness.
Human capital is what differentiates us.
Protectionism will destroy our competitiveness.
Our environment is vital to long-term prosperity.
Capital is the lifeblood of the economy.
Massive debt will cripple our ability to achieve long-term prosperity.
Russia’s sovereign wealth fund will continue to invest in Saudi Arabia’s Vision 2030 development programme, the Saudi-owned Al-Arabiya channel on Monday cited the head of the fund as saying. (Reuters)
Technology
Apple and Google are jointly building software into iPhone and Android devices to help track the spread of coronavirus by telling users if they contacted an infected person and are potentially sick themselves. The new project is slated for release in May. Medical experts know that contact tracing is vital to public health during disease outbreaks. This Silicon Valley effort will be one of the biggest American attempts to closely track the spread of coronavirus. Crucially, it is not the national coronavirus surveillance system that the White House was reportedly seeking. To build the voluntary contact tracing network, the new tech will rely on Bluetooth, typically used for short-distance communication between devices. When you test positive for the virus, you enter that information into an app on your phone, and other people who have been near you in the previous 14 days are alerted. Your own information remains private. (MIT Technology Review)
The Chinese telecoms giant Huawei has warned ministers that impeding its nationwide rollout of 5G would be a “disservice” to Britain. (The Times)
Coronavirus disruption puts supply chain software to the test, as AI firms adjust data, algorithms to better respond to the Covid-19 impact: In late January, the artificial intelligence startup Noodle.ai began detecting coronavirus-related shocks to food supply chains rippling across the Asia-Pacific region. Software firms like Noodle.ai have urgently added new information to shore up algorithms that predict food supply and demand. Manufacturers such as global food giant Danone S.A. have raced to feed AI tools with new data to help teams shift materials as needed and keep factories running. Distributors have turned to the machines to help model where to direct fleets of trucks and trains that keep store shelves stocked. (Wall Street Journal)
The need to reopen factories has driven investments in automation. Firms are innovating on new ways to use machine learning and internet-connected devices to operate equipment remotely. (Economist)
As if Zoom Video Communications didn’t have enough troubles, now it has the world’s most valuable company breathing down its neck. Twice last week, Microsoft issued statements touting the popularity of its Teams collaboration platform for meetings and video calls. The company said Thursday it hit a daily record of 2.7 billion meeting minutes on March 31, up 200% from two weeks prior. The company also said total video calls over the platform grew more than 1,000% during the month of March. That came three days after Microsoft boasted of the security of videoconferencing in Teams. (Wall Street Journal)
The coronavirus pandemic didn’t seem to have hurt Chinese AI firms’ ability to raise money yet, but as uncertainty drags on and corporations keep a tighter grip on their purse strings, many of these upstarts might find 2020 a rough year. (Caixin)
Teenagers still like Apple over Samsung, and it’s not even close. 85% of teenagers have iPhones, according to a new survey from Piper Sandler Companies. 88% of teenagers want their next smartphone to be an iPhone. And despite some impressive devices from Samsung, the company simply can’t compete with the iPhone when it comes to teenage interest. (BGR)
Smart Links
No, coronavirus is not a good argument for quitting cash. (MIT Technology Review)
Nearly three-in-ten Americans believe COVID-19 was made in a lab. (Pew Research Center)
The U.S. vs. China: Who Is Winning the Key Technology Battles? (Wall Street Journal)
How Softbank lost its vision. (Barron’s)
Facebook ad rates fall. (Wall Street Journal)
Roger Goodell will announce this year’s NFL draft picks from his home. (Washington Post)
Does social distancing work? This 30-second video went viral. (Ohio Department of Health)