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Virus panic update — It’s hard to overstate the threat to markets and the global economy from the coronavirus outbreak. It’s an existential threat that has sewn panic across the globe and wiped out trillions in wealth. Equity markets were overvalued for many months and required only a clear threat to reprice. Now they have and the reckoning has been swift and harsh and is likely not over.
Via Reuters: “Governments ramped up measures on Thursday to battle a looming global pandemic of the coronavirus as the number of infections outside China … for the first time surpassed those appearing inside the country.”
Markets slide again — Via Bloomberg : “U.S. stock index futures slid after American health authorities said they’ve identified the first case of coronavirus that doesn’t have known ties to an existing outbreak.
“‘President Trump’s press conference was certainly intended to be a confidence builder but I don’t believe it will have much impact on stocks,’ said Kristina Hooper, chief global market strategist at Invesco. ‘The drop in futures illustrates that words from politicians are meaningless. I believe it will take assurances from the Fed to send futures in the opposite direction..”
Via Fitch Ratings: “[O]utbreaks could weigh heavily on economic activity of these countries and hence our global growth forecast of 2.6% for 2020. We have already revised down several growth forecasts across Asia (including South Korea), and we see more countries at risk.”
House Financial Services has a mark-up hearing at 9:30 a.m. on multiple bills … Second estimate of Q4 GDP expected to be unchanged at 2.1 percent …
FED UNDER PRESSURE TO CUT — Standard Chartered’s Steve Englander: “We now expect the FOMC to ease at its 29 April and 10 June meetings (on hold, prior) in response to the risk that coronavirus disrupts US and global activity …
“We do not currently expect a third cut in 2020, but see risk of a December move if the rebound from coronavirus fears is stunted. The Fed may explicitly commit to unwind easing if disease risk fades.”
GOLDMAN ON 2020 — Via Goldman Sachs analysts: “With most investors focused on the coronavirus, the equity market is struggling to price the uncertainty and risk posed by the 2020 election.
“Polls and prediction markets show Senator Sanders as the clear Democratic front runner, and head-to-head polls indicate he would be competitive in the general election. However, many clients have expressed the view that President Trump would be a large favorite in such a contest, and parts of the equity market reflect that view.”
MARKET PANIC — Leuthold’s Jim Paulsen: “The collapse in the stock market in recent days has been swift, significant, dramatic and unnerving! And, with the VIX volatility index still hovering near 27, who knows how much longer and how much deeper it may still go?
“Many believe this crash in stock prices reflects the spread of the coronavirus beyond China and what this implies about global economic growth in the coming quarters. Certainly, the bond market seems to be signaling a pending stall in global growth. … Likewise, the U.S. stock market’s swift almost 7.5% decline from its high February 19th reflects growing fears of an economic calamity.”
FS Investments’ Lara Rhame: “Hope of successfully containing the virus deteriorated significantly over the weekend with news of fresh outbreaks in Italy, South Korea and Iran, bringing the virus to a total of 30 reported countries.
“Early indications that the virus could spread by air as easily as influenza and that infected people could be contagious early on – before they show symptoms – have only increased official concern. In short, while there continue to be more unknowns than knowns about COVID-19, the risk of a global pandemic is looking more likely.
TRUMP TRIES TO EASE FEARS — Our Nancy Cook and Meridith McGraw: “Trump tried to ease Americans’ fears about the potential spread of coronavirus … by putting himself at the center of it all. He cracked wise about his germaphobia, recounted a run-in with a sick friend using a stand-up comedian’s patter, waved around colorful graphs showing America’s superiority on virus containment and listed facts he had just learned about the flu.
“It was a performance that had kept White House staffers on edge all day, ever since the president unexpectedly tweeted his plans for a press conference after debarking at sunrise from Air Force One. Just hours before his appearance was expected to begin, communications staffers were uncertain about how — or where — the press conference would take place, and if the president or just the coronavirus task force would take questions.”
PENCE IN CHARGE — Our Matthew Choi: “Trump appointed his Vice President Mike Pence to lead a task force to combat the spread of the coronavirus, the president announced Wednesday.
“Speaking during a news conference, Trump cited Pence’s experience as governor of Indiana as qualifying him to spearhead the growing threat of the global outbreak. The White House had been weighing the appointment of a coronavirus czar in the lead up of the announcement as it faced criticism over its inconsistent messaging during the emerging crisis.”
JUDY SHELTON UPDATE — Via email from George Mason’s J.W. Verret: “I am glad Senator Toomey has given Judy the benefit of the doubt. Senate Republicans respect Senator Toomey’s leadership on Fed issues, with this momentum I predict she will now sail through confirmation.”
VIRUS CONCERN RISES — Via Morning Consult: “69% said they are concerned about the effects on the U.S. economy. That’s up from 55% who said the same in an early February survey. Americans are growing more worried about a potential hit on the U.S. economy from the coronavirus outbreak, as economic policymakers consider how to grapple with the expected fallout.”
BUSINESS TAKES ACTION — NYT’s David Yaffe-Bellany: “An oil company and a media group have told hundreds of employees in London to work from home. A television giant is stopping people who have visited certain countries from entering its offices in Europe. A German airline has asked workers to take unpaid leave.
“For weeks, the coronavirus outbreak in China rattled global supply chains, exacting a toll on major businesses around the world, though often in indirect ways. Now, as it spreads across Europe and Asia, the virus is becoming a more immediate threat to all types of businesses. From Milan to Berlin to London, companies in practically every industry are refining their emergency protocols or sending employees home to try to prevent an outbreak.”
MAJOR REVENUE HITS — WSJ’s Julie Wernau: “Some American companies say they could lose as much as half their annual revenue from China if the coronavirus epidemic extends through the summer, as businesses struggle to get boots back on the ground amid travel restrictions and shortages of basic protective gear.
“Nearly half of U.S. companies in China said they expect revenue to decrease this year if business can’t return to normal by the end of April, according to a survey conducted Feb. 17 to 20 by the American Chamber of Commerce in China, or AmCham, to which 169 member companies responded. One fifth of respondents said 2020 revenue from China would decline more than 50% if the epidemic continues through Aug. 30.”
MEGA-DONOR WANTS TO STOP SANDERS — CNBC’s Brian Schwartz: “Democratic megadonor Bernard Schwartz has started reaching out to party leaders, particularly House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, to encourage them to back a candidate for president in order to stop the surge of Sen. Bernie Sanders.
“Schwartz, the CEO of BLS Investments, told CNBC that in recent days he’s been trying to speak with Pelosi and Schumer about making a pick, in the hope that voters will follow their lead and end up denying Sanders the party’s presidential nomination.”
NAFCU Responds to ABA — NAFCU Chief Economist Curt Long “notes that 30 percent of credit union branches serve low-and-moderate income census tracts, while only 24 percent of bank branches do. In the past five years, 49 percent of branches built by large banks are located in high-income census tracts. The same banks that benefitted most from the $27 billion in 2019 tax savings resulting from the TCJA.”
CFPB AGREES TO DISCLOSE DISCRIMINATION DATA — Our Katy O’Donnell:
“The CFPB has agreed to collect and disclose data meant to track discrimination in business lending as part of a settlement with a consumer advocacy group filed today in federal court in California.
“The group Democracy Forward sued the CFPB in May, alleging that the consumer bureau was violating a provision of the Dodd-Frank law that requires it to collect and publish data on lending to women- and minority-owned small businesses.”
RANKING THE TOP CITIES — The Milken Institute released its annual ranking of Best-Performing Cities in the U.S.”