by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT]

Yesterday’s optimism about a potential peak in the coronavirus crisis is being undermined a bit today by reports of re-tightened lockdowns in some countries and the failure of EU finance ministers to agree on an aid program for hard-hit European countries.  We review all the key virus news along with other odds and ends below.

COVID-19:  Official data show confirmed cases have risen to 1,446,242 worldwide, with 83,424 deaths and 308,146 recoveries.  In the United States, confirmed cases rose to 399,929, with 12,911 deaths and 22,539 recoveries.  Here is the chart of infections now being published by the Financial Times:

Virology

• After declaring victory over the coronavirus and easing some travel and other restrictions in Wuhan city, Chinese authorities have quietly re-tightened some lockdown rules after dozens of citizens tested positive for the virus but were asymptomatic.  In fact, in the last eight days, more than two-thirds of those testing positive for the virus showed no symptoms.
  • The reports suggest there is still chance of a renewed outbreak that could force Beijing to reimpose its earlier draconian lockdowns.
  • Such a quick second wave could also force other countries to delay easing their restrictions until well after they get control of their new infections.
• Singapore, which had been praised for its early response and initial success in getting control over the virus, is now seeing a second wave that has forced the government to impose a near-total lockdown on the city-state.
• In Spain, now one of the key epicenters of the crisis in Europe, as many as 757 have died from the virus in the last day, marking the second consecutive rise in deaths after four straight days of declines.  However, the figure is still much lower than the peak of 950 less than a week ago.
• In England, another emerging hot spot in Europe, reports say actual deaths from the coronavirus through March 27 were almost double the official count, largely because of lagging counts and the failure to catch people who died but hadn’t been tested.

Real Economy

• The National Multifamily Housing Council has released a survey showing that as of April 5, just 69% of U.S. apartment renters had made their monthly payment compared with 81% in the same period during March and 82% in the same period as of April 2019.  The news is likely to weigh on REITs today.
• All the same, as signs emerge that at least the first wave of infections is peaking, government officials and corporate leaders are starting to develop plans for easing restrictions and reopening the economy.
  • Officials stress that reopening the economy will be a gradual process.
  • Key preconditions will be having a testing and surveillance system set up to detect a possible new outbreak, as well as plans to reintroduce restrictions if a new outbreak occurs.
• Glimmers of light are becoming even more visible in European countries that were quick to take steps against the virus.  Austria, the Czech Republic and Denmark have all announced that they will begin to loosen restrictions in the coming weeks.
  • Denmark has made the most far-reaching changes, saying this week that kindergartens and primary schools will reopen April 15.
  • The Czech Republic announced that shops selling some non-essential goods would be able to reopen on Thursday.
  • Austria said that small shops, DIY stores and garden centers would be able to open April 14.
• In contrast, evidence is building that poor, late-hit developing countries are facing increasing challenges from the virus, with India starting to suffer shortages of basic foods as workers get sidelined by the virus or social distancing rules.  In Thailand, rice prices have risen to a seven-year high.

U.S. Fiscal Policy Response

• President Trump and top lawmakers in Congress said they hope to approve hundreds of billions of dollars in additional funding for the newly created Payment Protection Program of small business loans, perhaps as early as Friday.  Demand for the loans has been higher than expected, raising concerns that the initial appropriation of $350 billion might run out.
• Along with the potential for PPP funding to run out and perceived difficulties in applying for the loans, the Small Business Administration is under fire for failing to meet a congressional directive to provide grants of up to $10,000 to businesses within three days of their application to its Economic Injury Disaster Loan program.  As we’ve noted before, it’s one thing for Congress to fund emergency virus programs, but how much they help the economy will depend largely on how well they’re implemented.

Foreign Fiscal Policy Response

• At yesterday’s virtual meeting to hammer out fiscal aid for Europe’s hard-hit countries, the EU’s finance ministers failed to reach an agreement.  The ministers will reconvene on Thursday in hopes of agreeing on recommendations they can make to EU leaders, but last night’s failure is still weighing on European stocks and Italian bonds so far today.
  • Press reports indicate the key holdouts were Italy and the Netherlands.
    • Italy, leading a group of mostly southern debtor countries that have been decimated by the virus crisis, is demanding the issuance of joint EU “coronabonds” to fund the aid, as well as the removal of any conditions on loans from the European Stability Mechanism.
    • The Netherlands, leading a group of northern creditor nations, is dead-set against mutual, EU-wide obligations and insists that any ESM loans be given on condition of economic reforms.
  • The dispute highlights how the crisis could potentially lead to a breakup of the EU as we discussed in our latest Weekly Geopolitical Report series on March 30 and April 6.
• The president of the European Research Council―the EU’s top scientist―has resigned after failing to persuade Brussels to fund a large-scale scientific program to fight the virus.
• A day after Japanese Prime Minister Abe announced an economic support program valued at ¥108 trillion, or about 20% of GDP, skeptical economists say the true value is much less because it takes into account multiple spending programs already in place.  Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute, estimates the true amount of additional spending is only ¥16.8 trillion (about $160 billion).

Odds & Ends:  Afghan and Taliban negotiators have broken off talks on a prisoner swap meant to pave the way toward a peace agreement, just weeks after U.S. Secretary of State Pompeo rescued the talks from a similar near-failure.

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