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

[Posted: 9:30 AM EDT]

Today is Earth Day and also Lenin’s birthday.  But please don’t accuse us of implying a connection!  Rather, we’re focused today on the latest coronavirus news, including the Senate’s passage of new PPP funds, and signs that oil prices may be stabilizing.

COVID-19:  Official data show confirmed cases have risen to 2,585,468 worldwide, with 178,845 deaths and 695,324 recoveries.  In the United States, confirmed cases rose to 825,306, with 45,075 deaths and 75,673 recoveries.  Here is the chart of infections now being published by the Financial Times:

As shown in the graph, many major countries have passed the “bend in the curve” and are seeing slower case growth, but few are exhibiting sharp declines in the number of new infections.  In addition, many countries are now revising their past death counts upward as further investigation shows many people likely died from the virus without it being realized.

Real Economy

• Intelligence officials say Chinese operatives were actively pushing disinformation about the coronavirus on U.S. social media and communications platforms as recently as mid-March in an effort to amplify concern and stir panic among Americans.
  • The amplification techniques are alarming to officials because the disinformation even showed up as texts on many Americans’ cellphones, a tactic that several officials said they had not seen before.
  • The finding has spurred agencies to look at new ways in which China, Russia and other nations are using technology platforms to spread disinformation and complicate government decision-making during the pandemic.
• The United States Oil Fund ETF (USO, 2.80) announced changes designed to stabilize the fund two days after it helped spark a historic plunge in U.S. oil prices.  One move was to exit some June positions in favor of new positions in July and August contracts.  The fund also warned it may buy other types of contracts, including off-exchange derivatives that could cause “significant tracking deviations” from its WTI benchmark.
  • Global oil prices are relatively stable so far today
  • All the same, with massive oversupply in the face of sharply reduced demand, there is probably little prospect for a lasting rebound in the near term.
• Continuing economic lockdowns and travel restrictions are raising concerns about food supply chains around the world.
  • Agriculture ministers from the G20 group of major developed and developing economies held a virtual meeting on Tuesday to discuss the issue, warning governments that they must take food supply impact into account while dealing with the COVID-19 crisis.
  • Lockdowns are also raising concerns about agricultural labor shortages in Europe, which could potentially disrupt the food supply and raise prices.
• Management consulting firm McKinsey & Co. has estimated that as many as 59 million jobs could ultimately be lost to the coronavirus crisis in Europe, while as many as 54 million are at risk in the U.S.

U.S. Policy Responses

• The Senate last night approved a bill providing an additional $484 billion in pandemic economic support, including $320 billion to top off the Payroll Protection Program (PPP) of small-business loans.  The House of Representatives will vote on the bill this Thursday.
  • The legislation is the fourth major COVID-19 bill to date, bringing the total fiscal response to approximately $2.8 trillion, or about 14% of U.S. GDP last year.
  • Democrats succeeded in adding $75 billion for hospitals and $25 billion for infection testing to the bill, but Republicans succeeded in excluding any general aid for state and local governments.
  • Republican leaders said state and local aid will be in a follow-on bill, but they vowed to be more focused on holding down federal debt in that legislation.
• Compounding the difficulties, some firms have complained that when applying for PPP loans hospitals have only gotten about $30 billion of the $100 billion approved for them in the CARES act last month.
  • Administration officials say they are struggling to write workable rules to govern the reimbursement of hospitals for treating the uninsured and prevent hospitals from springing surprise bills on patients as required in the CARES bill.
  • The delay is sparking bipartisan complaints in Congress.
• Among various options the Trump administration is considering to support oil-and-gas producers struggling with tepid demand and plunging prices, officials say one possibility is providing outright financial aid in return for government ownership stakes in the firms or their crude reserves.  Nevertheless, the idea would face long odds because of resistance from Democrats and climate change activists.
• As pushback against governor-led lockdowns intensify, the Republican-dominated legislature in Wisconsin sued for an injunction against the closure orders imposed by Democratic Governor Tony Evers.  The state supreme court has given the Evers administration one week to answer the suit.

International Policy Responses

• The South Korean government announced another round of fiscal support amounting to about $70 billion for the country’s worst-hit industries, small businesses and workers, adding to the $120 billion that had been previously announced.
• The South African government announced a fiscal support program amounting to about 10% of the country’s GDP, as well as its first-ever request for assistance from the IMF.
• Despite the ECB’s massive €750 billion bond-buying program announced last month, bond yields for weaker, harder-hit countries like Italy have started rising again.
• The Turkish central bank today slashed its benchmark short-term interest rate to 8.75% from 9.75% previously, marking its eighth straight rate cut and putting further downward pressure on the lira.

Hong Kong:  Chief Executive Carrie Lam reshuffled her cabinet, naming new secretaries for technology, financial services, home affairs, mainland affairs and the civil service.  The move, which was approved (or initiated) by Beijing, is being interpreted as an effort to tighten control over city employees and relations with the Chinese government.

North Korea:  Despite press reports this week that North Korean leader Kim Jong Un was in critical condition after emergency heart surgery, South Korean officials say Kim appears to be proceeding with his normal schedule, and there is no sign that North Korean military forces are under the kind of alert that would be expected in a crisis.  U.S. officials admit they still have no confirmation on Kim’s condition.

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