Brazil’s death rate continues to accelerate
Andres Schipani in São Paulo
The death rate from coronavirus in Brazil is continuing to accelerate at an alarming rate, making it the emerging world’s hotspot for the outbreak, even as President Jair Bolsonaro pushes for the economy to restart.
Latin America’s largest country reported a record 881 deaths on Tuesday, bringing the total number of fatalities to 12,400. The number of confirmed cases topped 177,589 — surpassing Germany’s 170,508, where the disease arrived a month earlier. However, local scientists estimate the real tally could be around 1m.
Mr Bolsonaro, whom critics see as Brazil’s coronavirus denier-in-chief, signed a decree on Monday labelling beauty salons, gyms and barber shops “essential services” that should reopen their doors. He continues to downplay the pandemic, clashing with state governors trying to tighten social isolation measures.
Researchers at the University of Campinas said on Monday that imposing a full lockdown in the state of São Paulo, Brazil’s most populous, would be inevitable in the coming weeks if the level of social isolation did not increase.
US daily death rate jumps back above 1,500
Peter Wells in New York
The number of coronavirus deaths in the US jumped by more than 1,500 over the past day, taking the national tally above 76,000.
A further 1,510 people died over the past 24 hours, according to data compiled on Tuesday by the Covid Tracking Project.
Monday’s rate of 837 was the smallest daily increase since March 31, but the Covid Tracking Project cautioned that Monday death rates tend to be lower because of slower reporting over the weekend, and typically bounce back on Tuesday.
New York, the hardest-hit state, had another 205 deaths over the past 24 hours, while New Jersey, the number two state, had 198 fatalities.
Illinois, at 142, had the next highest daily increase. That took its overall death toll to 3,610, the sixth highest in the US.
Since the pandemic began, 76,617 people in the US have died from coronavirus.
Asia-Pacific stocks fall after Fauci warning knocks Wall Street
Asia-Pacific stocks fell on Wednesday after Wall Street retreated following a warning from a member of the White House coronavirus task force that infections could rise if states ended lockdowns too early.
In Japan, the Topix index shed 1.1 per cent, South Korea’s Kospi dropped 1.2 per cent and the S&P/ASX 200 dipped 0.6 per cent.
Those moves came after the US benchmark S&P 500 fell 2.1 per cent and the tech-heavy Nasdaq Composite fell by the same amount, ending a six-day run of gains.
Investors eyed challenges faced by countries that had begun reopening their economies while Anthony Fauci, one of the most senior members of Donald Trump’s coronavirus task force, warned that ending lockdowns too early could result in “suffering and death” and delay economic recovery.
S&P 500 futures pointed to a 0.7 per cent fall when trading resumes on Wednesday.
KKR agrees $1.1bn deal to buy Commonwealth Bank of Australia wealth management arm
Jamie Smyth in Sydney
KKR is paying A$1.7bn ($1.1bn) to buy a 55 per cent stake in Colonial First State, an Australian wealth management group owned by Commonwealth Bank of Australia (CBA), the nation’s largest lender by assets.
KKR’s appetite for global deal making remains undimmed despite the coronavirus, which has piled financial pressure on the client companies of private equity owners that typically use large amounts of debt funding to complete transactions. On Tuesday KKR agreed to invest$750m into debt-laden cosmetics maker Coty in the first step towards a broader deal aimed at buying a majority stake in the group.
The CBA transaction, which was announced on Wednesday, marks the latest in a series of Australian deals for the US private equity giant, which acquired accounting software company MYOB and biscuit maker Arnotts last year in deals worth a combined A$5bn last year. The sale price represents a multiple of 15.5 times Colonial’s pro forma net profit after tax of approximately $200 million, according to a statement from CBA.
Colonial First State is one of Australia’s biggest wealth management groups with more than A$130bn in assets under management. The deal values the entire Colonial business at about A$3.3bn.
The transaction marks the latest stage in a strategic overhaul by CBA, which is simplifying its business to focus on core banking services following a recent public inquiry that detailed widespread misconduct across its wealth management businesses.
The proceeds of the sale of a controlling stake in Colonial will strengthen CBA’s balance sheet, which faces an additional A$1.5bn hit from bad debts arising from Covid-19. Tier one capital — a measure of balance sheet strength — fell 111 basis points to 10.3 per cent at end March following payment of dividends and provisions linked to the new Covid-19 related loan losses.
South Korea sheds jobs at fastest rate since Asian financial crisis
Edward White in Wellington and Song Jung-a in Seoul
South Korean job losses rose at their sharpest pace in two decades last month despite the country avoiding a nationwide lockdown while combatting the coronavirus health crisis.
Asia’s fourth-largest economy lost about 476,000 jobs in April, the steepest monthly decline since 1999 when the country was emerging from the Asian financial crisis, according to Statistics Korea data. Temporary workers were also hard hit with the number of such jobs down by 782,000.
The pressure on employment comes despite South Korea’s success in keeping most of its economy open this year as a system of mass testing, tracing and social distancing helped to contain the virus and dodge the kinds of crippling lockdowns seen in parts of Europe and the US.
The South Korean government has already boosted virus-related spending to about $200bn, more than 10 per cent of the country’s gross domestic product.
Moon Jae-in, the president, on Sunday warned of “colossal” economic damage and vowed to expand employment insurance for temporary workers as well as further boost state spending in technology and infrastructure.
The data also comes as health officials in Seoul race to control a fresh coronavirus outbreak in the capital. Around 100 people are so far believed to have been infected after visiting a popular nightlife district last weekend.
China reports 7 new coronavirus cases as Jilin cluster grows
Health authorities in China reported seven new coronavirus cases to the end of Tuesday as six new infections were linked to an outbreak in Jilin province.
The Communist party’s top official in Jilin province called for a “wartime footing” over the weekend after a cluster of infections was found in the city of Shulan, sparking fears of a second wave of cases in China. Jilin health authorities added six more cases to the cluster, all of which were close contacts of previous people found to have the virus.
One of the new cases in mainland China was found in a traveller returning through Shanghai.
The latest count takes the total number of reported infections in China to 82,926 and the number of reported deaths linked to Covid-19 was unchanged at 4,633.
Venezuela extends coronavirus lockdown until mid-June
Gideon Long in Bogotá
Venezuela has extended its coronavirus lockdown for another month despite having one of the lowest official casualty rates in Latin America — a statistic the opposition has questioned, saying the government is covering up the true extent of the outbreak.
President Nicolás Maduro said the lockdown would go on until June 12. Venezuela was one of the first countries in the region to go into national quarantine in mid-March.
The government has reported 423 cases of coronavirus and 10 deaths in a country of around 30m people. That is the lowest per capita death rate in the Western hemisphere bar a few Caribbean islands.
When the virus struck, many observers feared the worst for Venezuela, which has been in a deep economic, political and humanitarian crisis for years. One report, published late last year, found it was the least prepared country in the Americas to deal with a pandemic. Many hospitals do not have soap, water or basic protective clothing.
Many Venezuelans have been queuing for food and petrol, often ignoring calls for social distancing. Others say they cannot afford to stay at home during the lockdown as they have to work to earn money.
Mr Maduro said the US and countries in Europe and elsewhere in Latin America could learn from Venezuela’s example of “how to care for people”.
US posts record $738bn budget deficit in April
Mamta Badkar in New York
The US budget deficit swelled by a record $738bn in April as government spending to cushion the economy from the fallout of the pandemic surged and tax revenues tumbled.
Outlays for April totalled $980bn, the Treasury Department said on Tuesday, because of Covid-19 related spending, including economic impact payments to individuals and families, payments to state, local and tribal governments, increases in unemployment benefits, and Medicare and other Department of Health and Human Services programmes.
Meanwhile, tax receipts totaled $242bn, down 55 per cent from the same period a year ago, because taxes were deferred until July and because of some tax breaks included in the Cares Act.
That brought the deficit for the first seven months of fiscal 2020 to $1.48tn, compared to about $531bn in the same period a year ago.
“We currently forecast a deficit of $3.2tn for fiscal 2020, but there remains a significant risk for a larger budget gap this year if Congress approves more stimulus or if tax deadlines are extended beyond September,” said Gregory Draco, economist at Oxford Economics.
The US budget approved a $2.2tn stimulus package in March and then added a further $484bn in emergency funding that included money to replenish the depleted small business rescue fund. House Democrats have published their proposals for $3tn in additional stimulus.
News you might have missed
President Donald Trump has ordered the main federal government pension fund not to invest in an MSCI index that includes Chinese companies, which his administration says pose a serious national security risk to America.
House Democrats have published their proposals for another big US economic stimulus bill, as congressional leaders prepare for a fresh round of negotiations about how to provide relief to struggling states, cities and businesses.
The economic damage wrought by the coronavirus pandemic will hit companies’ earnings well into next year, with markets likely to dip again later this year, the chairman of private equity firm BC Partners has said.
India’s prime minister has unveiled plans for a $266bn stimulus package — equivalent to about 10 per cent of gross domestic product — to help the stalled economy recover from a seven-week coronavirus lockdown.
Anthony Fauci, one of the senior members of the White House coronavirus task force, has warned of the possibility of a second wave of cases later this year, directly contradicting the president’s assertion that the disease might simply disappear.
Junk bond exchange traded funds rose on Tuesday, as the Federal Reserve entered its hotly anticipated corporate bond programme which forms part of its plan to create a backstop for ailing US companies.
The hit to the global economy from the coronavirus crisis will be even worse than predicted less than a month ago, the head of the IMF said on Tuesday.
Donald Trump weighed in on a battle between Elon Musk and local authorities in California, urging officials to allow Tesla to reopen its factory.
Gilead signs deals with five India and Pakistan drug makers to produce remdesivir
Gilead has signed non-exclusive voluntary licensing agreements with five generic pharmaceutical manufacturers based in India and Pakistan to further expand supply of remdesivir, the drug which has shown success in some trials for treating Covid-19.
The agreements allow the companies — Cipla, Ferozsons Laboratories, Hetero Labs, Jubilant Lifesciences and Mylan — to manufacture remdesivir for distribution in 127 countries, the company announced late on Tuesday.
The countries are nearly all low-income and lower-middle income countries, as well as several upper-middle- and high-income countries that face significant obstacles to healthcare access, Gilead said in a statement.
Under the licensing agreements, the companies can set their own prices for the generic product they produce.
The licences are royalty-free until the World Health Organization declares the end of the Public Health Emergency of International Concern regarding Covid-19, or until a pharmaceutical product other than remdesivir or a vaccine is approved to treat or prevent Covid-19, whichever is earlier, the company said.
Protests hamper Hong Kong’s ability to profit from coronavirus success
Hong Kong’s success in controlling the spread of coronavirus is unlikely to result in a quick recovery because a return of local protests and a global recession will hamper growth, economists said.
Standard Chartered downgraded its 2020 gross domestic product forecast for the Chinese territory to a contraction of 7.2 per cent against an earlier estimate of 4.8 per cent fall. Official figures showed the city’s economy contracted by 8.9 per cent year on year in the first quarter.
Until a new Covid-19 case was reported on Tuesday, the city had recorded more than three weeks of no local infections, allowing the government to relax social distancing measures and allow businesses such as bars to reopen.
The bank said the return to normal life would help sentiment, but warned “the fact that Hong Kong, unlike some other economies, never entered full lockdown means that the subsequent release of pent-up demand is unlikely to be strong”.
In addition the bank pointed out that pro-democracy protests have returned, albeit on a smaller scale, after a lull at the beginning of the year when residents were focused on measures to control the spread of the virus.
“The return of local protests is likely to exacerbate an already weak post-coronavirus domestic story, where the unemployment rate and bankruptcy numbers are set to continue climbing for another quarter or two before peaking,” the Standard Chartered report said. It forecasts second-quarter GDP will fall by 10.5 per cent.
Iris Pang, chief economist, greater China for ING, said the Hong Kong economy had been hit by the US-China trade war and social unrest in 2019, sending it into a recession that deepened with the arrival of Covid-19.
Ms Pang forecasts the Hong Kong economy will contract by 4.1 per cent year on year in 2020, assuming the trade war between the US and China remains in check.
Hong Kong’s appeal as a destination for mainland Chinese tourists has evaporated thanks to the social unrest, Ms Pang said, meaning that even if the city relaxes quarantine and travel restrictions soon “mainland tourists are unlikely to visit Hong Kong if the threat to personal security persists”.
Unemployment in tourism, local retail and catering rose to 6.8 per cent at the end of March 2020, against the overall unemployment rate of 4.2 per cent, she said.
US-China virus tensions thrust renminbi back under spotlight
Hudson Lockett in Hong Kong and Anna Gross in London
When Donald Trump began lashing out at Beijing over its handling of the coronavirus pandemic, global currency traders’ attention snapped back to the exchange rate that last year nearly brought the world’s two most powerful economies to an impasse.
The renminbi has fallen by 0.5 per cent against the dollar since the end of April, when the US president asserted, without providing evidence, that he was “confident” Covid-19 emerged from a laboratory in Wuhan. He suggested that imposing trade tariffs could be one way to punish China in response.
That would pile more pressure on the Chinese currency, investors say, stalling trade talks between the two superpowers and threatening the stability of other emerging markets whose currencies would be forced lower by a weaker renminbi.
Read more here
China imposes travel restrictions in Jilin to control coronavirus outbreak
Christian Shepherd in Beijing
China has imposed strict travel restrictions in northeast Jilin province, in an effort to contain the spread of a cluster of locally-transmitted Covid-19.
“The current outbreak situation is serious and there is a significant risk of further spread,” Gai Dongping, Jilin city vice-mayor, said on Wednesday.
Jilin has suspended passenger trains to the city and residents are required to test negative for coronavirus 48 hours before leaving the city, state broadcaster CCTV said.
A team of central government health officials arrived on Wednesday in neighbouring Shulan, where the chain of 16 infections is believed to have originated. The city is currently the only place in China designated high risk for Covid-19.
A number of major cities across China’s northeast, including Harbin and Dalian, have also announced additional testing and quarantine requirements for travellers arriving from Shulan.
Scientists to look for genetic link to severity of Covid-19
Clive Cookson in London
UK scientists are joining a worldwide programme to discover human genetic factors that would help to explain why Covid-19 varies so much between individuals in its severity.
Although much of the variation in symptoms results from environmental and lifestyle factors, scientists are convinced that genetics plays a significant role too.
The project, announced by the government on Wednesday morning, will read the whole genomes — 3bn letters of genetic code — of up to 20,000 UK patients who are or have been in intensive care with severe Covid-19. Their DNA will be compared with the genomes of 15,000 of people who were infected with the virus but had mild symptoms.
The first 2,000 genomes have already been sequenced, said Mark Caulfield, chief scientist at Genomics England, the public body guiding the project alongside the NHS and other UK health organisations. Illumina, the US-based scientific equipment company, will read the DNA at its UK labs near Cambridge.
Kenneth Baillie of Edinburgh university, the project’s chief investigator, said: “Our genes play a role in determining who becomes desperately sick with infections like Covid-19. Understanding these genes will help us to choose treatments for clinical trials.”
Coronavirus testing surges as Seoul promises anonymity
Edward White in Wellington and Song Jung-a in Seoul
South Korea’s switch to anonymous tests has prompted a surge in people coming forward for Covid-19 screening after a homophobic backlash sparked privacy concerns and frustrated officials’ efforts to suppress a new cluster.
The country, which has been praised internationally for its handling of the virus , has been rocked by a sudden coronavirus outbreak linked to a popular nightlife district in Seoul, raising concerns for other governments trying to emerge from crippling lockdowns.
Confirmed Covid-19 infections linked to the cluster have risen to 119. But South Korean officials have been worried thousands of people in the area during a public holiday have avoided testing amid privacy fears after local media and online commentary linked the outbreak to venues popular with the LGBT+ community.
However, officials’ pledge to keep testing anonymous has prompted a surge in people coming forward for screening.
More than 14,000 at-risk people have now been tested, reflecting an eightfold increase in daily testing rates from just days earlier, Seoul mayor Park Won-soon said on Wednesday.
“Speed counts in our battle against the virus so people going for tests voluntarily is the most important thing … the number of people getting tests has sharply increased since we introduced anonymous tests,” Mr Park said.
More than one third of the people found to be infected were asymptomatic, he added.
Health officials have also conceded that earlier statements blaming a single man who visited Itaewon nightclubs were inaccurate.
“We can now say that the virus was spreading quietly in local communities before the holiday weekend,” said Kwon Joon-wook, deputy head of the Korea Centers for Disease Control.
But some from the LGBT+ community remain afraid of public vilification given homophobic discrimination from families and workplaces prevalent in Korean society.
“Some of us will never take a test … people would rather die,” said one blogger who identifies as gay.
Officials are working with police to access mobile phone and credit card records to trace everyone who was in the area in recent weeks — measures permitted under the country’s disease control laws.
In response to the latest outbreak, Seoul has already temporarily shut down clubs and the country has delayed the restart of schools. The capital is now also expanding randomised testing at other potentially high risk locations in a bid to stem further outbreaks.
India stocks rise after Modi unveils $226bn stimulus package
Amy Kazmin in New Delhi
The Bombay Stock Exchange Sensex defied regional gloom and rose 2.3 percent in early trading on Wednesday morning, amid investor optimism about Prime Minister Narendra Modi’s Tuesday night announcement of a $226bn economic support package and his promises of bold economic reforms.
Mr Modi offered few details of the components of the package — which he said would be equivalent to around 10 per cent of India’s GDP. However, he did say it would offer help to labourers, farmers, middle-class taxpayers, and industry.
Nirmala Sitharaman, the finance minister, is expected to provide specific details of the package in a press conference on Wednesday, and in further announcements in the days ahead.
Mr Modi’s long-awaited announcement of a financial support package to revive the stalled economy comes after data showed that India’s industry production contracted by nearly 17 per cent year on year in March, a far bigger contraction than analysts had forecast.
Output was hit by disruptions related to the coronavirus, and the lockdown imposed on March 24 to contain the spread of the disease. Analysts warn that India’s output data for April — all of which was spent under lockdown — will show an even more dramatic contraction.
UK economy shrinks at record 5.8% pace in March
Valentina Romei in London
The UK economy shrank at the fastest monthly pace on record in March as the coronavirus lockdown abruptly stunted demand.
UK gross domestic product fell by 5.8 per cent in March compared with the previous month, the largest drop since the monthly series began in 1997, according to the first GDP estimates by the Office for National Statistics.
In the first quarter, UK GDP fell by 2 per cent compared with the previous quarter, its largest fall since the financial crisis.
Jonathan Athow, deputy national statistician for economic statistics, said:
With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall.
Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially.
However, the ONS warned that GDP estimates for March and the first quarter “are subject to more uncertainty than usual as a result of the challenges we faced in collecting the data under the governments imposed public health restrictions”.
The contraction of the UK economy was smaller than the 3.8 per cent fall seen in the eurozone, largely reflecting the later start of the British lockdown. However, it was greater than that experienced by the US, where output fell by 1.2 per cent, or an annualised rate of 4.8 per cent.
Last week the Bank of England forecast UK GDP to have fallen by about 3 per cent in the first quarter and a further 25 per cent in the second quarter. This would mean an almost 30 per cent drop overall in the first half of 2020, the fastest and deepest recession for 300 years.
Container shipping line Maersk predicts 25% drop in volumes
AP Moller-Maersk, the world’s largest container shipping line, has forecast that volumes across its business will fall by up to 25 per cent in the second quarter of 2020 after Covid-19 disrupted supply chains across the world.
In a trading update, Maersk said:
Looking into Q2 2020, visibility remains low as a result of the COVID-19 pandemic.
We continue to support our customers in keeping their supply chains running, however as global demand continues to be significantly affected, we expect volumes in Q2 to decrease across all businesses, possibly by as much as 20-25%.
Maersk said that its operating profits had risen by 23% year-on-year, but did not provide any forward looking guidance, having said in March it would withdraw such forecasts because of the pandemic.
Tour operator TUI to slash costs and jobs
Alice Hancock in London
Tui, the world’s largest tour operator, said it plans to permanently cut costs by almost a third and reduce its number of employees by 8,000 as it seeks to restart the company following the coronavirus crisis.
The Hanover-based company said that despite plans to reopen a small number of hotels this week, it would need to be a “different Tui” in order to survive after the pandemic. This would involve a cut to investments, costs and the company’s presence in different countries, it said.
It is seeking to reduce its outgoings by 30 per cent and said that 8,000 roles would be either cut or not recruited.
Fritz Joussen, chief executive, said that he planned to “reinvent the holiday” offering more local destinations and different travel seasons. For 2020, he said, “the season starts later, but could last longer.”
Tui was hit early on in the crisis when an outbreak of coronavirus was discovered in one of the hotels it works with in Tenerife in February. Its share price has slumped 73 per cent since the beginning of the year.
The travel company stopped the majority of its operations in early March and applied for a German state loan to see it through the crisis. It said on Wednesday that it had total cash and available loans of €2.1bn.
UK to guarantee trade credit insurance
Oliver Ralph in London
The UK government is to guarantee trade credit insurance in a bid to ensure that the market does not seize up because of the crisis.
Trade credit insurance covers companies against the risk that their customers go bust before paying for goods that they have ordered. It covers about £171bn of business activity in the UK between 13,000 suppliers and 650,000 customers.
But insurers have warned that they face huge claims because of the crisis, leading to the risk that they will either stop offering cover or will have to sharply increase premiums.
On Wednesday, the government said it would introduce a guarantee to stop that happening. The move follows similar measures in Germany and France.
The guarantee will operate via a reinsurance agreement with trade credit insurers, with the exact details still to be worked out. It is due to be in place by the end of the month. John Glen, the economic secretary to the Treasury said that the move would “maintain a vital cog in our economy.”
Sony to launch new PlayStation as lockdowns boost gaming
Kana Inagaki in Tokyo
Sony said it will push ahead with the year-end launch of its new PlayStation 5 gaming console even as its quarterly profits plunged 86 per cent due to the coronavirus outbreak.
The launch of the new device, following its huge success with the PS4, comes on the back of an industry-wide jump in online sales of games as the coronavirus lockdown and school closures have fueled demand for at-home entertainment.
Still, the Japanese entertainment and gaming group warned of a widespread hit to its businesses as the pandemic disrupts filmmaking, recording of music and supply chains for smartphones and other electronics products.
For the January to March quarter, Sony said its net profit declined to ¥12.6bn ($118m) from ¥87.9bn, as it disclosed a ¥68.2bn hit from the Covid-19 outbreak, while revenue fell 18 per cent.
Citing the coronavirus uncertainty, the company withheld its guidance for the new financial year through March 2021.
Aston Martin posts £120m loss as lockdown closes plants
Peter Campbell, Motor Industry Correspondent
Aston Martin swung to a £120m loss in the first quarter and withdrew guidance for the year after coronavirus forced its factories and dealerships to close.
Revenues slid by 60 per cent to £78.6m as car sales halved to 578, while the average selling price of its cars fell to £98,000, compared to £149,000 in the same period a year earlier.
The quarter also saw Aston finalise the terms of a £540m rescue package to keep the luxury carmaker afloat.
A new equity injection and subsequent rights issue immediately after the quarter closed brought in Canadian billionaire Lawrence Stroll as executive chairman, who plans to push back a planned series of electric vehicles and focus Aston on Formula 1 and Ferrari-rivalling supercars instead.
“While in the short-term, as anticipated, we will have some difficulties due to the onset of Covid-19, having been in the business for a few weeks now I am even more enthusiastic and confident in the multi-year plan that we have set out,” said Mr Stroll.
Net debt rose to £956m at the end of the quarter, though this has fallen since the rights issue took place. Aston re-opened its St Athan plant in Wales earlier this month, and says it is on track to begin full production of the DBX sports utility vehicle within two weeks.
Commerzbank knocked to quarterly loss by Covid-19 blow
Olaf Storbeck in Frankfurt
Commerzbank swung to a bigger-than-expected loss in the first quarter as coronavirus dealt a nearly €500m blow to the German lender’s earnings.
The group reported a quarterly operating loss of €277m compared with a profit of €246m in the same period in 2019. A €479m hit caused by increased credit risks stemming from coronavirus weighed heavily on that figure, Commerzbank said.
Germany’s second largest listed lender boosted provisions for bad loans fourfold as it braces for an increase in defaults in the wake lockdowns that have severely affected the country’s economy.
The lender earmarked €326m for loans going sour in the first quarter, compared with €78m a year earlier and in line with analyst expectations. It warned that provisions for the full year will rise to €1bn to €1.4bn after €620m in 2019.
“We have a healthy loan book. We will therefore be able to cushion additional effects resulting from the pandemic,” chief financial officer Bettina Orlopp said, adding that the lender will step up cost management this year.
By the end April, Commerzbank had deferred more than 20,000 private and commercial loans with a volume of more than €2.5bn.
Commerzbank’s common equity tier 1 ratio, a key indicator of balance sheet strength, rose to 13.2 per cent of risk weighted assets, after 12.7 per cent a year earlier. The lender said it is targeting a CET1 ratio of at least 12.5 per cent for the full year. It posted a net loss of €295m from a profit of €122m during the first quarter of 2019.
European stocks fall on concern over slow reopening of economies
European stocks slid in early trading, under pressure from concerns over the timeline for reopening the world’s major economies and rising US-China tension.
The FTSE 100 fell 0.9 per cent in early trading, while in Paris the Cac 40 was down 1.2 per cent and Frankfurt’s Dax slid 1.3 per cent.
Asian stocks fell overnight, while on Wall Street the S&P 500 snapped a six-day run of gains to close 2.1 per cent lower.
The decline came as Anthony Fauci, one of the most senior members of Donald Trump’s coronavirus task force, warned that ending lockdowns too early could result in “suffering and death” and delay the eventual economic recovery. Concerns have also been growing over a potential second wave of infections in countries including China and South Korea.
Mr Trump on Tuesday also ordered the main federal government pension fund not to invest in Chinese companies, citing the risk of “future sanctions” over that country’s handling of the coronavirus pandemic
Japan Inc sustains bout of bankruptcies as virus takes toll
Robin Harding in Tokyo
The number of corporate bankruptcies in Japan rose by 15 per cent compared with a year earlier in March, according to new figures released by Tokyo Shoko Research, as coronavirus pushed already struggling businesses over the edge.
Of the 743 bankruptcies recorded by the company, with ¥145bn ($1.35bn) in total liabilities, 71 of them were specifically linked to the virus outbreak. Hotels, leisure facilities and retailers affected by social distancing and the fall in inbound tourism were the hardest hit.
Among the largest insolvencies of the month were Osaka-based hotel operator WBF Hotel & Resort; Eternal Amusement, which runs gaming arcades; and Cath Kidston Japan, the local arm of the British furnishings company.
Although coronavirus has hit business hard, analysts say that most of the insolvencies so far reflect companies that were already struggling, rather than healthy companies destroyed by the virus.
French ministers hit by pandemic legal complaints
Victor Mallet in Paris
French prime minister Edouard Philippe and other ministers are the targets of 63 legal complaints so far over their management of the coronavirus crisis, the chief prosecutor at the country’s highest court has revealed.
François Molins, chief prosecutor at the Cour de Cassation, told RTL radio that there were a “broad range” of complaints, adding:
Some are one-page complaints with no reasoning and others are better researched and 20 pages long.
Ministers targeted include Olivier Véran and Agnès Buzyn, current and former health ministers, as well as Nicole Belloubet, Muriel Pénicaud and Christophe Castaner, who hold the justice, labour and interior portfolios.
As president, Emmanuel Macron is immune from prosecution.
Mr Molins said the complaints were being examined by an investigation committee and would either be rejected or passed on to him for further action.
France is not the only nation to see increasing legal complaints related to coronavirus. The US, in particular, is expecting a deluge of litigation related to the pandemic and the subsequent economic crisis.
Pace of new Covid-19 cases eases in Russia
Henry Foy in Moscow
Russia’s rate of new coronavirus cases eased on Wednesday, even as it recorded an 11th consecutive day with more than 10,000 fresh infections.
The country has the world’s second largest number of Covid-19 cases after the US, and has been steadily adding record numbers as the number of new infections has reduced across Europe.
Russia recorded 10,028 new cases on Wednesday, according to official government data, the smallest rise in almost a fortnight. Its total number of cases is now at 242,271, with 2,212 deaths.
Despite the numbers of new infections remaining high, president Vladimir Putin announced he was lifting a national stay-at-home order this week in a bid to get the paralysed economy moving again.
Regional authorities have kept many specific quarantine measures in place, however.
Austria to reopen German border in June
Sam Jones in Zurich
Austria will fully reopen its border with Germany by mid-June, and plans to liberalise travel with most of its neighbouring countries in the coming weeks, chancellor Sebastian Kurz has announced.
The country will begin easing restrictions on cross-border travel from Germany from this Friday onwards, with only “random checks” in place at most major connections. All checks will end on June 15.
The two-stage reopening of the border between the two German-speaking countries was agreed between Mr Kurz and Germany’s chancellor Angela Merkel on Tuesday.
The Austrian government is currently also in discussions to end travel restrictions with Switzerland, the Czech Republic, Slovakia, Hungary and Slovenia. There are currently no plans to regularise border traffic with Italy, however.
Austria has been one of the most successful countries in Europe in containing and minimising the first wave of the coronavirus pandemic. Public health authorities reported just 25 new cases of Covid-19 on Tuesday.
As it has begun to significantly rollback its curbs on public life, Mr Kurz’s government has signalled that plans to cautiously restart Austria’s economically critical tourism industry in time for the summer season will be a key plank of its recovery programme.
France’s CMA CGM receives €1.05bn loan and state guarantee
Victor Mallet in Paris
Marseille-based shipping line CMA CGM has become the latest French company to receive a state loan guarantee linked to the coronavirus crisis, with the government backing a €1.05bn loan from BNP Paribas, HSBC France and Société Générale.
The decree confirming the state support, under the finance ministry’s emergency €300bn loan guarantee scheme for companies, was published in the Journal Officiel on Wednesday. Other companies to benefit so far include Air France, Fnac Darty, Castorama and Europcar.
The company said the loan was 70 per cent guaranteed by the state, had an initial one-year maturity and could be extended for a further five years.
CMA CGM has been hit by the disruption to its operations as a result of the pandemic that started in China. The shipping group said it expected “a limited slowdown” in its activity in the near term, with “an estimated decrease in market volumes of 10 per cent in the first half of 2020 compared to the first half of 2019”.
Poland records highest daily number of Covid-19 cases
James Shotter in Warsaw
Poland on Tuesday recorded its highest daily number of coronavirus infections, with 595 people testing positive for the novel virus amid an accelerating outbreak in the southern region of Silesia.
The ministry of health said that 492 of those newly infected were in Silesia, the heart of Poland’s mining industry, and PGG, the state-controlled mining group, has closed three of its mines in response to outbreaks among miners.
Poland’s deputy prime minister Jacek Sasin, said that so far 799 miners, and 650 of their family members had tested positive.
The sharp rise makes the region, which is the most densely populated part of the country and home to a sprawling agglomeration around Katowice, the epicentre of Poland’s coronavirus pandemic.
Overall, Silesia accounts for about 12 per cent of Poland’s population, and 25 per cent of total coronavirus infections.
Like most of central Europe, Poland quickly introduced wide-ranging restrictions on daily life in a bid to quell the coronavirus, shutting non-essential shops, banning large gatherings and closing its borders.
But unlike other smaller countries in the region, such as Slovakia and the Czech Republic, which have slowed new infections to a trickle, it has not yet been able to achieve a significant reduction in daily infections.
In total 17,062 people have been infected, and 847 have died.
OECD warns extra debt will ‘haunt’ companies and governments
Martin Arnold
The extra debt being taken on by already heavily indebted governments and companies to tackle the coronavirus crisis will “come back to haunt us”, Ángel Gurría, secretary-general of the OECD, has warned.
Speaking in an interview during the FT’s Global Boardroom online conference, Mr Gurría said:
We are going to be heavy on the wing because we are trying to fly and we were already carrying a lot of debt and now we are adding more.
Mr Gurría, who has run the Paris-based organisation for 14 years, said governments may have to “capitalise” some of this extra debt by bailing out companies or writing off some of the vast loan guarantees they have extended to keep banks lending.
He said many countries’ economies would recover more slowly than initially expected from the record post-war recession expected in the first half of this year. “I am not convinced that we are going to have a V-shaped recovery,” he said. “I think it will be more like a U. The key thing is to shorten the lower part of the U.”
The recovery could be disrupted by governments and companies attempting to simplify and shorten their supply chains to source more production locally and make them less exposed to the kind of disruption caused by the pandemic, he warned.
Hong Kong reports first local cases in more than three weeks
Nicolle Liu in Hong Kong
Hong Kong ended a 23-day period without local infections to confirm three coronavirus confirmed cases on Wednesday, although the territory is expected to go ahead with plans to reopen schools and loosen social distancing measures.
Two locally transmitted cases — a 66-year-old woman and her five-year-old granddaughter whose source of infection is unknown — and an imported case from Pakistan were reported by health officials. The cases take the tally to 1,051 with four deaths.
“This is the first time we [have] recorded local infections in more than 20 days. We are very concerned,” said Chui Tak-yi, the Under Secretary for Food and Health. “At this stage, we think it is not necessary to reimpose measures as strict as those in late March.”
The department of health plans to expand the testing scale, including the residents of the two patients’ apartment buildings and airport workers, said Chuang Shuk-kwan from the Centre for Health Protection.
Emirates to reopen some routes from next week
Simeon Kerr in Dubai
Dubai’s Emirates has announced plans to reopen scheduled flights to nine destinations from May 21.
The government-owned carrier said it would operate routes to London Heathrow, Frankfurt, Paris, Milan, Madrid, Chicago, Toronto, Sydney and Melbourne. The airline will also offer connections at Dubai airport for those travelling between the UK and Australia.
Emirates said it was working with other countries to restart flights to additional routes. Travellers will need to meet entry requirements to their final destinations, including approval from the United Arab Emirates authorities for expatriates stranded abroad seeking to return to the Gulf state.
The airline is also operating repatriation flights for expatriates and visitors seeking to return home to Tokyo, Conakry and Dakar.
Emirates, which suspended regular operations on March 25, has warned that coronavirus will have a huge impact on its financial performance and that travel demand will take at least 18 months to recover.
Turkey’s current account deficit widens as virus slams exports
Ayla Jean Yackley in Istanbul
A sharp slowdown in Turkish exports as coronavirus hits demand across the world pushed the country’s current account to its deepest deficit in almost two years, exposing a key vulnerability in the country’s credit-fuelled growth strategy.
Turkey’s balance of payments, which measures the flow of goods and services, produced a deficit of $4.92bn in March, the fourth consecutive month the measure was in deficit. The deficit had been forecast at $4.43bn in a Bloomberg survey. In March 2019, the deficit stood at $120m.
The “big year-on-year increase in the monthly deficit [reflects] a collapse in manufactured exports to Europe, plus the collapse in tourism, while demand was slow to drop,” Tim Ash, an economist at BlueBay Asset Management, wrote in a note to investors. “All told, [it’s] a pretty challenging balance-of-payments picture for Turkey.”
Exports fell 17.8 per cent to $13.5bn in March, overshadowed by imports of $17.8bn, data from the central bank showed. Tourism, which normally brings in billions in hard currency, such as dollars and euros, has all but dried up this year as countries suspend international flights to contain the virus.
Turkey relies on portfolio inflows to finance its chronic current account gap but foreign investors have sold about $10bn of stocks and bonds this year as the lira tumbled and fears mount the central bank may not be able to sustain its support of the currency as its reserves of foreign currency have dwindled.
Non-Premier league English football clubs risk financial collapse
English football matches should go ahead, restarting without spectators, to prevent clubs falling into financial hardship, insolvency experts have said.
The suspension of games since mid-March is causing “financial crisis” for non-Premier League squads, said Gerald Krasner, former Leeds United chairman and a partner at Begbies Traynor, as the accounting firm released its annual football finances report on Wednesday.
Mr Krasner warned of the possibility of television money deserting the game unless league games regain their momentum and fans can watch matches again.
Mr Krasner forecast:
We’re unlikely to see the wealthy clubs in the Premier League succumb to profound financial distress as long as they continue to be bolstered by large television revenues.
But what is absolutely essential, especially for the EFL [English Football League] clubs, is that they finish the season by playing the remaining matches behind closed doors.
The reality is that people have managed without football for more than a month now and there’s a real danger that unless the momentum can be regained and fans can begin to watch matches on TV again, the impetus will be lost and the draw of football will be diminished in the long term.
If that was to happen, the television money would soon desert the game too.
He added:
With rigorous testing and as much social distancing as is practical, there is no reason why the season shouldn’t restart in the first week of June.
Clubs in the Championship and below were less financially secure than those in the top-flight Premier League, Mr Krasner said, because they depend more on match-day revenues to pay their bills.
He said:
Invaluable income for EFL clubs, which receive a far smaller proportion of their revenue from broadcasters, has traditionally been generated by the hire of stadiums and facilities for corporate and other uses, but that will also have been wiped out by social distancing requirements.
Mr Krasner also estimated that, even with a rapid restart, as many as half a dozen clubs in divisions one and two still faced the danger of financial collapse.
Germany to ease border controls this weekend
Guy Chazan in Berlin
Germany is to relax its border controls from Saturday, but told its citizens to avoid holidays abroad for the time being.
Berlin closed the borders to most of its western and southern neighbours in mid-March in an effort to stem the spread of coronavirus. Exemptions were made for commuters, freight traffic and those who had a “compelling reason” to cross the border.
The government will extend controls on the borders with France, Switzerland and Austria from May 16 till June 15, interior minister Horst Seehofer said on Wednesday.
It plans to open its border with Luxembourg on Saturday, and hopes to do the same for Denmark, pending the outcome of talks between the Danish government and its neighbours.
Border crossing points from Saturday can be used, the interior ministry said. In recent weeks the authorities strictly restricted the number of points of entry into Germany, which had led to huge traffic jams for commuters.
Russia halts use of domestic-made ventilator over fire risk
Henry Foy in Moscow
Russia has suspended the use of a domestic-made ventilator used to treat patients infected with coronavirus, after two of the machines reportedly caught fire, resulting in the deaths of six people.
The country’s healthcare regulator said it was checking the quality and safety of Aventa-M ventilators manufactured after April 1, after a person died in a fire in a Moscow hospital on Saturday and five people died in a fire at a St Petersburg hospital on Tuesday. Both fires involved the machines, local media have reported, with some patients dying of carbon monoxide poisoning.
The ventilators are manufactured by a subsidiary of state-controlled industrial group Rostec. The company said there was a number of investigations taking place into the incidents.
“We’re interested in the quickest completion of checks and the establishment of the true cause of the incidents,” the company said in a statement published by local newswire Interfax. “The production of medical equipment which meets quality and safety standards is the key priority of our company.”
Also on Wednesday, Russia’s prime minister said that just Rbs4.5bn of a promised Rbs27bn in additional payments to doctors and other medical staff working with coronavirus patients had been paid, due to failures by local authorities to distribute the money.
The photo above depicts an emergency worker responding to a fire at St George Hospital in St Petersburg. Source: AP
Weak demand for new cars leads VW to pause production
Joe Miller in Frankfurt
Volkswagen will pause the production of four key models just weeks after reopening its manufacturing headquarters in Wolfsburg, due to weak demand for new cars in Europe.
The German group began ramping up operations at the world’s largest auto plant in late April, with almost 8,000 employees returning to the factory.
But in the coming days, Volkswagen will temporarily idle assembly lines for its best-selling Golf 7 and 8 models, as well as for the Tiguan and Seat Tarraco sports utility vehicles.
In an internal message seen by the Financial Times, VW manager Arne Meiswinkel said the company had to “align production to the expected market fluctuations”.
On Wednesday, Moody’s drastically cut its forecast for global car sales, predicting the market would shrink by a fifth in 2020, and by as much as 30 per cent in western Europe.
Lagos turns to Twitter vote to gauge support for lockdown
Neil Munshi, west Africa correspondent
The government of Lagos, Africa’s largest city, has taken to Twitter to gauge whether it should return to a full lockdown again, with officials complaining that locals were not following social distancing guidelines.
“Considering the level of compliance with government’s directives on limiting the spread of Covid-19 in a Lagos state, should the state government impose another lockdown or not?” the state’s official account tweeted on Tuesday evening.
Just over half of the 53,000 respondents have voted for another lockdown, with two days remaining on the poll.
Nigeria’s commercial centre began easing a six-week lockdown on May 4 amid mounting concern about the economic impact on the millions who live hand-to-mouth. But since then scenes of crowded markets and long bank queues have raised concerns about the potential spread of the virus in the megacity.
Lagos accounts for 1,990 of Nigeria’s 4,787 confirmed cases, though that figure likely undercounts the real toll because of a lack of testing capacity in Africa’s most populous country.
Worst behind us but opportunities arise, says pension fund head
Anna Gross in London
Markets are “through the worst” of the “meltdown” caused by coronavirus but opportunities do arise, the head of one of Sweden’s biggest pension funds said at a global digital conference.
“Markets stopped panicking when policymakers started panicking and since then policymakers have demonstrated they’re prepared to do whatever it takes,” Kerstin Hessius told the FT’s Global Boardroom conference.
There have been unexpected societal shifts that investors need to adapt to, including a move away from retail, but “there are good opportunities to work within this”, said Ms Hessius, the chief executive of AP3, the third-biggest Swedish national pension fund.
Others are less convinced that the worst is behind us. “The global economy is still in a heap of trouble,” said Eoin Murray, head of international investment at Federated Hermes, noting that removing pharmaceuticals, healthcare and mining stocks from the equation, the recovery in equities has been far from rosy.
“I think we are destined for further lows,” he said, adding that “part two will be about solvency later this year”.
There is also a real and looming threat of inflationary pressures later this year and into 2021, according to Niall O’Sullivan, CIO of investment solutions at Mercer. “For a while, you’re going to see people clinging on to cash, but there is a threat in the medium and long term of…animal spirits returning to consumers, causing prices to multiply,” he said.
Though, he added, “inflation would also be a triumph in the short term”.
Global total Covid-19 deaths climb towards 300,000
Steve Bernard in London
The highest number of global daily coronavirus deaths in five days was recorded as the death toll climbed towards 300,000, with the US reporting more than a quarter of the total.
Worldwide, 5,583 people died of the disease in the latest 24-hour period, statistics from Tuesday revealed, bringing the total since the pandemic began to 285,533.
In the US, 1,510 Covid-19 patients died on Tuesday, breaking a two-day run of fatalities under 1,000. This brings the total to 76,617, which is 27 per cent of the global figure, data from the Covid Tracking Project shows.
Globally, the number of newly confirmed Covid-19 cases rose by 85,359 on Tuesday, a 20 per cent jump on the previous day’s rise, statistics from the European Centre for Disease Prevention and Control read.
After a week of declining figures, the UK’s death toll rose by 627 yesterday. The worst-affected country in Europe by deaths has reported almost as many fatalities as Italy and Spain combined over the past 30 days.
Brazil remains the worst affected country outside of the US by deaths. It registered a record 881 fatalities yesterday, more than double the previous day, bringing the death toll to 12,400. The number of newly confirmed cases was surpassed only by US and Russia as a further 9,258 infections were recorded, pushing the total to 177,589 in the hardest-hit country in Latin America.
Russia reported 10,000 or more new cases for the 11th straight day, bringing the total to 242,271. The country reported a daily high death toll of 107 yesterday, increasing the total since the pandemic began to 2,212.
Explore data about the pandemic to understand the spread of the disease and its path in the Financial Times’ Covid-19 trajectory charts.
Survey: How are we doing with our coronavirus live coverage?
The Financial Times has been providing live coverage of the coronavirus crisis since January, with reporters and editors bringing you the latest twists and turns on what has morphed into one of the biggest stories in decades.
We’ve worked hard to enhance our coverage with features like the coronavirus case tracker at the top of the page, and regular snapshots of the humanitarian, corporate, financial and political fallout of the pandemic around the world.
We’re always looking to continue improving, and would appreciate your honest feedback on what you like and what you do not.
Third of Scots who died from Covid-19 in April also had dementia
Mure Dickie in Edinburgh
More than nine out of 10 people who died from Covid-19 in Scotland in April had a pre-existing medical condition, with nearly a third suffering from dementia or Alzheimer’s disease.
Data from the National Records of Scotland for the first time included details of other medical conditions on coronavirus death certificates. The NRS said 91 per cent of those who died of Covid-19 had at least one pre-existing condition, with dementia and Alzheimer’s most common at 31 per cent and ischaemic heart disease following at 13 per cent.
The NRS said people in Scotland’s most deprived areas were 2.3 times more likely to die with coronavirus than those living in the least deprived areas.
The weekly NRS statistics showed 415 deaths in Scotland were attributed to Covid-19 in the week to May 10, down by 110 from the previous week. Total “excess deaths” and coronavirus-linked deaths in care homes also fell in the week to May 10.
“This week’s figures do offer further, and perhaps sustained, signs of hope,” Nicola Sturgeon, first minister, told the Scottish parliament. But Ms Sturgeon indicated she was not ready to match the easing of the lockdown announced for England by Boris Johnson, UK prime minister. “We will continue to err on the side of caution,” she said.
Labour leader hits out at Johnson over care home advice
Sebastian Payne in London
Keir Starmer has accused Boris Johnson of misleading MPs over official advice about the spread of coronavirus in care homes.
At prime minister’s questions on Wednesday, the opposition leader pointed to advice from March 13, which stated it is “very unlikely that anyone receiving care in a care home or the community will become infected”.
Sir Keir posed the question to Mr Johnson over whether the government was too slow to act to staunch the pandemic in care homes. In response, the prime minister said: “It wasn’t true the advice said that.”
Based on the wording of the official document, it appears Mr Johnson could have been incorrect.
Sir Keir has now written to the prime minister, accusing him of misleading MPs and requested that he return to the House of Commons as soon as possible to correct the record.
Mr Johnson has previously said he “bitterly regrets” the spread of Covid-19 in care homes, which has killed 8,314 people. Some academic studies have suggested the true figure could be much higher. The government has pledged more money to tackle its spread, including on more tests and personal protective equipment.
The pair clashed over international comparisons on the number of coronavirus deaths. Sir Keir asked why the government had dropped the chart from its daily press briefings showing the UK compared with other nations.
Mr Johnson said that it was too soon to make proper international comparisons until “full data on excess deaths” was available.
Poland to reopen hair salons and bars despite jump in infections
James Shotter in Warsaw
Poland will let hairdressers, restaurants, bars and some sports facilities open their doors next week, despite the eastern European country on Tuesday recording its highest daily number of infections during the pandemic.
Schools will partially reopen to provide daycare for young children, the prime minister Mateusz Morawiecki said, as part of a phased easing of the restrictions introduced to combat the virus.
Strict social distancing and hygiene rules will apply, with limits on the number of people who can be in hairdressers or restaurants at the same time. Patrons will be required to keep 2m apart.
Poland has recorded 17,062 cases and 847 deaths from coronavirus, fewer than many nations in Europe.
Silesia, the heartland of the mining industry, in recent days has registered a sharp jump in cases. On Tuesday, Poland recorded 595 new cases, 492 of them in Silesia.
The plans to reopen could proceed because each Covid-19 patient infects on average fewer than one other person, which means that the pandemic is under control, the health minister said.
Restrictions could be reintroduced though if new infections spike, Lukasz Szumowski added.
India outlines credit guarantee scheme to support smaller businesses
Amy Kazmin in New Delhi
India has instructed banks to provide up to $40bn, collateral free, fully government guaranteed loans to micro, small and medium enterprises by October 31 to help them recover from the disruption of the coronavirus shutdown.
Nirmala Sitharaman, the finance minister, unveiled the credit guarantee scheme on Wednesday, as she began to elaborate on the details of New Delhi’s plans to revive the economy, battered by the suspension of virtually all economic activities since March 24.
Prime Minister Narendra Modi on Tuesday announced that his administration will provide a $266bn support package – which includes liquidity support from the Reserve Bank of India and previous relief measures to the poorest – to get the economy back on track. But the details will be spun out in a stream of press conferences over the coming days.
The new loans issued on the MSME lending scheme will carry a four-year tenure, with one-year moratorium on repayment, and are expected to benefit 4.5m units “so they can resume business activity and also safeguard jobs,” Ms Sitharaman said.
To give small and medium enterprises a boost, New Delhi will no longer follow the global tender route for government purchases of less than $26m — to enable to MSMEs to win more government contracts.
Ms Sitharaman said the central government – and all central government public sector enterprises – would pay all outstanding bills to micro, small and medium enterprises within the next 45 days.
In a reform move, New Delhi said it was significantly increasing the size limit for a business considered as a micro, small or medium enterprises, a change that it hopes will encourage firms to grow larger without fear of losing benefits. Until now, New Delhi’s restrictive definition of MSMEs has discouraged businesses from expanding for fear they would lose benefits, such as preferential access to credit. With the new definition, larger firms will also be eligible for such preferential credit.
Fed chair warns further stimulus may be needed
James Politi in Washington and Colby Smith in New York
Jay Powell, the chair of the Federal Reserve, has said that “additional policy measures” may be needed from the US central bank and fiscal authorities to prevent the mounting risk of long-term damage to the economy from the coronavirus pandemic.
In remarks to the Peterson Institute for International Economics in Washington on Wednesday, Mr Powell warned that “deeper and longer recessions” tended to leave “lasting damage to the productive capacity of the economy” — and the US risked an “extended period of low productivity growth and stagnant incomes”.
“We ought to do what we can to avoid these outcomes, and that may require additional policy measures. At the Fed, we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way,” he said in prepared remarks.
Mr Powell signalled that the White House and Congress should be considering additional fiscal stimulus, on top of the $3tn already passed since the start of the crisis.
“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” he said. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending,” he said.
US stock futures shed gains after Jay Powell comments
US equity futures gave up some of their gains after Federal Reserve chair Jay Powell said on Wednesday that “additional policy measures” may be needed to prevent the risk of long-term damage to the economy from the coronavirus pandemic.
S&P 500 futures, which had been up as much as 0.5 per cent before his remarks, trimmed their gains to be up 0.1 per cent, while Nasdaq 100 futures turned negative and were down 0.1 per cent.
Treasury yields edged lower after his remarks sent the yield on the US 10-year Treasury down 0.04 percentage points to 0.6492 per cent. Yields move inversely to price.
Air traffic will not return to pre-crisis levels until 2023, Iata says
Tanya Powley in London
International air traffic levels are unlikely to recover to 2019 levels until 2023-24, the trade body for global airlines has warned.
Iata on Wednesday said it expects international revenue passenger kilometres (RPK), a key metric for airline revenues, to lag behind domestic air travel markets.
International RPKs will not return to 2019 levels for another three to four years, the Geneva-based international body said, while it expects domestic RPKs to return to 2019 levels by 2022.
International traffic will be hit by a slower recovery owing to global travel lockdowns, it added.
Iata also expects a “sharp fall” in the average trip length, down 8-9 per cent from an average trip length of more than 2,000 kilometres previously.
The forecast comes as the global trade body hit out at the decision by the UK and Spain to introduce 14-day quarantines on travellers arriving from overseas.
“International travel cannot restart under such conditions,” said Alexandre de Juniac, director-general of Iata.
Ex-Trump aide Manafort released to home confinement on virus fears
Demetri Sevastopulo in Washington
Paul Manafort, the former presidential campaign manager for Donald Trump, has been released to home confinement because of the risk of contracting coronavirus at the prison where he was jailed for financial fraud.
Manafort was sentenced to 47 months and had been serving his sentence in Pennsylvania after the former lobbyist was convicted in 2018 of tax and bank fraud. He was one of the highest-profile cases to emerge from the Russia investigation led by Robert Mueller, the former FBI director and special prosecutor. But the charges related to income that he made from consulting in Ukraine and were not related to Russian interference in the election.
US media reported that a judge ruled that Manafort could serve his sentence — he is due to be released in 2024 — at his apartment in Virginia after his lawyers argued that he suffered from a series of medical conditions, including respiratory problems, that meant he was at higher risk of contracting the disease.
Manafort is the second former Trump associate to be released from prison owing to Covid-19. Michael Cohen, the president’s former lawyer who later turned on his boss, was released to home confinement this month. Cohen received a 3-year sentence after being convicted of several campaign-related crimes, including lying to Congress.
Stocks slip after Fed comments
Wall Street opened lower after the chair of the Federal Reserve warned the coronavirus pandemic risked causing long-term damage to the US economy.
Jay Powell said the US may need to deploy “additional policy measures” to avoid an “extended period of low productivity growth and stagnant incomes”.
“The recovery may take some time to gather momentum,” he added.
The S&P 500 opened down 0.2 per cent, after futures trade turned negative following Mr Powell’s comments. The Dow Jones slipped 0.4 per cent while the tech-weighted Nasdaq gained 0.1 per cent.
The rally in global markets had already faltered on Wednesday, under pressure from rising US-China tension and concerns over the timeline for reopening economies during the pandemic.
IMF plans $23.8bn loan for Chile
Benedict Mander in Buenos Aires
The IMF is set to extend to a $23.8bn flexible credit line to Chile to help it deal with the economic fallout caused by the coronavirus crisis.
The South American country requested a “precautionary” two-year credit line, which IMF managing director Kristalina Georgieva discussed with local officials on Tuesday. The funds are expected to come with no new conditions on the country during the term of the loan.
Ms Georgieva will recommend approval of the loan to the IMF’s executive board when it meets in the coming weeks, given the country’s “very strong economic fundamentals, institutional policy frameworks, and track record”, the IMF said.
US agencies accuse China of trying to steal coronavirus research
Katrina Manson in Washington
US agencies say China is trying to steal vital coronavirus research by hacking American organisations that are studying the disease, warning the illicit campaign could jeopardise delivery of secure, effective and efficient treatment options.
“Healthcare, pharmaceutical and research sectors working on Covid-19 response should all be aware they are the prime targets of this activity and take the necessary steps to protect their systems,” said a joint warning on Wednesday from the FBI and the Cybersecurity and Infrastructure Security Agency, a government body set up to protect the country from cyber attacks.
The FBI said it is investigating cyber attackers it says are affiliated to China and which are “attempting to identify and illicitly obtain” research on coronavirus testing, treatments and vaccines.
The public warning, issued on Wednesday, did not name the organisations targeted or say whether any attacks had been successful. The US and China have repeatedly accused each other of failures over the pandemic in increasingly heated exchanges.
Brussels sets out funding plans to support most crisis-hit economies
Jim Brunsden in Brussels
The European Commission president has set out plans for a “recovery and resilience instrument” to support economies knocked by the pandemic.
Ursula von der Leyen said on Wednesday that the money will be funnelled towards the parts of the continent “that have been most affected and where resilience needs are the greatest”.
The instrument will finance “key public investment and reforms . . . paving the way towards a climate neutral, digitised and resilient Europe”, Ms von der Leyen told MEPs.
The commission’s intention is that it will be the core of a multi-pronged plan: Brussels will raise money on capital markets and spend it through the bloc’s common budget.
Ms von der Leyen confirmed that the EU support would take the form of grants and loans.
The recovery instrument would be accompanied by other EU action such as a beefing up of regional aid funds, and increased lending to companies under the bloc’s “InvestEU” programme, Ms von der Leyen said.
Other parts of Brussels’ plans, to be unveiled this month, include creating a “strategic investment facility” to ensure critical medicines and other vital products are made within the EU, as well as a “solvency instrument” to support viable businesses laid low by lockdowns, Ms von der Leyen said.
Ms von der Leyen said that the EU’s borrowing would be made possible by “larger headroom” in the EU budget.
“This headroom fixes the [maximum] amount of money that the commission can borrow on the capital markets backed by the member states,” she said.
Democrats want merger moratorium for big groups getting bailout funds
Lauren Fedor in Washington
Democratic lawmakers Elizabeth Warren, Amy Klobuchar and David Cicilline have written to the Federal Reserve and the US Treasury, urging them to restrict “large corporations that receive bailout funds from engaging in potentially harmful mergers and acquisitions”.
“As small businesses struggle to stay afloat, they have become potential targets of large corporations seeking to exploit the crisis to increase their market power,” the legislators wrote. “Small businesses help form the backbone of our economy, yet giant corporations are benefiting most from this bailout.”
Ms Warren, the Democratic senator from Massachusetts, a staunch Wall Street critic, last month proposed the Pandemic Anti-Monopoly Act, which would impose a moratorium on deals by companies with more than $100m in revenues or financial institutions with a market capitalisation above $100m. Ms Warren co-sponsored the bill with Alexandria Ocasio-Cortez, the progressive congresswoman from New York.
Mr Cicilline, a Democratic congressman from Rhode Island, is the chairman of the House antitrust subcommittee. Ms Klobuchar, the Democratic senator from Minnesota, is the top Democrat on the Senate Judiciary antitrust subcommittee.
US oil stockpiles show first weekly drop since January
US crude stockpiles fell last week in their first decline since January, after coronavirus-related shutdowns around the world stoked worries of a glut in supply.
Inventories excluding the Strategic Petroleum Reserve fell by 745,000 barrels compared with a week earlier, the US Energy Information Administration said, bucking forecasts for an increase of 4.1m barrels. Crude stocks at the storage hub in Cushing, Oklahoma, were down by 3m barrels, their first drop since February.
Domestic gasoline inventories also declined, sliding 3.5m barrels versus analysts’ estimate of a 2.2m-barrel draw for the week.
Oil prices have clawed back some of their losses in recent weeks amid hopes that reopened economies will spur fuel demand and ease pressure on crude storage capacity.
West Texas Intermediate crude gave back gains it registered following the release of the EIA’s data. The US oil marker, which has jumped about 35 per cent this month, edged 0.7 per cent lower to $25.60 a barrel in recent trading. Brent was down 1 per cent to $29.68 a barrel.
Free to read: Researchers look to blood antibodies
Clive Cookson in London
Antibodies are emerging as weapons against coronavirus, not only in tests for past exposure to infection but also as potential treatments.
They have been given to thousands of patients in the form of blood plasma donated by people who have recovered from the illness.
Biotechnology and pharmaceuticals companies are working to create more sophisticated antibody medicines — some developed in animals — as confirmed virus cases worldwide pass 4.2m.
The Financial Times’ free to read today is by Clive Cookson: Researchers look to blood antibodies as weapons in virus fight.
Canada’s Trudeau refuses to set date for budget
Prime minister Justin Trudeau resisted calls to set a timeline for a new federal budget following a warning from an independent budget watchdog.
The Parliamentary Budget Officer estimated in late April that the Canadian deficit will increase to C$252bn (US$179bn) in 2020-2021, rising to 12.7 per cent of gross domestic product, up from 1.1 per cent in 2019-2020.
Yves Giroux told Canadian media on Tuesday that this was likely to be a low estimate and that it was “possible and realistic” that national debt could reach C$1tn this year.
A federal budget set for earlier this year was postponed owing to Covid-19, and Mr Trudeau has again resisted calls to set a date for a formal update on the public finances, citing uncertainty during the pandemic.
“A budget is usually something that projects what is going to happen in the Canadian economy for the next 12 months, and right now we’re having a lot of difficulty establishing with any certainty what is going to happen in the next 12 weeks,” Mr Trudeau said.
New York’s Cuomo hopeful new stimulus bill delivers funding to states
Andrew Cuomo remained hopeful New York and other US states would receive much needed funding in the wake of Democrats in Congress releasing a plan for $3tn in new stimulus spending that would support state and local governments through the pandemic.
Mr Cuomo, governor of the US state hit hardest by Covid-19, said the proposed bill should help fund virus testing and working families, and provide economic stimulus “that should help this nation rebuild” through the construction of public infrastructure.
“We understand what we have to do, we’re prepared to do it, but we need help from Washington,” he said.
In a joint statement on Wednesday, Mr Cuomo and Maryland governor Larry Hogan, the Republican chair of the National Governors Association, called for “the passage of critical priorities” to help states through $500bn in financial support for state budgetary shortfalls, increased funding to provide healthcare to the vulnerable and full cost share for Federal Emergency Management Agency response and recovery efforts.
As New York approaches the Friday expiry of a statewide restriction order, Mr Cuomo said 12 more counties were set to restart elective surgeries, a key revenue generator for hospitals.
A further 166 people in New York died from coronavirus over the past 24 hours, down from 195 on Tuesday, Mr Cuomo said. The governor again spoke at length about more than 100 cases of children who are being treated for illness believed to be tied to coronavirus.
Wall Street slides after Powell’s warning on economic damage
US stocks slipped on Wednesday after the chair of the Federal Reserve warned the pandemic risked causing long-term damage to the economy.
Equity losses were accelerating by early afternoon. The S&P 500 was down 2.1 per cent, while the tech-weighted Nasdaq shed 2.3 per cent.
The yield on the 10-year Treasury ticked 0.05 percentage points lower to 0.641 per cent as investors moved into the debt.
In an interview on CNBC, billionaire investor David Tepper said the market was “maybe the second-most overvalued stock market I’ve even seen” behind 1999. The S&P 500 fell to session lows after his comments before clawing back some of its losses.
The recent rally in oil prices fizzled out on Wednesday, even as US crude inventories posted their first weekly decline since January. West Texas Intermediate, the US marker, was down 1.3 per cent at $25.44 a barrel. Brent crude fell 1.8 per cent to $29.44 a barrel.
Whistleblower Bright warns US faces ‘darkest winter in modern history’
Demetri Sevastopulo in Washington
Rick Bright, a former top health department official turned whistleblower, warned that the US faces its “darkest winter in modern history” unless the Trump administration improves its response to the Covid-19 pandemic.
Mr Bright, the former head of the Biomedical Advanced Research and Development Authority who claims he was removed from his post because of concerns he raised about the US government response to the pandemic, said it was an “undeniable fact” that there would be a resurgence of Covid-19 in the autumn that would put a heavy strain on the US healthcare system because it would coincide with the typical increase in flu patients at that time.
“Without clear planning and implementation of the steps that I and other experts have outlined, 2020 will be the darkest winter in modern history,” Mr Bright said in a copy of remarks that he will provide to Congress on Thursday.
Mr Bright alleges that he was removed from his position because he raised concerns about the insufficient government response to the pandemic, including a lack of personal protective equipment and also because he resisted pressure to invest money in “drugs, vaccines and other technologies that lack scientific merit”.
The Office of Special Counsel, an internal government watchdog organisation, last week said there were reasonable grounds to conclude that Mr Bright had been ousted because of clashes with political appointees in the Trump administration.
Daily coronavirus death toll in UK passes 33,000
George Parker in London
Britain’s daily death toll from coronavirus was 494, taking the total number of fatalities to 33,186, communities secretary Robert Jenrick has told the daily Downing Street briefing.
Mr Jenrick was announcing details of his plan to reopen Britain’s housing market, including allowing estate agents to resume viewings of properties. He said it would help to stimulate the economy.
But the minister faced tough questions on why the government had failed to get a grip on the crisis in Britain’s care homes at an earlier stage and why it had stopped publishing a daily graph comparing death totals in different countries.
Jenny Harries, deputy chief medical officer for England, insisted it was difficult to make reliable international comparisons, citing factors such as different methods of recording Covid-19 deaths and the age profile of different populations.
Study finds no coronavirus ‘herd immunity’ in Spain
Daniel Dombey in Madrid
Just 5 per cent of Spaniards have been infected by coronavirus and “herd immunity” against the pandemic may be a more distant prospect than some had hoped, a government-backed report indicated on Wednesday.
Preliminary findings in a high-profile national survey, based on antibody tests, suggested that about 2m of Spain’s 47m inhabitants had contracted the virus, although infection rates in Madrid and the surrounding provinces were much higher, at between 10 and 14 per cent.
Salvador Illa, Spain’s health minister, said the findings confirmed government’s expectations and its cautious, staggered phase-out of the country’s tough, two-month-old lockdown.
However, the results, based on tests of more than 60,000 people across the country, are particularly significant because of the widespread hope that a large number of people in countries like Spain are at least temporarily immune to the virus because they have contracted it without being tested or perhaps even displaying symptoms.
If a sufficiently big proportion of the population were immune to the virus — about 60 per cent — a country as a whole could develop “herd immunity” and so be relatively protected against a coronavirus second wave, which is widely feared in the autumn if not before.
The country has been one of the worst hit in the world by the pandemic, with over 27,000 documented deaths. But Mr Illa said the results showed that “there is no herd immunity”.
Amazon calls for federal price gouging law targeting scammers
Dave Lee in San Francisco
Amazon has called for a US federal price gouging law that would give regulators added power “to go after scammers” who use the ecommerce site, and other platforms, to sell overpriced goods in times of crisis.
Amazon was criticised after merchants using its marketplace greatly inflated the prices of in-demand products, such as hand sanitiser, as fears around coronavirus grew. In a blog post published on Wednesday, the company said it has removed more than half a million listings, and suspended 4,000 sellers from its platform, and cited several cases where it had provided information to prosecutors to pursue charges.
However, Brian Huseman, Amazon’s public policy chief for the Americas, argued that the lack of a nationwide law on price gouging in the US made clamping down on abuse more difficult.
“The disparate standards among states present a significant challenge for retailers working to assist law enforcement, protect consumers, and comply with the law,” he wrote. “A federal price gouging law would ensure that there are no gaps in protection for consumers. This would also help retailers like Amazon more effectively prevent bad actors and ensure fair prices.”
He suggested the law should give the US Federal Trade Commission more powers to investigate price gouging, alongside state attorneys general, and should kick in whenever a public health crisis or national emergency is declared. It should take into account increased costs related to legitimate constraints, such as supply chain issues.
However, in a move that will likely be seen as Amazon seeking to protect its own liability, Mr Huseman suggested that the law should target those “who actually set the price of a product”. In Amazon’s case, that would mean the third-party sellers on its platform — but not necessarily Amazon itself.
Focus on wellbeing amid lockdown a boon for Weight Watchers
The coronavirus pandemic “unlocked a durable trend” that has prioritised wellbeing and Weight Watchers could benefit as it evolves from being just a weight loss company.
“Shifting from ‘diet’ to the larger dialogue around wellbeing” has boosted WW’s total addressable market to about $300bn, compared with just about $18bn when it was more focused on weight management, Stephanie Wissink, analyst at Jefferies, said.
“We are intrigued by WW’s position as an accessibly priced, leading digital solution for individuals who seek and will pay for an integrated wellness lifestyle platform,” Ms Wissink said, as she initiated coverage with a “buy” rating.
She pointed to four reasons to be bullish on the company. First, the lockdowns have driven growth in at-home meal consumption, which Ms Wissink argued is the base of the company’s weight loss programme, and which she expects will be sustained, although at lower levels. Second, focus on overall health has grown and ways to maintain a healthier lifestyle, including eating better, shedding weight, improving fitness and wellbeing, which are all included in the company’s app. Third, WW’s programme is more affordable than other commercial alternatives.
While WW reported a loss in the first quarter and reported weakness in studio sign-ups in March, the company’s finance chief Nicholas Hotchkin noted on the earnings call last month that in the two weeks since April 12, the company’s digital recruitment trends had “seen some good recovery and in fact total digital recruitment has been positive for the past two weeks”.
Federal Reserve to scale back lending operations in repo market
Colby Smith in New York
The Federal Reserve is scaling back its interventions in short-term borrowing markets, following signs that the strains that previously engulfed the market in March as a result of the spreading pandemic have ebbed.
On Monday, the New York arm of the central bank said it is sizing down its lending operations in the repo market, where investors borrow cash in exchange for high-quality collateral like Treasuries. While it will still provide $500bn in daily overnight loans, as well as $500bn in monthly loans on a weekly basis, it will no longer provide $500bn in three-month loans.
The decision to discontinue the longer term loans came “in light of more stable repo market conditions”, the Fed said in a statement. It marks a sharp reversal from actions taken in mid-March, when the Fed quickly ramped up its interventions to ensure broader market volatility did not ripple through to funding markets.
The Fed has also come to the aid of other critical markets in the past two months, including those for US Treasuries, agency mortgage-backed securities, corporate debt and municipal bonds, among others. Many of those facilities have yet to come online and the Fed has pledged to adjust the terms as necessary should trading conditions deteriorate.
It committed to do the same on Monday for the repo market, promising in its statement to “adjust repo operations as appropriate to support effective policy implementation and the smooth functioning of short-term U.S. dollar funding markets”.
Wall Street closes lower as investors worry over outlook
US stocks slipped on Wednesday after the chair of the Federal Reserve warned that the pandemic risked causing long-term damage to the economy.
The US may need to deploy “additional policy measures” to avoid an “extended period of low productivity growth and stagnant incomes”, Jay Powell said in a downbeat assessment of the outlook.
“The recovery may take some time to gather momentum,” he added.
The S&P 500 closed down 1.7 per cent, after falling as much as 2.7 per cent earlier in the session. The tech-heavy Nasdaq shed 1.6 per cent.
Wall Street has clawed back from its March lows as investors took heart from fiscal and monetary stimulus unleashed to try to counter the effects of lockdowns. But Mr Powell’s remarks, made during a virtual event with the Peterson Institute for International Economics in Washington, renewed concerns over the medium-term toll of the pandemic.
Edward Moya, senior market analyst at Oanda, said the comments sent a signal that the economic recovery will be much slower than everyone is expecting.
“The harsh economic reality appears to finally be capping off the tremendous stock market rebound from the March lows,” Mr Moya said. “Too many uncertainties persist as to when economic activity will return and be sustained.”
The yield on the benchmark 10-year US Treasury fell 0.04 percentage points to 0.65 per cent, as investors moved into safer assets.
Emerging countries need more extra funding than forecast, says IMF
Martin Arnold in Frankfurt
The extra funding needed for emerging market countries will exceed the IMF’s initial estimate of $2.5tn as the impact of the pandemic worsens by the day, its chief economist has warned.
Speaking on a panel during the FT’s Global Boardroom online conference on Wednesday, Gita Gopinath said: “Our initial estimate of funding needs was $2.5tn – it is much larger than that. All hands are on deck and no option is ruled out.”
Low and middle-income countries have already been hard hit by record capital outflows, a falling oil price, a collapse in tourism revenues and a steep fall in demand for their exports; few have fiscal space to cope with the health and economic crisis that is unfolding.
“If anything it looks like the outlook will worsen,” Ms Gopinath said. “If you look at a collapse in consumption we are seeing, it will lead to downward revisions.” Adding that “no country is being spared” the economic fallout from the pandemic, she said emerging market countries faced “a difficult mix that could generate a much deeper and more long-lasting recession”.
She said the options being considered included expanding IMF members’ special drawing rights, a proxy for foreign exchange reserve assets that are made available in proportion to their share of the global economy. However, this option faces opposition from the US.
Carmen Reinhart, professor of international finance at Harvard Kennedy School, said on the same panel: “The situation is far far more serious this time around than in 2008/2009 for everyone but notably for emerging markets, whether they rely on tourism or rely on a global supply chain that has been disrupted – all of them will be hit.”
Warning that unlike the financial crash of a decade ago, the coronavirus crisis is “regressive” and hits the poorest and weakest populations hardest, Ms Reinhart called for the G20 richest countries to expand their recent temporary freeze on about $20bn of bilateral loan repayments for 76 poorer countries to many more emerging market nations.
Eighty-five countries have approached the IMF for short-term emergency assistance in recent weeks — around double the number that called on the fund in the immediate aftermath of the 2008 financial crisis.
“If this continues, if larger economies need substantive IMF resources, there is not enough,” said Ms Reinhart. “It all depends on how long the situation lasts and how many large economies need IMF resources.”
Fiat Chrysler and PSA scrap plans to pay dividend before merger
Peter Campbell in London
Fiat Chrysler and Peugeot owner PSA have scrapped plans to pay a €1.1bn dividend each as part of their merger plan, bending to pressure not to pay out money to investors at a time they are accepting government support to pay staff wages during the coronavirus shutdowns.
“The board of directors of Fiat Chrysler Automobiles and the managing board of Peugeot SA each today decided not to distribute an ordinary dividend in 2020 related to fiscal year 2019, in light of the impact from the current Covid-19 crisis,” the pair said in a joint statement.
The two are preparing to merge to create the world’s fourth largest auto group, larger than General Motors or Hyundai-Kia, with strong positions in markets across Europe and in North America.
Pressure has been building on companies that accept government aid during coronavirus to avoid paying dividends. Both groups have placed workers on state support schemes while plants in Europe and the US are shuttered.
Under the original terms of the deal, FCA is due to pay a special dividend of €5.5bn to its investors before the merger closes, in order to equalise the values of the companies. The companies said the terms have not changed.
FCA chief executive Mike Manley last week told investors that “we have worked very well together on all of the elements to progress as rapidly as possible to the conclusion of the merger” and stressed that the financial terms of the deal “have not changed”.
A tweaking of the terms is widely expected before the completion of the process, as both companies have seen their share prices roughly halve since the start of the year.
In a statement late on Wednesday, the companies said the talks are “advancing well” and likely to conclude before the end of the first quarter of 2021, “subject to customary closing conditions”.
US death toll jumps to more than 78,000
The number of coronavirus deaths in the US rose at the quickest rate in about a week, pushing the national total above 78,000.
A further 1,726 people in the US died over the past 24 hours, according to data compiled on Wednesday by the Covid Tracking Project, which was the largest daily increase since a record of 2,746 on May 7.
New Jersey and Illinois led the increase, with 194 and 191 deaths over the past day, respectively. Massachusetts, with 174, saw the third highest daily rise.
New York, the hardest hit state overall, slipped down the rankings with a further 168 deaths over the past 24 hours.
Since the pandemic began, 78,343 people in the US have died from coronavirus, according to the Covid Tracking Project.
Trump labels Fed’s Powell as his ‘most improved player’
Donald Trump has described Jerome Powell as his “most improved player” for the Federal Reserve chairman’s swift moves in cutting interest rates in the US to near zero to support the economy through the pandemic.
“He has done a very good job over the last couple of months, I have to tell you that,” the president said at the White House on Wednesday.
“Because I have been critical but in many ways I call him my MIP. Do you know what an MIP is? It’s the most improved player.”
The comments bestow upon Mr Powell an honour typically reserved for hard-working professional basketballers, such as Giannis Antetokounmpo of the Milwaukee Bucks, but also represents an improvement in the president’s sentiment towards the head of the Fed. Mr Trump last year said via Twitter message that the central bankers were “Boneheads” for not, at the time, cutting ” interest rates down to ZERO, or less”.
The path to potential Most Valuable Player status in the president’s eyes may prove elusive for Mr Powell. Mr Trump said he only disagrees with him on one thing – negative rates – even though the Fed chair said earlier today he had little interest in taking borrowing costs below zero.
“I’m a believer in negative rates only if other countries that are competitors,” Mr Trump said. “Look, Germany, they’re an ally, they’re friends of ours, they’re still competitors on other things. So, Germany, Japan, others have negative rates and I think if they do, we’re the most prime of the world.”
“Certainly, if they have the advantage of negative rates, we should, too.”