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Our briefing for Friday July 17, 2020:
Jul 17, 2020 3:33:13 PM
- Starting with some good news from the United Kingdom as Captain Tom Moore will now be forever known as Captain Sir Tom Moore after being knighted on Friday. The 100-year-old became a national celebrity during the coronavirus pandemic raising close to £33M walking laps in his backyard. The knighting ceremony also marked the Queen’s return to public duties after the pandemic forced her to cancel almost all of her engagements.
- In the United States, CNN is reporting an unpublished document prepared for the White House coronavirus task force recommended that 18 states in the “red zone” should roll back reopening measures amid surging cases. The “red zone” as outlined in the 350+ page document are states that report new cases above 100 per 100,000 population and a diagnostic positive test above 10%. California, Florida, Arizona and Texas are some of the states that fall into this category. Roll back measures suggested includes closing bars and gyms and wearing a mask at all times outside of the home while maintaining social distancing.
- In Canada, its most populous province is starting to move into its final stage of reopening. Twenty-four of Ontario’s thirty-four public health units as of Friday will allow restaurants to resume indoor service while businesses such as bars, gyms and theatres can also welcome back customers. However, the heavily populated areas of Toronto, Hamilton, Niagara and Windsor-Essex will have to remain in stage 2 as they are still trying to reduce their COVID-19 numbers. Ontario reported 111 new cases on Friday.
- Spain are urging the Catalonia region, home to four million people, including residents of Barcelona to stay home as they have seen an increase in COVID-19 cases. The stay-at-home order is one stop short of a mandatory confinement but marks the strongest measure the Spanish government has made since emerging from its lockdown last month. The country reported 628 new cases on Friday, the most since the beginning of May.
- Israel is reimposing restrictions as the country sees a continued rise in new cases. As of Friday, gyms and exercise studios will closed to the public, as well as indoor dining in restaurants. Tighter restrictions will also happen over the weekend with the closure of stores (pharmacies + grocery stores exempted), beauty salons, museums and tourist attractions. The government also announced later in the month beaches will be closed to the public on weekends. Israel reported 1,800 new cases on Thursday and the government is facing heightened pushback from the public, including demonstrations outside the Prime Minister’s residence.
- India and Brazil have both crossed COVID-19 milestones that neither wished they would have had to reach. India now has more than one million coronavirus cases, joining Brazil and the United States as the only countries to do so. Several Indian states are imposing focused lockdowns as government officials try to protect their areas and economies. Meanwhile, in Brazil, their health ministry announced the country has reached two million cases. The country has also reported 76,688 deaths and have recorded more than 1,000 daily COVID-19 deaths on average.
Covid-19 – Due Diligence And Asset Management
CEO of World’s Biggest Money Manager Says Wearing Masks Will Help Economy Avoid Another Shutdown
Brief: BlackRock CEO Larry Fink told CNBC on Friday that wearing masks is critical to helping the U.S. economy recover from the damage caused by forced business closures because of the coronavirus. “We are witnessing many, many states reopening, but reopening without wearing masks. We need a world of compassion and that compassion is meaning wearing a mask,” Fink said on “Squawk Box.” “If we all wore masks, if we all cared about our fellow citizens a little more, we will be resolving this crisis much sooner.” However, a failure to wear masks and take other precautions may allow the virus to continue to spread and potentially necessitate more strict mitigation measures, he said. “If the disease continues to grow, if mortality rates grow from where they are today, then we’re going to have to see another shutdown of parts of our economy, and then the small and medium business … are going to have a harder time,” Fink said. In states such as Texas and California, parts of their reopening plans have already been pulled back or paused due to record-breaking Covid-19 case increases and spiking hospitalizations. Daily coronavirus cases in the U.S. hit another record, topping 77,000 on Thursday, according to data from Johns Hopkins University.
BlackRock Profit Beats Street Estimates as Markets Rebound
Brief: BlackRock Inc’s (BLK.N) results topped Wall Street estimates on Friday, helped by investors flocking to the world’s largest asset manager’s bond funds in the second quarter as global financial markets rebounded strongly from a COVID-sparked brutal selloff in March. BlackRock ended the quarter with $7.32 trillion in assets under management, up from $6.84 trillion a year earlier. The S&P 500.SPX rose 20% in the second quarter after falling by that amount in the first three months of 2020 as the coronavirus pandemic slammed the economy.“We had more conversations with our clients in the last six months than we have probably had in aggregate in years,” Chief Executive Larry Fink said in an interview. “Clients are looking to BlackRock more than ever before.”BlackRock reported a 21% jump in quarterly profit as investors poured money into its fixed-income funds and cash management services.The New York-based company's net income rose to $1.21 billion, or $7.85 per share. Analysts had expected a profit of $6.99 per share, according to IBES data from Refinitiv. (bit.ly/2ZEPkNv)
U.S. Bank CEOs Warn of Tougher Economic Road After Recent Gains
Brief: The road to recovery for the U.S. economy will be uneven, unclear and uncertain as the coronavirus retains its hold on business and Americans’ everyday activities, according to the heads of the nation’s biggest banks. In the wake of brighter data on employment, retail sales and housing over the last two months, most financial-institution executives curbed their enthusiasm about the economy during the kickoff to the latest earnings season -- even as some of their own profits rose. “There is no question as reopening has occurred, we’ve seen a pickup in that activity,” David Solomon, chief executive officer at Goldman Sachs Group Inc., said on the firm’s July 15 earnings call. But with a recent uptick in Covid-19 cases in several states “and this uncertainty persisting, I think you’ll see a flattening in that economic pickup and that will slow the progress we make.” JPMorgan Chase & Co. CEO Jamie Dimon was just, if not more, skeptical that the recent pace of improvement in the economy will endure. “You’re going to have a much murkier economic environment going forward than you had in May and June,” Dimon said on JPMorgan’s July 14 call. “You are going to have a lot of ins and out. You are going to have people scared about Covid. They’re going to be scared about the economy, small businesses, big companies, bankruptcies, emerging markets. So it just could be murky.”
Global Hedge Fund Industry Buffeted by Headwinds, says New Report
Brief: The global hedge fund industry is currently facing a number of headwinds, from fee pressure, increased redemptions and liquidations, to the decreasing new fund launches as investors around the world look towards defensive strategies, according to a new report from ResearchAndMarkets.com. But despite the tough times, the industry saw a double-digit annualised return in 2019 for the first time in the past six years. The Global Hedge Fund Industry: Growth, Trends and Forecasts 2020-2025 report highlights that the United States currently accounts for three-quarters of assets under management globally in the sector. Despite hedge fund activity in other regions globally expanding alongside that of the United States, the country also accounts for 3,405 of the 5,523 institutional investors active in hedge funds and 3,319 of the 5,383 active hedge fund managers. The report also takes a look at fees and how due to investor pressure, fund managers in some places have given up the traditional 2-20 fee structure for 0 per cent management fee and 30 per cent performance fee.
Credit Managers Pessimistic on Global Economy
Brief:Credit portfolio managers remain cynical on the global economy despite the recovery of equity markets since March, according to the second-quarter survey from the International Association of Credit Portfolio Managers. The vast majority of surveyed credit managers, 87%, forecast rising loan defaults over the next 12 months globally. By region, 95% see defaults rising in North America, 91% in Europe, and 82% in Australia. The least negative region appears to be Asia, with 67% of surveyed managers believing corporate defaults will rise in that region over the next 12 months. "I think that's a reflection that Asian countries have managed the (COVID-19) pandemic in a way that they look significantly better, but of course things change day to day," said Som-lok Leung, IACPM's executive director, in a telephone interview.Mr. Leung said credit managers feel there is a disconnect between equity markets and what they are dealing with on a day-to-day basis. "Most of the IACPM members are banks," he said. "These people are managing bank portfolios which are primarily corporate credit loans." Those companies are in distress, he said, "dealing with their lines of credits, asking for amendments, extensions, all these kinds of things to weather the current storm."
Private Equity Hitting the Breaks on Outside Legal Spending
Brief: Private equity firms in the U.S. and the U.K. are cutting back on outside legal spending amid an M&A slowdown that began even before the coronavirus pandemic, according to a May 2020 survey conducted by Apperio, a U.K.-based legal spend analysis company. Nearly all U.S. respondents - 98% - anticipated a decline in spending, the report found, with 83% expecting outside legal spending to contract by 6% or more.
