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Our briefing for Thursday May 7, 2020:
May 7, 2020 4:08:43 PM
- The coronavirus pandemic has made two months ago feel like two years ago. Nowhere is this more evident than the unemployment numbers in the United States. In the beginning of March, the country was experiencing its lowest unemployment rate in 50 years. Fast forward to Thursday where another 3.2 million Americans filed for insurance benefits. One in five Americans have now tried to claim unemployment benefits since mid-March. CNN is reporting the Trump Administration will not implement the Centers for Disease Control and Prevention (CDC) guidelines for reopening the country after asking for it. A senior CDC and administration official were sourced in the report, noting a 17-page recommendation from the CDC went to White House task force officials who found it “overly prescriptive” and that their guidance was too much ‘one size fits all’.
- During a Thursday news briefing, Canadian Prime Minister Justin Trudeau announced a $4 billion plan to boost pay for essential workers. The final details of the plan are still being worked out with the provinces who will be responsible for deciding which workers are eligible. British Columbia’s Premier John Horgan revealed his province’s plan on its next phase in reopening the province, which could include healthy people able to hold small gatherings once the Victoria Day long weekend rolls around in two weeks. A range of businesses including non-urgent health care, stores, libraries, parks, salons and restaurants could also resume by the middle of May, assuming they can meet public health guidelines.
- The Bank of England has forecasted the coronavirus will push United Kingdom’s economy into its deepest recession in 300 years. The country’s output has plunged 30% in the first half of the year, but the central bank has no plans to launch a new stimulus package.
- France plans to start easing its two-month lockdown as of Monday May 11th. Edouard Phillipe, the country’s Prime Minister noted some special restrictions will remain in place for the Paris region as the number of COVID-19 cases remain high and is densely populated. Social distancing guidelines will be enforced on public transport as 400,000 businesses plan to reopen in the country, while secondary schools and parks in the capital will remain closed. France has had 25,000 deaths due to the coronavirus pandemic.
- Russia’s coronavirus cases have overtaken France and Germany to become the fifth most in the world with close to 180,000. Despite this, President Vladimir Putin has backed a plan by Moscow Mayor Sergei Sobyanin to gradually begin lifting restrictions after May 12th, which would allow certain industrial facilities to begin working. Those taking public transport would be required to wear a mask and gloves.
- The World Health Organization (WHO) is considering a new mission to China to seek the source of the coronavirus pandemic. A WHO epidemiologist said without knowing where the animal origin is, it’s hard to prevent an outbreak like this from happening again. During a Thursday news briefing, a Chinese foreign ministry spokeswoman didn’t directly answer if the country would allow WHO officials in for their fact-finding mission.
Covid-19 – Due Diligence And Asset Management
Hedge Funds Post Best Month in Six Years, Led by Equities
Brief: Hedge funds rose 4.2% in April, the most in data going back to January 2014, as U.S. stocks rebounded to their best return in more than 30 years. Equity managers led the gains, posting a 6.5% advance in the month, according to preliminary figures from the Bloomberg Hedge Fund Indices. So far this year, hedge funds are down 6.7%. That still has outpaced the S&P 500 Index, which sunk about 9% for the first four months of the year, including reinvested dividends, as the coronavirus outbreak and measures to contain it rocked global markets. But equities were less volatile in April, with the S&P 500 jumping almost 13% -- its best month since 1987.
Neiman Goes Bankrupt, Idled by Virus and Crushed by Debt
Brief: Neiman Marcus Group Inc. filed for bankruptcy after efforts to manage its crushing debt load unraveled amid the spreading coronavirus pandemic. Creditors will take control of the luxury department store chain, according to plans outlined in a Chapter 11 petition filed in Houston. The move gives the Dallas-based chain a break by letting it stay in business while management works out a recovery plan. The company, led by Chief Executive Officer Geoffroy van Raemdonck, said it has support from a substantial majority of its creditors, who agreed to put up $675 million to get Neiman Marcus through the court process. They’ll also provide $750 million in exit financing. When the company emerges from bankruptcy in early autumn, management expects to see about $4 billion cut from its existing debt load -- the legacy of a 2013 leveraged buyout by current owners Ares Management Corp. and the Canada Pension Plan Investment Board. Neiman listed debt obligations of about $5.5 billion in its filing.
Paul Tudor Jones Reportedly Buys Bitcoin as an Inflation Hedge, Compares Crypto to 70s Gold Trade
Brief: Legendary trader Paul Tudor Jones is reportedly buying bitcoin as an inflation hedge as central banks around the globe print money to relieve coronavirus-battered economies.Jones, one of Wall Street’s most-successful and seasoned hedge fund managers, revealed in a message that one of his funds holds a low single-digit percentage infutures on the cryptocurrency, Bloomberg Newsreported. He compared it to the gold trade in the 1970s, according to the report. Bitcoin futures trading on the CME jumped 5% on Thursday. Jones, founder and chief executive at Tudor Investment Corp., told CNBC in March thathe thought the stock market could be higher by Juneif coronavirus cases began to peak. The investor said at the time that he expected stocks to endure a choppy April but that, ultimately, equities would again climb.
JPMorgan Mulls Shrinking Office due to Coronavirus Crisis
Brief: JPMorgan could join the ranks of big investment banks shrinking their office space as its investment banking boss predicts a portion of its staff may continue to work from home after the coronavirus crisis. Daniel Pinto, who runs JPMorgan's corporate and investment bank, told Citigroup analysts that he could "envision a scenario" where employees continue to work from home on a rotational basis, according to a note seen by Financial News, as the coronavirus looks set to permanently impact how large financial services organisations work. Pinto suggested that such a move would fall in line with the bank's sustainability targets "as well as reducing square footage" of its office space. He cautioned that the bank would need new methods of measuring employees productivity in such a scenario. Around 90% of JPMorgan's corporate and investment bank employees are currently working from home - compared to a firmwide figure of 75% - and the experience could change the way the bank does business, the note said.
Home Working Conduct During Lockdown is now a Concern for Financial Services, says KPMG Vice Chair
Brief: Conduct issues created by home working with a flatmate who works for a competitor firm has become such a worry for financial services firms that employees' living conditions could be scrutinised in the future, according to KPMG’s vice chair for financial services Kay Swinburne. Swinburne made the comments about conduct issues emerging as a result of homeworking during the coronavirus lockdown, at the City Week Covid-19 Operational resilience for financial institutions webinar series on May 5. “We’re also finding some very strange ones where you suddenly realise there are people sharing houses in a way that normally wouldn’t cause difficulty,” Swinburne said. “If you have several young investment bankers sharing a house in Chelsea it’s a problem when they’re trading portfolios they shouldn’t have knowledge of.”
Coronavirus: Goldman Sachs in Talks to Buy Invesco Holdings
Brief: Goldman Sachs is in talks to buy a big portfolio of company stakes being sold by the asset manager Invesco in a race to shift illiquid holdings whose value has been hit by the coronavirus pandemic. Sky News can reveal that a unit of Goldman Sachs Asset Management (GSAM) is closing in on a deal to acquire the positions, which include a holding in Oxford Nanopore, a gene sequencing specialist. City sources said that an agreement to buy the private company stakes, which are nominally valued at hundreds of millions of pounds, could be finalised within weeks. One added that a team within GSAM which manages private equity portfolios was leading the transaction at the Wall Street giant.
