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Coronavirus Diligence Briefing

Our briefing for Tuesday April 27, 2021:

Apr 27, 2021 5:17:03 PM

  • In the United States, the Centers for Disease Control and Prevention (CDC) have issued new guidance on outdoor mask use for fully vaccinated Americans on Tuesday. In their briefing, CDC Director Dr. Rochelle Walensky said fully vaccinated people can unmask outdoors, if they are walking, running, hiking, or biking alone or with members of their household. Fully vaccinated Americans can also go mask free while dining at an outdoor restaurant with friends from multiple households. However, Dr. Walensky cautioned those fully vaccinated that plan to attend medium sized, or large events like a live performance or sporting event should still wear a mask.
  • Canadian Prime Minister Justin Trudeau said the country will send $10 million through the Canadian Red Cross to the Indian Red Cross to help the country’s stretched health-care system through its deadliest wave of COVID-19. Prime Minister Trudeau said the money will go to fund ambulance services and the local purchasing of personal protective equipment. Relevant ministers are also in touch with their Indian counterparts about what more Canada can do to help. Elsewhere in the country, CBC is reporting the federal government has rejected a request by the Ontario provincial government to double the federal paid sick leave program to $1,000 a week with Ontario chipping in for the cost. Prime Minister Trudeau said during a Tuesday news briefing that Finance Minister Chrystia Freeland is working closely with the province to develop its own supports.
  • In the United Kingdom, the latest data shows close to 34 million have received at least their first inoculation of a COVID-19 vaccine. The latest numbers mean the vaccine rollout has already reached over half of the UK population with a first dose and a quarter of adults are now fully vaccinated with both shots. Health Minister Matt Hancock sent out a message via his social media announcing the next stage of the vaccination program with vaccines now being offered to those 42 years of age, or older and that all adults who want a COVID-19 vaccine can have one by the end of July.
  • The two largest European Union (EU) countries outlined their plans on pandemic recovery spending on Tuesday. Germany and France plan to use the EU’s pandemic recovery fund for fighting climate change and boosting the use of digital technology across the economy. Under the fund’s formula, France will receive €40 billion while Germany will receive €28 billion. France’s Finance Minister, Bruno Le Maire has called on the European Commission, the EU’s executive branch, to quickly evaluate the plans so that money can start flowing to member states as early as July. Le Maire said since the fund was approved, the bloc has lost too much time to large economies like the United States and China recovering faster and Europe must remain in the race.
  • The Associated Press is reporting coronavirus infections have surged past one million in the Philippines, which is causing officials to assess whether to extend a monthlong lockdown in the Manila region. The government is in a no-win situation as the reopening will undoubtably lead to a spike in cases but keeping it in place will continue to batter the economy while making their citizens suffer through joblessness and hunger. The Philippine Red Cross said surging infections have placed hospitals “under siege” and that it has set up field hospital tents and converted unused classrooms and buildings to quarantine patients. 
  • In Australia, the snap three-day lockdown in Perth and surrounding regions did its job with the lockdown ending as no new COVID-19 community cases were recorded. Premier Mark McGowan said that while people were free to leave their homes and return to work and schools, some interim restrictions would be in place for the remainder of the week, such as mandatory wearing of face masks in public. Elsewhere in the country, Prime Minister Scott Morrison has followed suit like many other countries throughout the world and has suspended all direct passenger flights from India until May 15th. The move will leave many Australians stuck or needing to find their own way out of India for the time being with Prime Minister Morrison saying no one will be prioritized, such as high-profile cricket players who play abroad in a professional league.

Covid-19 – Due Diligence And Asset Management

It’s Time to Return to the Office, Jamie Dimon Signals to Wall Street

Brief : Jamie Dimon is sending a message to his fellow Wall Street chiefs: It’s time to bring employees back to the office. JPMorgan Chase & Co. became the first major U.S. bank to mandate a return to offices for its entire U.S. workforce, with staffers being told they’ll need to come back in about two months. The lender’s top decision-making body, led by Chief Executive Officer Dimon, said in a memo to staff Tuesday that it “would fully expect that by early July, all U.S.-based employees will be in the office on a consistent rotational schedule.” Industry leaders have been preparing for an end to remote work since the earliest months of the pandemic last year. Dimon, who’s been going into the bank’s headquarters since June, said as far back as September that he expects economic and social damage to result from a longer stretch of working from home. David Solomon, Dimon’s counterpart at Goldman Sachs Group Inc., called the remote-working arrangement an “aberration” that needs to be corrected as quickly as possible. “This is fantastic news and the fact that it’s JPMorgan and Jamie Dimon — this will send a very positive message to other CEOs, not just in New York but around the country, to start making plans to on-board their employees,” Bill Rudin, chief executive officer of Manhattan office landlord Rudin Management Co., said in a phone interview.

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HSBC to Cut Office Space by 20% in 2021, Halves Business Travel

Brief: HSBC Holdings Plc expects to cut its office footprint by 20 per cent this year and is budgeting for half its previous business travel costs as the adoption of flexible working spurs changes to longstanding practices. The bank, which has already committed to a 40 per cent reduction in office space in the long term, expects to get halfway to its goal over the course of this year, Chief Financial Officer Ewen Stevenson said in an interview with Bloomberg Television Tuesday. “We do very much want to move to a hybrid working environment,” he said. HSBC’s pace highlights how quickly the pandemic has redrawn the office market as businesses debate the type and extent of space required for their newly-remote workforces. Vacancies have soared in financial centers such as London, and even Chief Executive Officer Noel Quinn and his senior team at HSBC are hot-desking to help reduce the bank’s footprint at its Canary Wharf headquarters. “Firms have told us that they remain committed to retaining a central London hub but how they operate will inevitably change to reflect post-pandemic trends, such as hybrid and flexible working,” Catherine McGuinness, chair of the policy and resources committee at the City of London Corporation, said in a statement Tuesday.

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Why the S&P 500 is Still Treading Water Despite Strong Company Results

Brief: By almost any measure, this has been an astonishing earnings season for US corporates. At the time of writing, around two-thirds of companies had beaten expectations – and not just by a little. Barclays analysts put average earnings per share growth at an impressive 63%. However, it doesn’t appear to be having much impact on share prices. Why? Tesla is a case in point: its earnings rose to 93 cents per share, against expectations of 79 cents with revenue up 79% year on year. Its share price dropped 3% in the immediate aftermath of the results. Overall, the S&P 500 has been treading water even as results have come through strongly. The strong macroeconomic picture is also not providing the support it should. The US economy is flying. Retail sales registered almost 10% growth year on year in March. The IMF is predicting GDP growth of 6.4% for 2021. Manufacturing is seeing huge expansion and jobs growth is buoyant. Steven Bell, chief economist at BMO Global Asset Management, says there is more to come. “The excellent vaccine rollout plan is unleashing a surge in spending as consumers emerge with bank accounts bursting with cash from a whole series of fiscal handouts,” he says.

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US Consumer Confidence Returns to Pre-Pandemic Levels

Brief: Consumer confidence rose sharply for a second straight month, hitting the highest level since the pandemic began, as the rapid rollout of vaccines and another round of U.S. financial support for Americans boosts optimism. The Conference Board reported Tuesday that its consumer confidence index advanced to a better-than-expected 121.7 in April, up from 109.0 in March. It was the strongest reading since the index stood at 132.6 in February 2020, right before the COVID-19 pandemic struck in the United States. The present situation index, based on consumers assessment of current business and labour market conditions sored from 110.1 to 139.5. The expectations index, based consumers' views of what conditions will be like over the next six months, posted a more moderate gain, rising from 108.3 last month to 109.8 in April. Economists believe that the rising consumer confidence will bolster overall economic growth as consumers, who account for 70% of economic activity, step up their spending as lockdown restrictions are eased.

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Goldman’s Digital Hedge-Fund Matchmaking Push Boosted by Lockdowns

Brief: Goldman Sachs’ long-planned online migration of some lucrative prime-brokerage businesses picked up steam during the pandemic as hedge funds and investors working from home were unable to meet in person, while other Wall Street banks are taking more measured steps. Last July, Goldman Sachs Group Inc launched Marquee Connect, offering online virtual introduction services for top clients. Other prime brokers told Reuters they were also moving to bring some prime broker services online, but one cautioned that clients may be getting “Zoom fatigue” with hopes to resume meeting in person once more people are vaccinated. Humans have long handled capital introduction services, in which third parties like banks attempt to matchmake investors with hedge funds. But as large swathes of other bank services have moved to virtual platforms, banks have been increasingly looking at how to move some of these services online too.

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Gundlach says Fed is Guessing that Inflation Will be Transitory

Brief: It is not clear that U.S. inflation will be “transitory” as the Federal Reserve economists are trying to convey, according to Jeffrey Gundlach. “I’m not sure why they think they know that it’s transitory,“ Gundlach of DoubleLine Capital LP said in an interview with BNN Bloomberg Tuesday. “How do they know that when there’s plenty of money printing that’s been going on and we’ve seen commodity prices going up really massively.” While the Fed does have a point in saying the year-over-year increase -- which Gundlach says could be as high as 4% -- is higher in part because of the low, pandemic-induced numbers from 2020, the central bank may also be underestimating the impact of its wide-open monetary policies. “There’s plenty of indicators that suggest that inflation is going to go higher, and not just on a transitory basis, for a couple of months. So we’ll see how the Fed is trying to paint the picture, but they’re guessing.“ Gundlach is chief executive and chief investment officer of Los Angeles-based DoubleLine Capital, which managed more than $136 billion as of Dec. 31. While bond yields remain very low, it’s hard to figure out who’s going to buy the massive bond market issuance, he said.

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Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Topics:Coronaviruscovid-19