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Our briefing for Tuesday October 20, 2020:
Oct 20, 2020 3:55:16 PM
- In the United States, the Food and Drug Administration (FDA) are holding an important meeting on Tuesday where potential COVID-19 vaccines will be top of mind. For instance, one of the topics on the agenda will be the criteria for allowing emergency use of COVID-19 vaccines and plans to monitor its safety after a regulatory go-ahead. Drug companies such as Pfizer, Moderna and AstraZeneca could provide early analyses of late-stage trials by the end of this month, or sometime in November, which will force regulators to consider regulatory authorization. AstraZeneca’s United States trial has been on hold since September 6th after a participant in the UK fell ill, but media reports are noting trials are expected to resume as early as this week after the FDA completed its review.
- In Canada, the possibility of a snap election looms as the opposition Conservatives are proposing a creation of a parliamentary committee to probe the Liberal government’s pandemic response. The purpose of the probe is to gain a better understanding of the federal government’s response spending and possible ethical lapses. During a news conference on Tuesday, Prime Minister Justin Trudeau said that Canadians will go to the polls if his government loses a confidence vote on the Conservative motion. However, Conservative leader Erin O’Toole argued the creation of the committee to probe possible misuse of tax dollars during the pandemic would not be legitimate grounds for triggering a federal election.
- After talks fell apart on Tuesday, United Kingdom Prime Minister Boris Johnson says his government will place the Greater Manchester region under its strictest coronavirus restrictions. The move will mean pubs not serving substantial meals will close, along with other businesses, including casinos and betting shops. “Unfortunately, an agreement was not reached”, said Johnson in a televised news conference. “As I said last week, it would be better and would have been better for defeating the virus if we worked together.”
- In a televised address on Tuesday, India’s Prime Minister Narendra Modi has cautioned his citizens to take greater precaution during the country’s ongoing festival season. Daily infections have dropped since hitting a peak one month ago, but health officials are concerned the country of over 1.4 billion people could see an increased risk of a new surge during the festival months ahead. Prime Minister Modi is calling on the Indian population to continue wearing masks in public and follow all social distancing norms.
- In the Middle East, the International Monetary Fund (IMF) released a report on Monday noting nearly all nations have been pushed into some form of a recession this year due to the coronavirus pandemic. The region obviously though isn’t alone as the IMF is predicting the global economy will shrink by 4.4% this year, marking the worst annual plunge since the Great Depression of the 1930s. The IMF projected Lebanon will take the worst hit from the pandemic in the Middle East region, seeing an economic contraction of 25%. However, while the report did show short-term pain for all in the region, it also recognized an expected rebound next year for all but two nations – the aforementioned Lebanon and Oman.
- Japan, with help from a United States information security firm announced the country has seen its research institutions developing COVID-19 vaccines hit by recent cyberattacks. In what is believed to be the first of its kind in Japan, the U.S. firm didn’t disclose the names of targeted institutions, but believe China is behind the cyberattacks based on the techniques employed. The attacks involved sending emails attached with electronic files, which seemed to be related to the new virus but contained computer viruses. With the race to develop a COVID-19 vaccine a lucrative possibility, the news of cyberattacks isn’t surprising. In July, the United States, Britain and Canada alleged Russian hackers were trying to steal information from their respective country’s researchers.
Covid-19 – Due Diligence And Asset Management
Goldman Sachs Sends Some London Staff Home Following Positive Tests for COVID-19
Brief: Goldman Sachs GS.N has sent some staff home from its London office after two employees tested positive for COVID-19. The U.S. investment bank sent a memo to staff at its Plumtree Court site in central London on Oct. 15 informing them of the positive tests and saying that people who had been in close contact with the staff members had been contacted by the bank’s “Wellness team”. “These two colleagues last worked in the office on Tuesday, 13 October and Wednesday, 14 October, respectively. They will remain in self-isolation as per firm guidelines,” the memo seen by Reuters said. Goldman Sachs is one of several banks that has encouraged groups of employees back into its London offices. London is currently categorised under the “high risk” level in the British government’s coronavirus alert system.
Citi’s Mann Fears Virus Economic Hit Will Crimp Firms for Years
Brief: Bad news for central bankers trying just about everything to stoke inflation: Citigroup Inc. reckons companies’ pricing power is severely damaged. Catherine Mann, the U.S. bank’s global chief economist, fears the pandemic has left so much slack in the economy that firms won’t be in a position to demand higher prices for some time. That, not just rising wages, is ultimately necessary for generating inflation. In the euro area, consumer prices are falling, while a key measure of U.S. inflation rose in September at the slowest pace in four months. “We get back to a trajectory for growth, but we do not return to the trajectory of global GDP that we had in place in January, pre Covid,” Mann said during a panel discussion hosted by the World Economic Forum on Tuesday. Officials across major economies responded to the virus outbreak with record fiscal and monetary stimulus in a bid to prevent corporate insolvencies and ruinous levels of unemployment. The outlook is still bleak, however, and the International Monetary Fund this month warned of a tough recovery path ahead. “The implications of that for workers, and for different age-group demographics, and for convergence of growth rates in emerging markets are all very dire,” Mann said.
UBS Gives Employees COVID Bonus of One Week’s Pay, Softens Career Exit
Brief: UBS UBSG.S is giving lower-ranking employees an extra week's pay this year in light of the COVID-19 pandemic and adding a financial softener for employees looking to exit finance, the world's largest wealth manager said on Tuesday. “As a sign of appreciation for their contribution throughout this challenging year, and acknowledging that the pandemic may have resulted in unexpected financial impact, the Group Executive Board has decided to award UBS’s employees at less senior ranks with a one-time cash payment equivalent to one week’s salary,” the Swiss bank said in a statement announcing its third-quarter results, adding the measure would add roughly $30 million in expenses in the fourth quarter. The bank also said it had modified its bonus policy so that eligible employees who wanted to make a career change under the strains and uncertainty of COVID-19, would be able to retain more deferred compensation than previously.
BlackRock Says Scale of Restructurings Could Exceed 2008 Crisis
Brief: BlackRock Inc. says that the scale of restructuring needs globally could exceed the previous peak that followed the 2008 global financial crisis. “One big reason is the significant growth in sub-investment grade debt,” the company’s research arm, BlackRock Investment Institute, said in a note dated Oct. 19. The amount of outstanding debt with ratings below investment grade, including loans and private credit, has more than doubled to $5.3 trillion since 2007, according to the asset manager. As the overall cost of borrowing fell, companies loaded up on debt. This has left many vulnerable as their revenues came under pressure from Covid-19 related disruptions. BlackRock isn’t the only one warning of the risks of company failures. Despite low rates, U.S. corporate bankruptcies posted their worst third quarter ever. While supportive fiscal and monetary policies have helped companies raise capital and lower borrowing costs, “not all borrowers have benefited equally” and smaller firms have lacked access to the public markets, BlackRock said in the note.
Biotech Investor Sees COVID-19 Drug Shaking Off Company’s Tarnished Past
Brief: Biotech investor Dale Chappell was looking to start Humanigen Inc. with a clean slate when his hedge fund assumed control in 2016, but things took longer than expected. The stock has swelled over 500% this year after positive early results from an experimental treatment for a potentially lethal side-effect of Covid-19. The shares have been volatile since July when it reached a more-than four-year high, though results expected this quarter from a late-stage study may be the ticket to keep Humanigen on track after a roller coaster ride. Chappell, who has a medical degree from Dartmouth College and served a fellowship with the National Cancer Institute, saw promise in the pipeline of Humanigen, then known as KaloBios, when he first took a stake in 2016. Investors may remember KaloBios as a company teetering on the edge of bankruptcy before the now disgraced and jailed Martin Shkreli swept in and took it over in 2015. Shkreli’s one-month stint as CEO left the company badly scarred before it fell into insolvency. That’s when Chappell and the fund he founded, Black Horse Capital LP, stepped in to provide financing to get the company back on its feet.
Investors Rethink Roles of Certain Assets in Portfolios
Brief: Investors are rethinking the roles of certain asset classes in their portfolios due to the coronavirus pandemic and its impacts on markets. The pandemic has created the need for resilient investing, with new assumptions and new asset allocations, panellists at the Pensions and Investments WorldPensionSummit said, Monday. For some, that may mean moving away from assets that are traditionally seen as safe havens. As a result of aggressive monetary policy by central banks, the pandemic has led to the need to reframe the relationship that the State of Wisconsin Investment Board, Madison, should have with U.S. Treasury bonds, at the time when rates and yields are low, said Brian Hellmer, managing director, global public market strategies. The board manages $126.3 billion in assets. Bonds had provided hedging qualities and return generation before the pandemic but now only have one of those features. He said bonds are an insurance policy that have a cost without producing an ongoing, real return. “That’s a structural immediate to long-term challenge for us,” he said. Mr. Hellmer said his fund has to consider exposure to the asset class at a time when it may seem counterintuitive to walk away from what some may perceive as being the safest asset class, because pricing has created an expectation of these assets giving no real return.
