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Our briefing forFriday May 1, 2020:
May 1, 2020 4:50:52 PM
- With the United States federal guidelines of social distancing expiring on April 30th, many states are moving towards a gradual reopening starting today. The largest state making a move on Friday is Texas with Governor Greg Abbott’s executive order superseding local orders. This will allow businesses like retail stores, malls, restaurants and theatres to reopen at a 25% capacity. Other states are allowing salons and gyms to open while some are easing restrictions on outdoor activities such as opening parks, and golf courses.
- In Canada, Ontario Premier Doug Ford will allow some business to reopen on Monday May 4th as long as they meet strict public health measures. Those business allowed to reopen include garden centres and nurseries, lawn care and landscaping, essential construction projects, and golf courses can open for maintenance, but not for the public. Nova Scotia is also following similar easing of restrictions, allowing for parks and trails to reopen, as well as other outdoor activities to resume such as fishing. Elsewhere, Tiff Macklem will inherit the unenviable job of playing a lead role in leading the country out of the economic crisis the coronavirus created. Macklem was named the new Bank of Canada head and will replace Stephen Poloz as his term ends June 2nd.
- Matt Hancock, the United Kingdom’s Health Secretary announced during a Friday news conference the government hit its goal of 100,000 coronavirus tests by the end of the month, stating 122,347 tests were deployed on Thursday, the last day of April. The government had pledged to hit the 100,000 test per day milestone earlier in the month when they were criticized their testing abilities were not comparing with other countries such as Germany.
- A third of France is currently in a “red category” zone, which means they would not be released from their lockdown if this is still the case once May 11th arrives.
- India said on Friday they would extend its nationwide lockdown for another two weeks after May 4th. However, the government would allow for “considerable relaxations” in lower risk districts that are colour coded as outlined in their plan to fight the virus. India’s health ministry said the country has just over 35,000 cases and close to 1,150 deaths due to the coronavirus.
- Australian Prime Minister Scott Morrison said his government will consider relaxing coronavirus-related mobility restrictions next Friday. Growth in new infections have slowed to less than 0.5% per day in the country as compared to 25% at its peak a month ago.
- Ending the week on a positive note with the story of UK Captain Tom Moore. The war veteran turned 100 on Thursday and Mr. Moore had a goal of raising £1,000 for the NHS Charities Together. Moore gained worldwide attention as he walked laps in his garden for the cause. His touching story filled a school hall with 120,000 birthday cards, including happy birthday messages from the Queen of England and Prime Minister Boris Johnson. As for Moore’s goal of £1,000 for the charity; he did slightly better with the fundraising currently topping £32 million!
Covid-19 – Due Diligence And Asset Management
Trump Weighs China Stock Ban for $50 Billion of Federal Savings
Brief: President Donald Trump is exploring blocking a government retirement fund from investing in Chinese equities considered a national security risk, a person familiar with the internal deliberations said. The Thrift Savings Plan -- the federal government’s retirement savings fund -- is scheduled to transfer roughly $50 billion of its international fund to mirror an MSCI All Country World Index, which captures emerging markets, including China. The Federal Retirement Thrift Investment Board overseeing the fund made a decision in 2017 that the money should be moved by mid-2020. Opponents of the transfer in recent weeks have engaged in a last-minute effort to stop it.
Apollo, Employees Face $1 Billion in Clawbacks on Rout
Brief: Apollo Global Management Inc. faces the prospect of having to hand back earlier profits from several of its funds as its holdings were hit hard by the economic fallout from the coronavirus pandemic. The firm, together with some current and former employees and partners, were potentially on the hook to give back $965.4 million in profit taken as of the end of March, New York-based Apollo said Friday. Apollo is the first major alternative asset manager to suggest it may have to pay back profits, known as clawbacks -- a possible harbinger for an industry that’s thrived over the past decade. Many of its biggest bets have been on economic bellwethers such as the travel, energy and retail sectors that have been devastated by the outbreak.
Think Wall Street’s Back to Normal? Not so Fast, Options Markets Say
Brief: Options investors are preparing for more volatility ahead despite last month’s sharp rebound in U.S. stocks, reflecting doubts that markets will be quick to return to their former highs in the middle of the coronavirus pandemic. Market turbulence has plunged alongside stocks' climb since late March, with the Cboe Volatility Index , known as "Wall Street's fear gauge," last at 37.19 on Friday after peaking above 80 in mid-March. The S&P 500.SPXrose 12.7% in April, its biggest monthly percentage gain since 1987, and has climbed more than 27% from its March 23 closing low.In another bullish sign, the front end of the S&P 500 volatility term structure, which plots volatility expectations over time, is no longer inverted, suggesting that worries over a near-term stock reversal are subsiding.
“Very Negative” Stance Powered Pershing Square Gains – But Ackman Does not See Protracted Slump
Brief: Pershing Square CEO Bill Ackman’s “very negative view” and “good sense of timing” powered the firm’s stellar USD2.6 billion gain last month but the high-profile activist hedge fund manager does not fear a protracted 1930s-style depression as a result of the Covid-19 shutdown. Pershing Square Capital generated the remarkable return in March with a USD27 million credit hedge as the impact of the coronavirus pandemic sent global markets into a tailspin. In a podcast interview released this week, Ackman explained how growing concerns over the Covid-19 spread early in the year, and the subsequent economic implications of the US shutdown, formed the basis of his lucrative bet.
Leaked UBS Document Offers Road Map for How City may Return to the Office
Brief: A UBS consulting unit's advice to clients on returning to work gives an eye-opening road map for how the new normal in City working life might play out. A 13-page document put together by UBS's Capital and Consulting services division, seen by Financial News, recommends that firms come back to work in phases, prioritising key employees over others. Top of the list are traders, which are in the “highest operational risk category”, it said. While UBS's unit advises hedge funds, it lays out a model for returning to work in the wake of the pandemic that could be applied to any financial services organisation. Traders, portfolio managers and analysts should be brought back into the office during what the document describes as "risk level two", when new cases of Covid-19 have been trending down for two weeks, schools re-open or some lockdown restrictions are lifted.
