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Coronavirus Tests Limits of Central Bank Firepower

February 29, 2020 by Leave a Comment

“We would rather have a vaccine than a rate cut and fully recognize that monetary policy is not optimized for addressing this type of shock,” Krishna Guha and Ernie Tedeschi of Evercore ISI wrote in a note to clients.

  • Answers to your most common questions:

    Updated Feb. 26, 2020

    • What is a coronavirus?
      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.
    • What if I’m traveling?
      The C.D.C. has warned older and at-risk travelers to avoid Japan, Italy and Iran. The agency also has advised against all nonessential travel to South Korea and China.
    • Where has the virus spread?
      The virus, which originated in Wuhan, China, has sickened more than 80,000 people in at least 33 countries, including Italy, Iran and South Korea.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is probably transmitted through sneezes, coughs and contaminated surfaces. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • Who is working to contain the virus?
      World Health Organization officials have been working with officials in China, where growth has slowed. But this week, as confirmed cases spiked on two continents, experts warned that the world was not ready for a major outbreak.

America’s economy is susceptible to the threat posed by coronavirus, given that growth has largely been powered by consumer spending. Long-lasting quarantines could keep shoppers at home while fear of infection could prevent even those not quarantined from venturing out. The shock might be particularly dire for small businesses that do not have big cash cushions: A few weeks of depressed sales can push them to the edge of ruin. And if companies close or downsize and jobs are lost, consumer spending would suffer even more.

Florian Hense, an economist at the German bank Berenberg, said central bankers can at best mitigate the economic impact, not contain it.

“You can’t bring people back to factories. How are you going to convince consumers to leave their houses and buy goods?” Mr. Hense said.

Despite those shortcomings, economists say that pre-emptive action might still be of some help. Rate cuts — or even hints that they are coming — can help calm markets and keep credit flowing. If it seems that the coronavirus is going to have longer-lasting effects on consumer and business spending, lower borrowing costs can offer some reprieve by stoking demand.

“I think it would send a huge signal if the Fed was willing to cut rates, even a quarter of a point, on an inter-meeting basis,” Narayana Kocherlakota, formerly president of the Federal Reserve Bank of Minneapolis, said Friday. And coordinating statements with other global central banks could help, he said. “This is obviously a global shock, so it’s reasonable to think about a global response.”

Article source: https://www.nytimes.com/2020/02/29/business/economy/coronavirus-central-banks-economy.html

Filed Under: Economy News

Why a Coronavirus Recession Would Be So Hard to Contain

February 29, 2020 by Leave a Comment

“I believe we’re going to have a massive shortage of goods,” she said. “Two weeks ago I told people this was coming. The big problem was economists don’t understand how global supply chains work, how intertwined and interconnected they are.” It is an issue she said would particularly affect pharmaceuticals and electronics.

Macroeconomic policies can’t really do anything about supply shocks like those. But it’s possible that supply shocks can bleed into demand shocks, and there economic policy can help.

Tara Sinclair, who studies business cycles at George Washington University, compares it to a grocery store. A store with no goods on the shelves has a supply problem, while a store with full shelves but no customers has a demand problem. And it is generally easier to boost short-term demand than short-term supply.

But supply problems can bleed into demand problems, and vice versa.

“If first the store is empty of products, and then people don’t go to the store anymore and they lose their jobs, they can’t buy anything,” Ms. Sinclair said. “That’s what we’re risking here.”

In parts of Italy, for example, where outbreaks of the virus have disrupted daily life, tourism is slowing and restaurants and stores are reportedly empty as people seek to avoid exposure. That could result in waiters and store clerks who endure a drop in income, which could in turn feed back into less demand for all sorts of products, and a weaker economy.

Similarly, businesses might go bankrupt if the financial markets freeze up and they cannot get access to credit, meaning otherwise sound businesses end up laying off employees or closing down.

The role for economic policy, in that sense, wouldn’t be to solve the supply shock, but to try to prevent that initial supply shock from triggering a demand shock.

Article source: https://www.nytimes.com/2020/02/29/upshot/coronavirus-recession-US.html

Filed Under: Economy News

The perfect storm sends natural gas crashing

February 29, 2020 by Leave a Comment

If you’re waiting for natural gas prices to recover, you might be in for a considerable wait, as inventories are expected to hover well above their five year average for the remainder of the year, the EIA has forecast, painting a rather sour picture for the industry that has seen investments stifled due to the lower prices.

In fact, inventories later this year will reach levels never seen before if forecasts prove accurate.

Also on rt.com Shale decline inevitable as oil prices crash

The Nitty Gritty of Nat Gas Supply and Demand

According to the Energy Information Administration Short-Term Energy Outlook (STEO), working natural gas in storage in the Lower 48 will end the current heating season—which ends on March 31—at 1,935 billion cubic feet.

This is 12% above the previous five-year average.

Now, we’re about to head into what the industry refers to as “the refill season”. Normally, the end of the heating season is when inventories are at their lowest. Now, we’re heading into this stockpiling season with inventories that are high. So we will be amassing even more nat gas in inventory as heating demand falls off.

The EIA estimates that we will end the refill season, which runs until the end of October, with 4,029 billion cubic feet. This would be the largest monthly level of nat gas we’ve ever had in storage.

At the end of January, inventories had already reached 2.6 trillion cubic feet.

1 Goldman: China coronavirus could push oil down by $3

COVID-19 and the Weather

The COVID-19 outbreak—likely soon to be pandemic—might be the obvious target on which to lay blame for the increasing inventories. After all, it is responsible for demand in crude oil.

But that is only a piece of the puzzle, with weather, weather, weather topping the list of critical factors that are affecting natural gas inventories.

January 2020 was the fifth warmest January on record—that’s out of over 125 years of data. January 2020 saw average temperatures of 35.5 degrees F across the United States. This is 5.4 degrees more than the 20th Century average, according to the US Department of Commerce’s National Oceanic and Atmospheric Administration.

The problem? It’s just been so warm that the need for heating has been reduced, depressing demand. And while production has not fallen with demand, inventories have bloomed. Add to that unfavorable price scenario the fact that COVID-19 is spooking the market and further denting demand, and you have a perfect storm for lower nat gas prices.

Oftentimes, these lower price points created by subdued demand in one sector courtesy of the mild weather will create additional demand from other segments. Large-volume users such as power plans or iron and steel mills have the ability to switch between nat gas and coal or even petroleum—and they will choose the lowest cost ones. So as natural gas in storage climbs and prices fall, one would expect a bit of an uptick in demand from some of the other sectors.

But it has done little to mediate inventories.

While weather has been the primary driver of the lower nat gas prices, COVID-19 is worth a mention. The virus is expected to strip away 10bn m3 from China’s 2020 gas demand alone, according to Sublime China Information. Most of this demand destruction will be seen in Q1. For China, some are expecting gas demand to return to normal by March, if things don’t get worse—a condition that public health officials are saying is likely to happen.

Also on rt.com ‘Gasmaggedon’ sweeps over global gas market

Production Won’t Fall Off Enough

Natural gas production has shown no signs of slowing throughout 2019. In fact, in 2019, US natural gas production was at record levels, averaging 92.1 billion cubic feet per day. And 2020 isn’t looking any better.

Towards the end of 2019, average production was higher than at the beginning of 2019, so while the EIA sees monthly production declining in 2020, from 95.4 Bcf/d last month to 92.5 Bcf/d in December, the average for 2020 is still expected to be 2% higher than the average of 2019.

Inventories Up, Prices Down

This weather phenomenon combined with robust production is tanking the price of natural gas. The Henry Hub spot price averaged $2.02 MMBtu. But after the first week of February, prices had fallen to $1.86 MMBtu. Even through the remainder of the heating season, when inventories typically contract, the EIA expects nat gas prices will stay below $2 MMBtu. Prices should tick up in Q2, the EIA says, with an overall average price of $2.53 MMBtu for the year.

Whether its weather or COVID-19, record inventories for nat gas are likely on their way. And with record inventories comes low prices—a fact that offers traders about as much certainty as they’re going to get in this volatile market.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/481924-perfect-storm-natural-gas/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Right-Wing Media Says Virus Fears Were Whipped Up to Hurt Trump

February 28, 2020 by Leave a Comment

“My inbox is flooded with people trying to get me to interview people who are being passed out as experts, who really are not experts,” she said.

In addition, the coverage, presented with the signature flash of cable news, has at times amplified misleading or downright false narratives about the spread of the virus.

Senator Tom Cotton, an Arkansas Republican, for instance, floated the possibility in a Fox News interview that the coronavirus had originated at a Chinese laboratory, a theory that scientists say lacks any evidence.

Jon Cohen, who is among the team of reporters covering the coronavirus for the magazine Science, said anyone exaggerating the likelihood that the virus had been created in a laboratory could leave viewers misinformed.

“It reinforces biases people have against China, against government, against scientific research,” Mr. Cohen said.

Mr. Limbaugh, who was awarded the Presidential Medal of Freedom by Mr. Trump this month, used his radio program this week to link the virus with the Democratic presidential front-runner, Senator Bernie Sanders of Vermont.

“Just keep in mind where the coronavirus came from,” Mr. Limbaugh told listeners. “It came from a country that Bernie Sanders wants to turn the United States into a mirror image of: Communist China.” (At a CNN town hall on Monday, Mr. Sanders, who identifies as a democratic socialist, described China as an “authoritarian country, becoming more and more authoritarian,” adding that it had “taken more people out of extreme poverty” than any other nation.)

Article source: https://www.nytimes.com/2020/02/28/business/media/coronavirus-right-wing-media.html

Filed Under: Media Business

Stocks Suffer Worst Week Since Financial Crisis Amid Coronavirus Fears

February 28, 2020 by Leave a Comment

Oil producers are nervous since the break-even price for many wells in U.S. shale fields is about $45. So far, though, energy executives in West Texas report that they have made no major changes to drilling activities because of the coronavirus outbreak and its economic fallout. Officials also say they have experienced no disruptions in supplies of materials and equipment.

CBS said on Friday that the studio has shut down the 33rd season of the competition reality show “The Amazing Race” because of concerns over the spread of coronavirus.

The new season, which started production Feb. 22, had filmed three episodes in England and Scotland. When Italy, Austria and other parts of Europe started reporting cases of the virus, the producers decided to shut it down. No new start date has been determined.

“At this time, no racers or anyone on the production team traveling with them have contracted the virus, or shown symptoms, and we are not aware of anyone being exposed to it,” a CBS spokesman said in a statement.

The shutdown coincided with growing fears about international production and distribution in the entertainment business. Paramount Pictures’ “Mission Impossible VII” halted a planned three-week shoot in Venice earlier this week. The studio is already grappling with its inability to open its domestic hit “Sonic the Hedgehog” in China, after the country closed its theaters last month. The animated film was scheduled to open in the country on Friday.

Universal Pictures canceled its Asian press tour for the new James Bond movie, “No Time to Die,” but the film is still scheduled to open worldwide April 10.

Tim Cook, chief executive of Apple, sounded a more positive note than many.

“It feels to me that China is getting the coronavirus under control. You look at the numbers coming down day by day by day, so I’m very optimistic there,” he told Fox Business on Thursday.

Article source: https://www.nytimes.com/2020/02/28/business/stock-market-today-coronavirus.html

Filed Under: Economy News

In Rare Statement, Fed Chair Keeps Rate Cut on Table as Virus Risks Roil Markets

February 28, 2020 by Leave a Comment

“An emergency cut by the Fed prior to the meeting is possible — it will depend on the extent of market dysfunction,” they wrote.

The stock market trimmed its losses after Mr. Powell’s statement was released at 2:30 p.m., but remained in significantly negative territory.

“The statement is a step in the right direction, but it stops short of what is needed, which I think is a statement that says that the Fed can act preemptively to support the economy,” said Roberto Perli, an economist at Cornerstone Macro. “It’s missing a sense of timing.”

Mr. Powell’s colleagues have expressed concern about the coronavirus, but several have also signaled that they were not ready to lower interest rates. James Bullard, the president of the Federal Reserve Bank of St. Louis, said during a speech in Florida earlier Friday that “we could cut rates if we got a global pandemic that actually develops with health effects that seem to be approaching the same level as seasonal influenza, but that doesn’t look like the baseline as of today.”

The statement by the Fed chair underlines that the most important member of the 17-person Federal Open Market Committee is closely focused on an unfolding public health concern.

Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland and a monetary policy voter this year, said in an interview on Thursday that the Fed should keep its options open. Ms. Mester, who is generally cautious about such moves, initially opposed the Fed’s decision last year to lower borrowing costs three times.

“We always have to come in with open minds about what’s going on with the economy, and every day we’re getting new information, especially with something that’s fast-moving, like this,” Ms. Mester said when asked whether a cut next month was possible.

Article source: https://www.nytimes.com/2020/02/28/business/economy/federal-reserve-says-ready-to-act.html

Filed Under: Economy News

Lizzo Sued Back by Songwriters Over ‘Truth Hurts’

February 28, 2020 by Leave a Comment

The Raisens had raised many of their major arguments last year, on social media and in an interview with The New York Times, in which they described that songwriting session, from April 2017 — about five months before “Truth Hurts” was released. They posted audio clips comparing “Truth Hurts” with the original track they wrote with her, which was called “Healthy.”

But their countersuit, filed in Federal District Court in Los Angeles, has far more detail, including excerpts from what it says are Justin Raisen’s text exchanges with Lizzo and with her primary producer, Ricky Reed. According to screenshots submitted in the complaint, Reed reached out to Raisen when the song went to No. 1; seeming sympathetic to the Raisens’ claims, Reed said he wanted their dispute “resolved.”

A representative for Lizzo declined to comment. But in her suit last fall, she portrayed the Raisens and Yves Rothman, another writer who said he was denied credit on “Truth Hurts,” as having only “come out of the woodwork” once the song became a hit. “The men who now claim a piece of Truth Hurts,” she said on social media at the time, “did not help me write any part of the song.”

The case drew wide attention not only because it challenged the authorship of a smash hit — “Truth Hurts” was No. 1 for a total of seven weeks last year — but because it shined a light on the tense negotiations that often go on behind the scenes among artists, producers and writers to divide credit and royalties. Writers and their advocates often argue that while pop artists have many opportunities to exploit their fame, songwriters’ livelihood is almost entirely dependent on the percentages, or “splits,” that they get from contributing to hit songs.

Among the lawyers representing the Raisens is Lawrence Y. Iser, a noted copyright attorney who in 2010 represented David Byrne in a lawsuit against Charlie Crist, the governor of Florida, who had used a Talking Heads song without permission in a Senate campaign ad.

Article source: https://www.nytimes.com/2020/02/28/arts/music/lizzo-truth-hurts-lawsuit.html

Filed Under: Media Business

The Flaw in Warren Buffett’s Estate Plan

February 28, 2020 by Leave a Comment

Mr. Buffett wrote in the letter that keeping such a concentrated position of stock was not in accordance with prudent trust management and could open up trustees to litigation from beneficiaries who received less money than they expected. Berkshire Hathaway’s stock could conceivably tumble in the 12 to 15 years he expects it will take to distribute his billions to charity.

This acknowledgment might seem enough to absolve the trustees, but such directives have not always protected trustees from litigation over the management of the assets. Once a trust is funded, those trustees are managing and distributing that money for an entity that is separate from Mr. Buffett or any other person who created the trust. They are responsible to the beneficiaries, be they charities or individuals, who are expecting to get distributions that do not decrease.

“Whenever there’s money involved, people are likely to sue,” Ms. Klein said. “With individuals, there’s no more where that came from. And attorneys general are vigilant overseers of charitable funds. The best advice is: Be vigilant about performing your fiduciary duty.”

If the person setting up the trust is determined to make it restrictive, advisers recommend setting up a directed trust, which splits up the roles of trustees and gives some the right to direct actions of others. These trusts have existed for a century in Delaware, and other states have adopted them more recently, including Nebraska, where Mr. Buffett lives.

“When you look at directed trusts, it’s very clear under the statute that, with what you can give to the adviser, they’ll be off the hook,” said John D. Dadakis, a partner at Holland Knight. “In a jurisdiction like Delaware, you can say, ‘Hey, this was the guy who created Berkshire Hathaway.’ Unless you saw malfeasance at the company level, can you really say he was wrong about what he did?”

There are ways to undo what people have written into their trust documents, but they generally involve going to court for guidance. But sometimes, the documents are not as tied up as they seem.

“It may be rigid on its face, but there could be flexible provisions written in,” said Kevin Matz, a partner at Stroock Stroock Lavan. One strategy is decanting, in which the assets of an existing trust are poured into a new one. Another is looking for provisions that allow the assets to be distributed to other beneficiaries, who can then put them in their own trusts.

Article source: https://www.nytimes.com/2020/02/28/your-money/warren-buffett-estate-planning.html

Filed Under: Your Money

Britain bought a record amount of Russian gold last year, spending over $5 BILLION

February 28, 2020 by Leave a Comment

According to customs data seen by RBC business news outlet, gold exports to Britain have grown more than 12 times in terms of value, to $5.33 billion.

Supplies to the UK accounted for 93 percent of all Russian gold exports. Twelve other countries, including Kazakhstan and Switzerland, bought only $409 million-worth of Russian gold.

Also on rt.com Russia keeps stockpiling gold as bullion prices continue to surge

In physical terms, gold exports from Russia to the United Kingdom in 2019 increased 11 times, from 10.4 tons to 113.5 tons.

Almost the entire volume of deliveries to the UK is gold bullion. Taking into the account the London standard (an ingot weighing about 12.5 kg), it turns out that Russia delivered at least 9,000 ingots to the UK last year.

In addition to gold, Russia also increased the export of platinum (doubled to $936 million) and silver (2.5 times, to $100 million) to the UK.

Experts say that, in general, the scale of gold inflows to the United Kingdom most likely reflects global trends in demand for the precious metal and the country’s traditional role as a center for its trade and storage.

Also on rt.com UK wants to ease trade restrictions on some Russian imports

According to Oleg Shibanov, a professor of finance at the New Economic School in Russia, there was certainly a Brexit factor which could affect British investors, along with “many other uncertainties,” such as the US-China trade war.

Russia has continued filling its coffers with gold, having added almost seven tons of the precious metal to its reserves in January. The country’s total gold holdings amounted to 73.2 million troy ounces (2,276.8 tons) as of February 1, and are worth around $116 billion, according to the latest data from the Central Bank of Russia.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/481903-russia-uk-gold-sales/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Stock markets on edge amid fears of coronavirus turning into global pandemic

February 28, 2020 by Leave a Comment

Stocks in Asia, the continent with the highest number of confirmed cases globally, have all tumbled, as investors were scrambling for safety in recent days.

Both China’s Shenzhen composite and Shenzhen component dropped nearly 5 percent each on Friday. Hong Kong’s Hang Seng index fell more than 2.5 percent.

Also on rt.com BIGGEST DROP IN HISTORY: Dow plummets by record 1,190 points as coronavirus panic week drags on

Japanese stocks also saw major declines, with the Nikkei 225 plunging almost four percent to 21,142.96 and the Topix index also down around four percent to 1,510.87.

South Korea’s Kospi slid 3.3 percent to 1,987.01, while the SP/ASX 200 in Australia fell 3.25 percent to close at 6,441.20.

In Thailand, the market has even fallen more than 20 percent from its 52-week high into bear market territory.

Overall, the MSCI Asia ex-Japan index dropped 2.71 percent.

In Europe, markets immediately plunged at the trading opening on Friday.

The pan-European Stoxx 600, which tracks shares across the continent, pummeled about 2.7 percent. The FTSE 100 also took a dive, falling around 3.3 percent, with similar drops on the top Italian and Spanish indices. German DAX was down almost four percent, while French CAC fell 2.7 percent.

Also on rt.com Worst week since ‘08 crisis: Indian stocks tumble as coronavirus fears grip global markets, plunging Sensex by nearly 1,300 points

US stocks are expected to open sharply lower on Friday after the biggest single-day drop during the previous day’s trading, when the Dow Jones Industrial Average fell 1,190 points.

“I think what’s happening right now is the concern for investors is that they believe that this epidemic is probably, you know, getting to a stage where it could become a global pandemic,” Chetan Seth, Asia Pacific equity strategist at Nomura, told CNBC on Friday.

New cases of the novel coronavirus continued to surge outside of China, which on Friday announced 327 new cases and 44 deaths. South Korea reported 256 more confirmed cases of the novel coronavirus on Friday morning, bringing the national total to 2022.

Countries from New Zealand to Belarus confirmed their first cases, among almost 50 nations now afflicted. Infections have soared in Europe and the Middle East, while the first known case in sub-Saharan Africa was confirmed in Nigeria.

In the US, California Governor Gavin Newsom announced the state is monitoring 8,400 people for coronavirus after the first US infection case of unknown origin was confirmed.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/481881-global-markets-fall-coronavirus/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business
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