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JP Morgan’s Dimon sees financial stress similar to the global financial crisis ahead

Jamie Dimon is chief executive officer of JPMorgan Chase & Co.

On the coronavirus pandemic:
  • “At a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008” 
  • More specifically for his firm, JPM earnings this year will be “down meaningfully”
  • 180,000, or about 70%, of the firm’s employees are working from home
  • JPM is paying around $1,000 to those whose jobs don’t allow them to work remotely
Adds:
  • people could return to work more quickly if governments made tests widely available
  • to determine who has recovered from the disease
  • “The country was not adequately prepared for this pandemic,”

Dimon is correct on the unpreparedness. Three months of denial from the very top of the US administration that there was even a problem has cause such a tragic escalation in the numbers of lives lost.

Here are the US companies who are hiring

This via Bloomberg, some hiring to offset the job losses elsewhere

Instacart 300,000
Walmart 150,000
Amazon 100,000
Dollar General 50,000
CVS 50,000
Albertsons 30,000
Pizza Hut 30,000
Dollar Tree 25,000
Papa John’s 20,000
7-Eleven 20,000
Dominos 10,000
Kroger 10,000
Walgreens 9,500

Pepsi 6,000
Service, delivery workers. There will be similar developments on other economies (scaled to the size of those economies of course).
These will not entirely offset the job losses ahead. Initial claims this week are seeing estimates, some of 3 million (BoA)

Oil services giant Halliburton rumoured lay offs (unpaid)

Halliburton is a huge supplier of products and services to the energy industry.

The firm has been hit by the intertwined coronavirus and oil price plunge
Chatter about is that the business is requiring mandatory furloughs for around3,500 employees
  • at its its North Belt campus in Houston
  • From 23 March
  • One-week on, one-week off roster for up to 60 days
  • Employees won’t be paid on their week off
  • Health care and benefits won’t be affected
Like I said, chatter at this stage.
This will be just one example of lay offs right across industry.

Oil ignores the Saudi-Russia war drums so far today

Oil sneaks back above $34, bounce of over 9% for today

WTI H1 10-03

Oil moved a little lower on the headline that Saudi Arabia would step up production to 12.3 mil bpd next month but buyers leaned on the near-term trendline support to keep a move towards the $34 level seen currently.
Since the headline, there have been a couple of Russia and Saudi Arabia remarks as well but so far oil is not faltering just yet. So far, the market mood has been relatively positive with US futures also seeing gains of over 4% today.
But with coronavirus fears still persistent and Saudi Arabia and Russia heading for a prolonged duel, it is going to be hard to see how oil can sustain any meaningful gains.
For today, look out for the overnight high @ $34.88 as that may provide a technical reprieve on a move higher in oil prices. But in the big picture, there’s only so long that oil can ignore the war drums before falling lower once again.

China refineries reportedly processing 25% less oil than they were last year

Bloomberg reports on the matter

The report highlights that Chinese refineries are cutting back on output even further to cope with weak demand and a lack of workers due to the coronavirus outbreak.

Throughput is now reported to be 25% below the average in 2H 2019 and the low run rates are expected to last through February at the very least. The run rates have fallen to just about 10 mil bpd this week – the lowest since 2014.

China oil
That certainly won’t give oil bulls much encouragement and this is another warning sign to overseas oil suppliers to China surely.
This headline alone may not be one that impacts the market too heavily but just note that all of these things add up when you weigh up the potential impact of that the coronavirus outbreak is having on the global economy.

UK PM Boris Johnson speaks with China President Xi – says “I love China” (or did he?)

Chinese state media reports that BJ proclaimed his love for China in his phone call with Xi, which came just days after US President Trump threatened BJ over Huawei

You’ll recall the UK is OK with granting sensitive contracts to Huawei despite Trump’s opposition.
On the love, South China Morning Post says:
  • Johnson displayed a cosiness with Beijing that contrasts with his hardline approach to the European Union amid Brexit trade talks.
(SCMP link is here for more)
More:
“Britain welcomes investment from Chinese companies,” Johnson told Xi, according to Chinese state broadcaster CCTV. “We would like to strengthen our cooperation with China under the Belt and Road Initiative.”
Putin, Trump, Xi, Johnson.
Sheesh.
Keeping track of who owns who is getting complicated.
Chinese state media reports that BJ proclaimed his love for China in his phone call with Xi, which came just days after US President Trump threatened BJ over Huawei

Jeff Bezos announces $10 billion ‘earth fund’

Amazon founder on his plan to fight climate change

Jeff Bezos announced this on his instagram account:
Today, I’m thrilled to announce I am launching the Bezos Earth Fund.⁣⁣⁣
⁣⁣⁣
Climate change is the biggest threat to our planet. I want to work alongside others both to amplify known ways and to explore new ways of fighting the devastating impact of climate change on this planet we all share. This global initiative will fund scientists, activists, NGOs – any effort that offers a real possibility to help preserve and protect the natural world. We can save Earth. It’s going to take collective action from big companies, small companies, nation states, global organizations, and individuals. ⁣⁣⁣
⁣⁣⁣
I’m committing $10 billion to start and will begin issuing grants this summer. Earth is the one thing we all have in common – let’s protect it, together.⁣⁣⁣
That’s a big chunk of money for the world’s richest man, but still only a dent in his $130.5B estimated net worth.

Apple says it doesn’t expect to meet revenue guidance this quarter- Full Report

Apple issues update

Apple says they now expect a slower return to normal conditions in China with demand curbed within the country.
Here is the statement:
Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10. Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.
The first is that worldwide iPhone supply will be temporarily constrained. While our iPhone manufacturing partner sites are located outside the Hubei province – and while all of these facilities have reopened – they are ramping up more slowly than we had anticipated. The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues. These iPhone supply shortages will temporarily affect revenues worldwide.
The second is that demand for our products within China has been affected. All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout.
Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations.The situation is evolving, and we will provide more information during our next earnings call in April. Apple is fundamentally strong, and this disruption to our business is only temporary.
Our first priority – now and always – is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency.
How can three things all be your ‘first priority’? Judging by all the Foxcon reports, it’s tough to make the argument that health and safety is exactly the priority.

US weighs new move to limit China’s access to chip technology – report

US continues to target Huawei with proposed changes to restrict its use of chip-making equipment from the US

US China

The WSJ reports that the US is weighing new trade restrictions against China to cut off Huawei access to key semiconductor technology, citing people familiar with the plan.

It is reported that the Commerce Department is drafting changes to the foreign direct product rule, to make it so that chip factories overseas would need licenses if they intend to use American equipment to produce chips for Huawei. The full report can be found here.
That will be quite the change if it goes through as I reckon it won’t only add to more tensions between the US and China but also lead to further supply chain disruption in the industry as there will be a chunk of companies who will be restricted to do business.
But this once again goes to show that any real conciliation between the US and China on trade and other matters is still far away. The fact that the US wants to cut China off one of its key imports goes to show that these two are still clearly “at war”.

S&P says coronavirus outbreak will cut 0.5% from Australia’s real GDP growth in 2020

The ratings agency a bit downbeat on Australia’s GDP, but on the bright side:

  • S&P says economic impact of coronavirus unlikely to negatively affect Australia’s sovereign rating
  • says short, temporary delay in balancing government budget unlikely to strain Australia’s creditworthiness