Business Maverick

Business Maverick

April 8: Five Things You Need to Know to Start Your Day

A Wall Street sign is displayed in front of New York Stock Exchange (NYSE) in New York, U.S., on Friday, March 13, 2020. President Donald Trump said House Democrats aren't giving enough in negotiations on legislation to help Americans deal with the spreading coronavirus outbreak, dashing hopes on both sides that a deal was imminent. Photographer: Mark Kauzlarich/Bloomberg

The UK and New York state reported their most deadly days since the outbreak. Goldman Sachs is seizing on the global rout by setting up a new fund worth up to $10-billion. And Chinese economists and officials are pondering what was once unimaginable: should Beijing slash its economic growth target, or abandon it altogether? Here are some of the things people in markets are talking about today. 

Virus Update

The U.K. and New York state reported their worst daily death tolls since the pandemic began even as several European nations said they planned to ease lockdowns, and Italy reported its fewest new infections since March 13. Still, parts of Europe are facing an imminent risk of critical medicine shortages. Meanwhile, China said it didn’t have any new deaths for the first time since the pandemic emerged in December, news that comes a day before the lockdown is lifted in Wuhan, where the pathogen was first detected in humans. And U.S. President Donald Trump blasted the World Health Organization, saying it was wrong to advise against travel restrictions, though he acquiesced to backlash around the world and eased a Covid-19 export ban on masks and other protective equipment. Elsewhere, U.K. Prime Minister Boris Johnson, who was moved to intensive care Monday, is in stable condition, and ministers in India have advised Prime Minister Narendra Modi to partially lift the lockdown. Also, after an initial reluctance, more countries around the world are embracing face masks. Global cases topped 1.39 million, and deaths exceeded 79,000. Here’s how Bloomberg is mapping the outbreak of the virus.

Markets Slide

Stocks in Asia looked set to halt a two-day rally after U.S. equities gave up strong gains and investors weighed signs of a slowing rate of coronavirus spread against more fatalities. The dollar sank. Futures were lower in Japan, Hong Kong and Australia. S&P 500 futures opened lower in Asia. The S&P 500 Index fell 0.2% after surging as much as 3.5% to briefly meet the technical definition of a bull market — a gain of 20% from its March low. Treasuries retreated and the yen ticked higher. Oil sank to the weakest level since the start of the month as investors weighed whether the world’s biggest producers will be able to strike a deal that cuts enough output to offset an unprecedented demand loss from the coronavirus outbreak.

Facing Reality

The coronavirus shock has influential Chinese economists and officials engaging in a previously unimaginable debate: should Beijing drastically reduce its economic growth target or even abandon it altogether? The goal for gross domestic product growth is usually announced at an annual gathering of the nation’s legislature in early March, guiding economic policy for the remainder of the year. That’s been delayed due to the virus lockdown and there’s still no date for the National People’s Congress, leaving economists and markets in the dark. An ambitious goal of somewhere around 6% would suggest a flood of stimulus will be deployed. A more realistic number in line with private analysts’ forecasts of around 3% would signal a continuation of the current targeted support measures. Here’s a rundown of the likely outcomes. Meanwhile, even though economists are virtually certain China’s central bank won’t follow others in unleashing large-scale monetary stimulus any time soon, investors are betting on it anyway.

Seizing on the Rout

A sudden near shutdown of the economy has left distressed firms threatened for survival and even healthy companies in peril. It’s also sparked an opportunity unlike any seen in more than a decade, giving investors a wide range of financing options, with the prospect of promising gains when the world is up and running again. Goldman Sachs is looking to make the most of that silver lining as companies are desperate for cash to outlast the downturn. The Wall Street firm, which has the biggest investing platform among its peers, is looking to raise a fund of $5 billion to $10 billion. It will focus on channeling its cash into debt-like instruments that have a higher ranking in the capital structure and provide a bridge for companies to get past the economic uncertainty.

Bad Debt Bargain

Amid all China’s efforts to contain the economic damage of the coronavirus outbreak, a crucial development slipped by almost unnoticed — the creation of the first national bad-debt asset manager in 20 years. Galaxy Asset Management Co. won approval in mid-March to convert into ​a financial asset management firm, gaining a much-coveted license to buy bad loans directly from banks nationwide, and the ability to borrow at relatively low rates. The economic dislocation from Covid-19 threatens to add 5.6 trillion yuan ($790 billion) of bad debt — more than double the amount Chinese banks already sit on — according to S&P Global Inc. Galaxy Asset is the first stated-owned bad-debt manager set up since the creation of the so-called big four in 1999 to help clean up a mountain of soured loans at the nation’s biggest banks.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours.

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