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Get up to date on what's moving global markets this morning.
(Bloomberg) --
Italy’s death toll from the coronavirus surpasses China’s. U.S. President Trump again hints that China is at fault for bringing about the global outbreak. Distressed debt in the U.S. doubles in just two weeks. Oil analysts warn that crude prices could slide below $20 a barrel. Here are some of the things people in markets are talking about today.
President Donald Trump again suggested China is responsible for the global coronavirus outbreak, complaining at a news conference that the disease “could have been stopped” before it spread globally. “It could have been stopped right where it came from—China—if we would have known about it,” he said at a White House news conference on Thursday. “But now the whole world, almost, is inflicted with this horrible virus.” As he opened his news conference, Trump again called the disease the “Chinese virus,” a term that officials in Beijing have said is offensive. In prepared notes for the news conference, Trump crossed out “corona” in the word “coronavirus” and wrote “Chinese” above it in black marker, according to a photo posted on Twitter by a Washington Post photographer. Meanwhile, as Italy’s coronavirus death toll surpassed China’s, the U.S. issued its highest warning to Americans not to travel abroad, and Australia and New Zealand closed their borders to non-residents. Britain’s government denied it plans to confine Londoners to their homes and ban them from leaving the capital. And bad news for film buffs: the Cannes Film Festival was postponed. Cases around the world surpassed 231,000, and deaths are inching closer to 10,000.
Almost half of China’s listed consumer companies don’t have enough cash to survive another six months, underscoring the urgent task Beijing has to re-start its economy and get shoppers spending again. Restaurants are in the worst shape as the coronavirus outbreak has kept consumers at home, with about 60% unable to cover labor and rental costs, according to data compiled by Bloomberg and company reports covering 50 listed firms. Among jewelry and apparel companies, almost half don’t have the cash to last the six months unless demand rebounds sharply, the data show. Demand looks unlikely to rebound quickly as consumers remain hesitant to leave their houses after weeks of government warnings about the dangers of mingling with others. China is also now on guard for a second wave of infections, in part from people traveling back to the country from other affected areas.
Stocks in Asia look set to rise modestly after a topsy-turvy session for U.S. equities ended with the S&P 500 higher, as investors assess the extent to which a wave of policy actions can stave off the worst of an economic downturn. Futures were higher in Australia and Hong Kong, with Japan markets shut Friday for a holiday. Amid the U.S. gains earlier, the Nasdaq Composite Index led the rally, with bargain hunters snapping up tech shares. Tesla Inc., Twitter Inc. and Netflix Inc. all rose at least 5%. The dollar continued its charge higher as the recent dash for cash showed little sign of easing, while Treasury yields dipped. Crude surged the most on record as Middle East producers began to show signs of strain and Trump said he would get involved in the oil-price stand-off at the “appropriate time.”
SoftBank is seeking to raise billions so its first Vision Fund can support portfolio companies battered amid the coronavirus pandemic. How much? $10 billion. The company is in talks with outside investors to provide $5 billion, which will then be matched by a $5 billion contribution from the Japanese conglomerate, said people familiar with the matter who requested anonymity because the talks are private. To be sure, SoftBank may be unable to secure sufficient commitments from investors, in part because Middle Eastern sovereign wealth funds have been rocked by the steep decline in the price of oil. The Vision Fund — which counts Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. as its biggest backers — had spent $80.5 billion of its $98.6 billion total as of Dec. 31, according to filings. The fund plans to reserve some of the remaining cash to pay back a coupon attached to the Saudi investment, said some of the people, and the new capital would be used to support struggling portfolio companies and to fund opportunistic acquisitions of smaller rivals whose valuations have also been battered, some of the people said. Some of the fund’s largest investments have taken a hit, like Uber and other food delivery services.
In less than two weeks, the amount of distressed debt in the U.S. alone has doubled to a half-trillion dollars as the collapse of oil prices and the fallout from the coronavirus shutters entire industries. In all, U.S. corporate bonds that yield at least 10 percentage points above Treasuries, as well as loans that trade for less than 80 cents on the dollar, have swelled to $533 billion, data compiled by Bloomberg show, up from $214 billion on March 6. Going global, the distressed pile could top $1 trillion, estimates from UBS Group AG show. “We could see this be worse than 2008,” said Philip Brendel, a senior distressed credit analyst at Bloomberg Intelligence. Why should we care? Distressed debt is a term used to describe the borrowings of companies that are perceived to be under acute financial pressure and often suggests that there’s considerable risk those borrowers will default on their obligations. As a global recession looms, there’s a good chance that more and more corporations could end up in similarly dire straits.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- How one street shows Hong Kong’s deep-seated economic pain.
- A coronavirus explosion was expected in Japan. Where is it?
- Structured products sold in Korea could roil global markets.
- Distaste for stocks is so high, even the bears are starting to run.
- Credit is the scariest market to watch, not the Dow or S&P.
- Japan could face year-long slump if the ‘cursed’ Olympic Games are cancelled.
- Alibaba pitches a diagnostic tool to Europe in an outreach move from China.
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