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Our briefing for Thursday, December 2, 2021:
Dec 2, 2021 4:23:53 PM
- The United States will now require that anyone entering the country by air to provide a negative Covid-19 test no later than a day before they cross the border. The new regulations will come into place early next week after the Biden administration made changes to current 72-hour testing window. The changes were put in place as a reaction to the new omicron variant that has countries across the globe anxious about reviewing their border policies. The United States made no mention of changes to land border crossings at a White House briefing on Wednesday, or if fully vaccinated travelers will be required to show proof of a negative test before entering the country. Currently, Canada has exempted U.S. nationals from stringent rules facing other travelers entering from abroad, it is unclear whether those regulations will change next week when the U.S. rules come into place.
- On Wednesday, Pfizer Inc. officially started the real-time process of getting their anti-viral pill, currently named PF-07321332, approved for use in Canada. The announcement comes after the Canadian government said earlier in the week that they are in advanced talks with Pfizer and Merck & Co Inc. to purchase large supplies of the anti-viral drugs. As of November 30, Canada has recorded 7 cases of the omicron mutation of the virus. In clinical trials, the Pfizer pill was shown to be 89 per cent effective in reducing the risk of hospitalization or death caused by the coronavirus. In early November, the U.S. Food and Drug Administration approved the Merck & Co pill in a 13-10 vote, despite concerns that it could cause birth defects in pregnant women. The FDA stressed that the drugs should be given only to those who will receive the most benefit.
- The United Kingdom has approved the use of a new antibody treatment used to treat people who are at high risk of developing more severe Covid-19 symptoms. The treatment, sotrovimab, currently under the brand name Xevudy, is said to also be effective against the new omicron variant, according to the manufacturer. The Medicines and Healthcare products Regulatory Agency (MHRA) on Thursday said that the treatment has been found to be effective in reducing the risk of hospitalization or death “in people with mild to moderate COVID-19 infection who are at an increased risk of developing severe disease.” The drug was found to reduce the risk of death for those with symptomatic Covid-19 by up to 79 per cent and following clinical review, can be administered within 5 days of the onset of symptoms. June Raine, chief executive of the MHRA was pleased to announce that there was “yet another therapeutic that has been shown to be effective at protecting those most vulnerable to COVID-19”.
- On Thursday, outgoing German chancellor Angela Merkel is expected to meet with the 16 regional premiers to approve new regulation that will impose lockdowns on the countries unvaccinated. According to a document drafted by Merkel’s office, the new regulations will no longer allow unvaccinated people to enter non-essential business, restaurants, and theaters. Nightclubs in the country will also close in high density areas where infection rates are skyrocketing. “The important thing is that this is virtually a lockdown for the unvaccinated,” said Health Minister Jens Spahn, “the more than 12 million adults who aren’t inoculated is what is creating a challenge for the health system.” Experts have warned that the number of people in intensive care could reach 6000 by Christmas, and that if new regulations are not imposed, that that number could be higher. The new legislation will also impose mandatory vaccines for those working in hospitals and special care homes.
- The Brazilian economy has entered a recession which could cause trouble for President Jair Bolsonaro as he mounts a re-election campaign. Inflation from pandemic recovery, extreme weather conditions and high interest rates are believed to be the causes of the recession. The national statistics agency said on Thursday that the gross domestic product fell 0.1 percent from July to September. The unemployment rate in the country currently stands at just over 12 per cent and inflation is at a 5 year high. Unlike similar countries, Latin America’s largest economy has seen next to no post-pandemic boom, despite lifting lockdown restrictions earlier this year. Chief economist at MB Associados, Sergio Vale, said that “the economy reached a high level in the second quarter and stopped there, and some sectors, such as agriculture, suffered a great deal.” The agriculture sector alone is down 8 per cent on the quarter due to droughts and frost. These factors have stunted the Brazilian economy’s growth and has put in it in a worse position than it was pre-pandemic.
Covid-19 – Due Diligence And Asset Management
Investors flee U.S. corporate junk debt on inflation, Omicron concerns
Brief: Worries over surging inflation and a new variant of the coronavirus are roiling the U.S. corporate junk bond market, though some believe the tumble could draw investors seeking higher yields. November marked the worst month since the start of the pandemic for the bonds of low-rated companies, with high-yield bonds notching an average return of minus 1.03%, the lowest since March 2020, according to Morningstar Direct data. Spreads, which indicate the yield premium investors demand to hold junk-rated debt over safer U.S. Treasuries, also widened the most since the beginning of the COVID-19 pandemic. Among the factors driving the moves were fears that higher inflation will force the Federal Reserve to normalize monetary policy faster than expected, as well as a rush away from comparatively risky assets on worries over the Omicron variant, analysts said. “With most managers sitting on healthy returns for the year, there’s a bit of de-risking as well,” said John McClain, portfolio manager at Brandywine Global Investment Management.
‘The pandemic has changed IR’: Thomas Kudsk Larsen on his move from AstraZeneca to small cap Sobi
Brief: 'For people doing IR, I think this pandemic has been so fundamental in terms of changing their daily lives,’ says Thomas Kudsk Larsen, talking to IR Magazine about why he made the move from pharma giant AstraZeneca – made a topic of household debate across the globe by the pandemic – for Swedish small-cap biopharma firm Sobi (short for Swedish Orphan Biovitrum) where he now serves as head of communication and investor relations. Part of the issue is the nature of investor relations itself. As such an outward-looking profession – where the job is really about talking to people, whether investors, management, other departments or external stakeholders – much of what Larsen says was important to him about the job has changed. Outside of the busy quarterly results periods, IR people are usually out and about having meetings, holding site visits or traveling to conferences and busy roadshows. Of course, all that stopped with Covid-19 and, although virtual stepped in, for people like Larsen who thrive from that personal contact, something vital had been lost. Many believe things won’t go back to the way they were either: four in five IROs believe the experience of Covid-19 will lead to a permanent change in roadshow activity, according to IR Magazine’s Global Roadshow Report 2021, with more than a third strongly believing we will not see a return to the pre-pandemic norm.
JPMorgan Says Buy the Dip as Omicron May Signal Pandemic Ending
Brief: The recent market turmoil caused by the emergence of the omicron virus strain may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. While it is likely that omicron is more transmissible, early reports suggest it may also be less deadly, which would fit into the pattern of virus evolution observed historically, strategists Marko Kolanovic and Bram Kaplan wrote in a note Wednesday. This might ultimately be a positive for risk markets because it could signal that the end of the pandemic is in sight, they said. “Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in Covid and lockdown beneficiaries and rally in reopening themes,” the strategists said. “We view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities and reopening themes, and to position for higher bond yields and steepening.” The emergence of the new virus strain has roiled markets in recent days, with countries around the world stepping up travel restrictions.
PE acquisitions stabilise after market turbulence, says Rickitt Mitchell
Brief: The number of acquisitions made by private equity-backed businesses across the UK shown signs of stabilising after a buoyant period, according to Rickitt Mitchell’s Buy and Build Barometer. The latest analysis from the corporate finance firm, conducted in partnership with Experian Market iQ, reveals 125 deals were completed in Q3 2021, down 25 per cent on the second quarter of the year. Bolt-on transactions had hit a record high in Q1 2021, with 196 completed at a value of GBP2.3 billion. In the regions, the South East (16), East of England and London (both 14) continue to be the best performing areas for dealmaking, while Yorkshire is outperforming the rest of the Northern regions with 11 transactions completed during Q3) – a record amount for the area. Figures from the Buy and Build Barometer suggest that deal values accumulated this year have also followed a similar trend, with Q3 figures decreasing by 75 per cent to GBP235 million from GBP943 million in Q2 2021. While the number of transactions completed reflects the same number of bolt-on deals as in Q2 2020, the value of the deals has retracted year-on-year by 25 per cent from GBP313 million.
Hedge fund titan Ray Dalio warns investors against trying to time the market as Omicron rocks stocks
Brief: Legendary investor Ray Dalio has warned people against trying to time the market as uncertainty about the Omicron coronavirus variant shakes stocks. Dalio told CNBC on Tuesday that the most important thing for investors is to be in a safe, well-balanced portfolio and to not try to be too smart. "You will not market-time this. Because even if you were a great market timer, the things that are happening can change the world, so it changes what should be priced into the markets," he told CNBC's Andrew Ross Sorkin. The discovery of a new coronavirus variant, which the World Health Organization has called Omicron, has triggered volatility in stocks after a placid period for the market. The US benchmark S&P 500 index dropped 1.9% Tuesday, after Moderna's CEO said existing vaccines were unlikely to be as effective against the new virus strain. Scientists are rushing to find out more about Omicron. In the meantime, investors have been left guessing about the possible economic impacts. Many analysts have recommended staying invested and said that the fundamentals of the US stock market still look sound.
