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Our briefing for Thursday, March 31, 2022:
Mar 31, 2022 4:14:24 PM
- The United States Senate is expected to vote early next week on a deal that is likely to secure $10 billion worth of Covid-19 relief funding. Democrats and Republicans are nearing a deal on a pandemic funding package that may now exclude money for the global vaccine effort that President Joe Biden has been trying to push through for most of his presidency. Republican Senate leader Mitch McConnell said the bill has been “skinnied down” from $15 billion to $10 billion as of Wednesday night. Senate Majority Leader Chuck Schumer expects the bill to be passed. “The gap has been narrowed greatly, and we’re intent on working with Republicans to cross the finish line because this is vital for our country if, God forbid, a new variant rises in the future, and that’s all too likely,” Schumer said. The agreement is a far cry from the $22 billion originally proposed by Biden earlier this month, and smaller still than the $15.6 billion that was scrapped from 2022 budget bill that would have seen money taken from a rescue package destined for state-level governments. The $5 billion intended for the global vaccine effort is likely to be dropped due to disagreements over where the money will come from. House Appropriations Chair Rosa DeLauro said the need for vaccines outside of the U.S. is still of great concern. “No amount of domestic preparedness can continue with an onslaught of new variants,” she said. Senator Roy Blunt, a Republican from Missouri has said that Congress is likely to propose another bill that will focus on Covid-19 aid outside the U.S. within two months.
- In Canada, the economy continued on its streak of monthly gains in February, leading to expectations that the central bank will begin a tightening cycle to curb soaring inflation. According to preliminary data from Statistics Canada, the gross domestic product rose 0.8 per cent last month for the ninth straight month in a row, with economy rising 0.2 per cent in January alone. From the start of 2022, the country was able to keep an upward trajectory despite lockdowns brough on by the Covid-19 pandemic and was able to keep a steady pace heading into February when most of the country’s restrictions were lifted. Canada is now projected to grow at an annualized rate of 0.4 percent in the first quarter, nearly doubling January predictions from the central bank. “Heading into the year, some slowdown in activity was expected due to the pandemic restrictions, but, unlike in past waves, that wasn’t the case,” said Benjamin Reitzes, head of Canadian rates and macro strategy at BMO Capital Markets. Led by Governor Tiff Macklem, the central bank began a tightening cycle with a 25-basis-point hike earlier this month and now economists at Bank of America and Citigroup are expecting a 50-basis-point hike at each of Macklem’s next three decisions.
- The number of patients in London hospitals testing positive for Covid-19 has reached a two-month high. As of Wednesday, 2,330 people were in hospital with the virus in the U.K. capital, which is the most since February 3. There are currently just over 100 patients requiring ventilators, down considerably from the peak in mid-January. Most cases of the virus are unknown when patients enter the hospital, with only 563 entering solely for Covid-related illnesses. A survey by the Office for National Statistics last week found that 3.4 million people in England had the virus in the week ending March 19, about 1 in every 16 people. Starting in April, people in the U.K. will no longer be provided with free PCR or lateral flow tests and will have to pay for testing out of pocket. However, based off of the most recent NHS data, deaths resulting from the virus still lag behind the number of people infected considerably.
- More than 16 million people will be confined to their houses in the second phase of Shanghai’s Covid-19 lockdown. Residents are being asked to even avoid those in their own household as the virus circulates throughout the city. Residents in the western part of the city, which contains about two thirds of Shanghai’s population will begin a three-day lockdown starting at 3 a.m. on Friday just two hours before the eastern part of the city will be coming off their own lockdown which began on Monday. Most parts of the eastern section of the city will regain public transport on Monday, with particularly hard-hit areas remaining suspended. Shanghai’s communist party chief Li Qiang said late Wednesday that the city will attempt to curb the spread of the virus by using “whole-region static management,” a phrase that has previously indicated the most stringent level of lockdowns in other parts of the country. In the northeastern province of Jilin, static management meant that residents were completely barred from leaving their homes, many of whom have complained they were unable to receive basic necessities like groceries and were without health care as several medical facilities were closed.
- India is witnessing a drop in Covid-19 cases as some states begin to do away with coronavirus restrictions. As the virus surges in other parts of Asia, on Thursday, the western state of Maharashtra announced it will lift all Covid-19 related restrictions on April 2 ahead of the Marathi New Year, a spring festival for Marathi and Konkani Hindus. Maharashtra was one the hardest hit areas of the country during the first and second waves of Covid-19, and although it will lift all restrictions, the government continues to advise the wearing of masks in public areas. The state is seeing roughly 100 new cases a day, and as of Monday, there was 963 cases across all 35 districts. In Delhi, the nation’s capital, authorities have decided to stop handing out fines for those not wearing masks in public, and only 113 new cases were reported. The city has gone multiple days this month without a death related to the virus and the country as a whole has seen cases drop dramatically over the last two months.
Covid-19 – Due Diligence And Asset Management
Anthony Scaramucci says he’s ‘not quite convinced’ on the recession signal the bond market flashed
Brief: A key signal of recession flashed in the bond market this week, but SkyBridge Capital’s Anthony Scaramucci told CNBC that he would be cautious on predicting there would be a downturn. On Monday, the U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006. On Tuesday, the yield spread between the 2-year and the 10-year rate came close to inverting but stayed positive. Historically, the yield curve has inverted prior to recessions, indicating investors’ concern about the health of the economy. “So historically it would signal that we’re heading into a recession 12 to 18 months from now, but I will be cautious on that data,” Scaramucci said on CNBC’s “Capital Connection” on Wednesday. When the bond market is healthy, yields are higher for bonds with a longer time to maturity, and lower for short-term yields. Investors expect a bigger reward for lending their money for a longer time. But when the opposite occurs — meaning an inverted yield curve — short-term bonds pay a higher yield than long-term ones. That represents a distortion in the market and suggests bond investors are worried about the economy’s long-term prospects.
Thiel-backed venture firm Mithril seeks to nominate candidates for Adagio's board
Brief: Mithril Capital Management, co-founded by Peter Thiel, intends to nominate candidates to the board of COVID-19 drug developer Adagio Therapeutics, according to a regulatory filing from the venture capital firm. Mithril Capital Management’s unit, Mithril II LP, owns a 10.1% stake in Adagio as of March 28 and has reached an agreement with some other shareholders to vote all of their respective shares in favor of the election of the nominees at the 2022 annual meeting. The battle for the board comes as the company announced on Wednesday plans to apply for U.S. emergency use authorization for its COVID-19 antibody, adintrevimab. Adagio’s shares jumped 54% to $5.94 before the bell. The company did not respond to a request for comment on Mithril’s filing.
U.K. Economy Grew More Than Expected as Omicron Raged
Brief: The U.K. economy grew stronger than expected at the end of last year, displaying resilience as the omicron variant of the coronavirus spread. Gross domestic product expanded 1.3% in the fourth quarter, the Office for National Statistics said Thursday. That’s more than the 1% figure previously reported. Service industries expanded more quickly than the ONS had previously estimated, and exports also enjoyed a bigger jump. The figures also showed the collapse in the economy at the height of the pandemic was not quite as bad as previously thought. In 2020, GDP shrank 9.3% rather than the 9.4% previously estimated. The rebound in 2021 was correspondingly shallower, with growth of 7.4%, down from the earlier estimate of 7.5%. That’s still the largest increase in GDP in a single year since World War II.
China’s Covid Lockdowns Strain Economy and Global Supply Chains
Brief: China’s Covid lockdowns are putting the economy under strain and threatening to disrupt global supply chains, prompting Beijing to call for more contingency plans to deal with the risks. Purchasing managers’ indexes for March showed lockdowns in the technology and trade center Shenzhen and automotive city Changchun cut factory activity in the month. Services have also been hit hard as restaurants and retail shops close because of renewed restrictions and tightened social distancing measures. Supply chain scares are intensifying as Shanghai -- home to the world’s largest container port -- battles mounting infections. Covid controls in the city are impacting operations and reducing efficiency at the port, while shipping giant AP Moller-Maersk has already shut some facilities in the city. “Beijing’s determination in maintaining its Zero Covid strategy for fighting the infectious omicron variant will very likely deal a severe blow to China’s economy and will also have a global impact,” economists at Nomura Holdings Inc. led by Lu Ting wrote in a note.
Air Canada to ramp up capacity this year, but won't yet reach pre-pandemic levels
Brief: Air Canada plans to more than double its capacity this year compared with 2021, but says that is still below its pre-pandemic level. In its outlook for this year the airline says its capacity, measured by available seat miles, for 2022 will be up about 150 per cent compared with last year. However, Air Canada says its capacity will still only be about 75 per cent of where it was in 2019 as it continues to account for passenger demand, public health guidelines and travel restrictions. The airline says it expects its adjusted cost per available seat mile for 2022 to increase about 13 to 15 per cent when compared with 2019. Looking further into the future, Air Canada says it expects its capacity for 2024 to be about 95 per cent of its 2019 level.
