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Global stocks tumble after dire warnings on virus toll

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A new quarter brought a fresh jolt of volatility to global equity markets on Wednesday, with Wall Street opening down as the coronavirus crisis worsened in the US and pressure on economies around the world mounted. 

The S&P 500 fell 3.7 per cent as trading began, with banks and technology stocks particularly hard hit. The Nasdaq Composite declined 3.1 per cent. 

London’s FTSE 100 dropped 3.7 per cent while Frankfurt’s Dax and Paris’s CAC 40 were down roughly 4 per cent. The Europe Stoxx 600 fell 3.2 per cent.

The new leg down for global equities, which followed the worst quarter for markets since the 2008 financial crisis, came after President Donald Trump warned that up to 240,000 people could die in the US from Covid-19.

Italy and Spain, the two worst-hit countries in Europe, have shown some signs of improvement in recent days, as the centre of the coronavirus crisis quickly shifts to the US. 

“Europe seems to have reached, if not [passed], the peak in new infections,” said Marco Wagner, economist at Commerzbank. “In the US, on the other hand, the situation is becoming more acute. A flattening of the infection curve is still not apparent.” 

On Tuesday, Mr Trump warned Americans of a “very, very painful two weeks” ahead while Anthony Fauci, a top government health official, said people should be prepared for high fatalities.

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The world’s biggest economy, like many others, has already shown severe signs of strain from the lockdowns prompted by the pandemic, with the number of people seeking unemployment benefits shooting late last month to a historic high of 3m. 

In a sign of the heavy blow faced by investors globally, the UK’s biggest banks announced after the close of trading on Tuesday that they would scrap billions of pounds worth of dividends under pressure from the country’s top financial regulator. 

Bank shares dropped on Wednesday, with HSBC down about 9 per cent, and Barclays, Lloyds Banking Group and Royal Bank of Scotland falling about 5 per cent. US banks tracked their European counterparts lower, with broader KBW bank index, one of the most widely tracked measures of the performance of the US banking sector, down 6 per cent. 

Business executives in the eurozone, Japan and South Korea reported a marked deterioration in the factory sector in March compared with February, according to purchasing managers’ indices that are closely watched by investors as leading economic indicators. 

Robert Carnell, Asia-Pacific head of research at ING, said Wednesday’s Asia PMI readings confirmed a “grim picture” for manufacturers. He added that “the prospect for most economies’ manufacturing sectors as they head into the second quarter is for even more weakness, exacerbated where lockdown measures are newly enacted or tightened”. 

Most Asian markets were lower, with Japan’s Topix down 3.7 per cent and South Korea’s Kospi off 3.9 per cent. China’s CSI 300 slipped 0.3 per cent.

The Institute for Supply Management is also set to publish its latest reading on the US factory sector, which is considered to be one of the best forward-looking proxies for the rate of change in US gross domestic product. Economists polled by Reuters expect the ISM gauge to sink to 45 in March from 50.1 the previous month. A reading below 50 points to a contraction in the sector. 

Global equities had rallied over the last week amid quarter-end portfolio rebalancing, and as investors pinned their hopes on huge stimulus efforts by policymakers and the eventual slowing of the spread of Covid-19.

The yield on 10-year US Treasuries, viewed as a haven during times of market uncertainty, slipped 0.09 percentage points to 0.611 per cent. Yields fall as bond prices rise.

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Pattie Lovett-Reid: Financial silver linings amid COVID-19

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TORONTO —
We are likely going to mourn our pre-COVID-19 financial life.

Pre-COVID-19 we were financially carefree and driven in part by FOMO — fear of missing out.

We rushed into the real estate market for fear prices were going to continue to climb and price us out of our dream of homeownership forever.

We looked to social media platforms for influencers to focus us on the next must-haves in everything from design to fitness, with an emphasis on the-more-you-spend-the-better-the-end-product. In many cases it was an unfulfilled promise to a better life. Didn’t matter, we bought into the belief anyway.

Financially, life seemed so easy and even carefree prior to the pandemic. Even if meant trying to keep up with the Joneses meant your debt level was as high or higher than theirs.

Interest rates were so low, borrowing to expand your business, or your lifestyle was the norm and not the exception. The debt trap was sustainable until a wildcard hit. In this case, a wildcard in the form of a pandemic. A pandemic that now threatens us on a personal financial level.

Our focus has been on health. As it should be. However, as the virus, we hope, is starting to level out, the shift to economics has to become front and centre as big money decisions have had to be made.

It is clear to me a health crisis is rapidly becoming a deep economic crisis for many.

Families are desperately looking to shore up their balance sheets. For now many financially struggling are being supported by government benefits, but as mass layoffs continue to happen, a natural question is emerging, what is going to happen to us?

A tough but honest question. Canadians are coming to the realization the economic ground has shifted and not in their favour.

We are at an important turning point and we need to confront our brutal financial facts but it is also important to look to a better future. I’m an optimist. I believe we will get through this together but it is going to be a longer journey than we hoped.

I also believe there will be a new norm or a post-COVID- 19 financial life. We will act and do things differently. New innovation will happen, new technology will emerge, especially as we work from home and learn to not only adapt but in some cases embrace it.

As well, in an interesting turn of events, there are financial silver linings emerging:

I get it, it is very tough right now and there is not a lot of clarity. However, sometimes the only way through a difficult situation is to work your way through it slowly, fiercely and one step at time. Believing that small changes and a few silver linings can lead to big results for when better times return. And I do believe they will return.

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    1. After being in a retail deep freeze for weeks we now clearly see we can get by with a lot less. Spending doesn’t bring us happiness. Relationships and life experiences do.
    2. We have a far better appreciation for what we need and what we want. There is no confusion defining the difference between a “want and “need”. Gone are the days of mindless spending.
    3. Cash is king.
    4. Having a emergency fund was once consider a luxury. It is now recognized as necessity
    5. If you have a job you are working hard to keep your job. Nothing is taken for granted in today’s employment landscape.
    6. Saving even just a little is far more satisfying than mindless spending will ever be.
    7. We are eating out less, doing home repairs more and discovering strengths and passions by way of hobbies we never knew we had.
    8. We appreciate the need to buy Canadian, buy local and buy quality.
    9. Health is the new wealth and sustainability from process, product, to personal protection are front and centre.
    10. Relationships matter. Canadians are making an effort to be social while physical distancing. We need it and we want it. New opportunities to embrace this new norm will emerge.

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Sexist and racist chats spike among home-bound traders

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City bosses have seen a spike in sexist, discriminatory and unlawful behaviour since thousands of finance workers started working from home due to the ongoing coronavirus pandemic. 

Surveillance companies that help banks, funds, private-equity and trading firms track employee behaviour, told Financial News that firms have seen a rise in misconduct amongst remote-working staff. 

The reports of misbehaviour come as regulators brace for more market abuse cases as the virus exposes gaps in systems suddenly tasked with tracking thousands of employees scattered throughout London. 

Behavioural analytics firm Behavox, which is backed by Softbank Vision Fund 2, said its clients saw an 18% increase in alerts generated by the platform to flag dodgy behaviour when their staff began homeworking in March compared to the month before.

“They could comfortably be sitting in their bedroom or in their home office and be chatting away with their colleagues without being noticed,” Behavox’s chief executive Erkin Adylov said.

“[This] is encouraging these cliques or these kind of buddy networks, where people are frivolously using sexist, racist and discriminatory language that wasn’t there before.”

The financial services industry – among the world’s most heavily regulated – has long used surveillance software to track employee phone calls, texts, trading activity and behaviour. Such technology is now taking on a new prominence as compliance workers battle to keep up with worker communication from afar.

SteelEye, a data analytics firm that has 55 clients in the finance sector, said firms using its surveillance software had seen a spike in “language that could be deemed as harassment” or “completely inappropriate for a professional environment”, according to its chief executive Matt Smith. 

SteelEye clients also saw a “massive increase” in alerts flagging possible insider dealing and market abuse in the first few weeks of the lockdown, said Smith.

The CEO of a third surveillance software provider, who spoke on the condition on anonymity, said that weeks into the crisis the “psychological impact of the Covid lockdown was now starting to take effect” and the “stresses of a prolonged period of homeworking could bring out the worst in people”. 

Firms like SteelEye and Behavox can’t access information within client surveillance systems, people with knowledge say, but clients can share examples of behaviour picked up by their software.

Mark Steward, the Financial Conduct Authority’s executive director of enforcement and market oversight, told Financial News in April that the regulator was bracing for an uptick in market abuse cases in the wake of the pandemic. 

The FCA said in a 27 May note that it was aware of a “surge in the number of surveillance alerts in a number of markets” in recent weeks. 

The note warned financial services firms to ensure they were maintaining “robust market surveillance” to catch out would-be miscreants in light of “changes in market conditions and the current use of alternative working arrangements” during the Covid-19 lockdown. 

Working under lockdown, SteelEye’s Smith said had increased “the ability for people to do nefarious things if they want to do nefarious things”.

He also warned that finance workers tracked by the firm’s systems have been frequently switching work communication to channels not tracked by their company surveillance systems. That’s “always a red flag” for compliance teams seeking out signs of wrongdoing, he said.   

The Behavox system had flagged an attempted intellectual property theft at one of its investment firm clients in early May, Adylov said. “A person was trying to steal proprietary data relating to a deal that was going on live … The [Behavox] system found out and caught this person in the act of trying to take proprietary information away from the client. And it escalated this to the compliance team, which then decided to act on it.”

Adylov added: “Typically these types of events are very rare, but what we’re seeing is that these rare events are becoming more frequent in the work from home environment.”

“I think … they [finance workers] are probably assuming that compliance teams are just asleep at the wheel or are probably firefighting somewhere else.”

Financial services firms may decide moving their staff back into the office is the only way to stamp out misbehaviour, other experts have warned. 

Paul Tombleson, a partner in KPMG’s forensics team and head of its trader surveillance practice, said most banks will want to move traders back to a “secure physical environment relatively quickly”. 

“It’s very difficult to replicate the controlled environment you have in place on a trading floor from home,” he said. “When you take a trader out of the trading floor, and you put them in their home … there is nothing you can do to put a hard control in place.” 

“You can’t have a supervisor sitting next to them.”

To contact the author of this story with feedback or news, email Lucy McNulty

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Encouraging vaccine news, signs of financial support drive gains for U.S. stocks – News – Sault Ste. Marie Evening News – Sault Ste. Marie, MI

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U.S. stocks closed out another big month of gains last week, with the Dow Jones Industrial Average passing 25,000 and the S&P 500 breaching 3,000 for the first time in more than two months.

Stocks got off to a hot start to the week due to more encouraging news on the COVID-19 vaccine front. On Tuesday, Novavax announced it is beginning Phase I clinical trials of its coronavirus vaccine candidate. Pharmaceutical giant Merck also announced last week it will begin work on a vaccine, and Moderna reported positive data for its early-stage vaccine candidate earlier this month.

Investors were also encouraged by further signs of economic support from governments and central banks around the world. The European Commission announced a new economic stimulus package worth about $825 billion last week, while U.S. Senate Majority Leader Mitch McConnell said Congress will “probably” need to pass additional economic relief measures as well.

U.S.-listed Chinese stocks experienced volatile trading as geopolitical tensions between the U.S. and China once again heated up. The Senate has passed a new bill that threatens to delist Chinese stocks from U.S. exchanges if they do not comply with more rigorous financial oversight requirements.

China’s National People’s Congress has also approved a controversial new national security bill that would decrease the autonomy of the so-called Chinese special administrative region of Hong Kong.

“As soon as we get out of the COVID-19 thing, China will be a huge driver of volatility for markets,” said Shawn Cruz, manager of trader strategy at TD Ameritrade. “If you think about how deep those supply chain relationships are … if China decides to make things more difficult for us they can do it. It’s a known-unknown, and I think that’s why it drives so much volatility in markets.”

President Donald Trump signed an executive order targeting social media companies on Thursday after Twitter added fact-checking links to some of Trump’s tweets. Twitter CEO Jack Dorsey said he stands by the company’s decision, while Facebook CEO Mark Zuckerberg said he does not believe social media companies should fact-check politicians.

Earnings In Focus

Shares of Dollar Tree and Toll Brothers both gained more than 15% last week after impressive earnings reports.

This week, earnings season continues to wind down with reports from Dick’s Sporting Goods on Tuesday, Campbell Soup on Wednesday, and Gap and JM Smucker on Thursday.

More than a third of all S&P 500 companies have withdrawn their full-year 2020 earnings guidance, according to FactSet.

Economic Numbers

Despite the strong stock market performance, investors will likely get an economic reality check this week when the European Central Bank makes its interest rate decision and monetary policy statement on Thursday and the U.S. Labor Department releases its monthly jobs report for May on Friday.

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