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Stocks Climb as Wall Street Weighs U.S. Rescue Deal: Live Updates

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If you want to shut down an economy to fight a pandemic without driving millions of people and businesses into bankruptcy, you need the government to cut some checks. The coronavirus response deal that congressional leaders struck early Wednesday will get a lot of checks in the mail, but they’ll soothe only a few months of financial pain.

The legislation, which is expected to be enacted within days, is the biggest fiscal stimulus package in modern American history, and more than double the size of the roughly $800 billion stimulus package that Congress passed in 2009 to ease the Great Recession.

Among the items in the bill are:

  • $350 billion in loans for small businesses to help bridge their expenses for up to 10 weeks. Firms would not need to repay up to eight weeks of the loans if they refrain from laying off employees, or move by June to rehire employees they have already laid off. Supporters of the measure say those loans, if rapidly deployed, could help thousands of firms survive, at least temporarily.

  • $500 billion in aid to airlines and other large corporations that have been hurt by a cratering of consumer demand amid the crisis. Much of the money would be used to backstop loans and other assistance that the Federal Reserve said it plans to extend to companies.

  • A $1,200 payment for each adult — and $500 per child — in households that earn up to $75,000 per year for individuals or $150,000 for couples. The assistance phases out for people who earn more.

Economists hailed the emerging agreement as a good start — one that works on multiple fronts to keep money flowing through the parts of the economy that have been suddenly rendered inactive. But some warned that it may not actually be large enough, given the enormous economic challenge the United States faces today.

“Much of the small business community is facing an extinction-level event,” said John Lettieri, the chief of the Economic Innovation Group think tank in Washington, who pushed heavily for a package of small business loans in the agreement. “Will this bill help? Absolutely. But the lending capacity needed to prevent mass closures and layoffs could be four or five times larger than what is being provided.”

Investors started sizing up a $2 trillion coronavirus rescue package to shore up the American economy, and stocks inched higher on Wednesday, adding to a surge the day before.

After opening slightly lower, the S&P 500 climbed in early trading. Some of the companies expected to benefit from government help led the gains. Boeing was up more than 20 percent, helping lift the Dow Jones industrial average by more than 3 percent; American Airlines jumped more than 15 percent; Carnival Corp. jumped 12 percent. All three had logged double-digit gains on Tuesday as talks on the package progressed.

Democratic and Republican leaders in the Senate finally came to agreement in the early hours of the day. On Tuesday, stocks on Wall Street had their best day since 2008 on expectations of the stimulus deal.

Lawmakers and their aides were still finishing the massive legislation that would enact the country’s biggest emergency spending plan ever, so only the broad outlines were known. The Senate was expected to vote Wednesday.

Governments elsewhere are also laying out plans to help. On Monday, Germany prepared an emergency budget and rescue fund for companies and state-supported loans. European Union leaders are working on additional measures to help loosen up money for some countries to help soften the economic blow of the virus.

Though investors have welcomed the plans, few are willing to conclusively say that the worst of the market sell-off is over.

On Wednesday, European stocks initially rallied but gains soon faded.

Widespread social distancing measures put in place to control the spread of the coronavirus have hammered consumer spending, the heart of the American economy. Economists are expecting almost unthinkable declines in the gross domestic product in the second quarter. Analysts at Capital Economics said on Wednesday that they now expect growth in the U.S. to fall 40 percent in the second quarter, at an annualized pace, as the unemployment rate jumps to 12 percent — higher than its 10 percent peak in 2009.

Markets have been volatile in recent weeks, seesawing on sentiment that has veered between hope that governments around the world will take strong measures to stem economic losses from the spread of the coronavirus, and fear that policymakers are not making bold enough decisions.

“Encouragingly, recent new lows in stocks have been accompanied by either sideways or even lower volatility, indicating markets are starting to become more comfortable with the potential range of outcomes we face,” Paul Haefele, chief investment officer at UBS Global Wealth Management, said in a note to investors.

On Monday morning, American Airlines Flight 1 departed John F. Kennedy Airport in New York, bound for Los Angeles. It had six passengers.

The flight is normally one of the airline’s busiest and most profitable. Now it is a money pit, a cross-country symbol of how thoroughly the coronavirus pandemic has decimated commercial air travel in a matter of weeks.

Never before has customer demand dropped so swiftly, and never before has it been less clear when — or even whether — the global airline industry will truly recover.

“This is scary,” said José Freig, American’s head of Latin America operations, who is managing the company’s coronavirus response team. “It’s difficult to find a bottom on this one.”

Dozens of American companies expect to resume normal operations in China by the end of April and keep their investment plans, a survey by the American Chamber of Commerce found.

While the pandemic has continued to cripple economies around the world, the Chinese authorities have started to revive production and ease their lockdown on Hubei Province, where the coronavirus first appeared. Last Thursday, China reported no new local infections for the first time since the outbreak began late last year.

After surveying nearly 120 firms, the chamber’s China branch said on Wednesday that some companies also planned to maintain investments they had previously set in motion, even as half the firms reported significant drops in revenue and others were pessimistic about economic growth amid the pandemic.

But reports have claimed that health officials in Wuhan, Hubei’s capital, are not publicizing the number of people with asymptomatic infections, raising fears that the virus is still spreading. Cases are also climbing among people arriving in the country from abroad, threatening to start a second wave of infections.

In the age of coronavirus, many people have transformed overnight from office workers into telecommuters. And they are increasingly relying on videoconferencing apps like Zoom and FaceTime to correspond with peers.

But inevitably, with homes and workplaces merging into one, the boundaries between personal and professional lives are eroding — and awkward situations have ensued.

By now, you may have had a few video calls with colleagues who took meetings in odd places, like their bathroom or closet, to avoid their children. Then there are the colleagues who surrender their boundaries entirely and let their children and pets be a part of the meeting.

We all get it: No one was really prepared for this transition, and there are limits to what we can all do. But now feels like an opportunity to bring up how to be kinder to your co-workers in workplace video calls, since they’re the ones the calls are really for in the end.

Where did President Trump get the idea about the economy being “opened up and just raring to go by Easter”? Today’s DealBook newsletter puts the pieces together.

Wall Street executives have been warning the president about the financial effects of a prolonged shutdown.

A pivotal moment in this campaign came on a call yesterday with the likes of Paul Tudor Jones, Steve Schwarzman of Blackstone, Dan Loeb of Third Point and Ken Griffin of Citadel, who told the president and vice president that the markets were eager to hear about a plan for reviving the economy. Later in the day, the president went on Fox News and put a date on it.

Reporting was contributed by Jim Tankersley, Alexandra Stevenson, David Gelles, Brian X. Chen, Elaine Yu, Daniel Victor, Jason Karaian, Kevin Granville and Carlos Tejada.

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COVID-19 crisis means financial trouble, creative opportunity for London non-profits, leaders say

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Non-profit agencies in London are taking a pounding in the coronavirus fallout, with just some of those groups losing more than $9 million combined in the first two weeks after the global pandemic was declared.

Leaders in the sector say the crisis spells huge trouble for local organizations, but is also opening the door to innovation and creativity.

“This is really difficult. There is that shared grief,” said Michelle Baldwin, head of the Pillar Nonprofit Network, which supports 600 such groups in London.

When Pillar surveyed its members to begin to gauge the devastation of COVID-19, the response was immediate – nearly a third of its members responded within a day – and the numbers stark.

By March 24, about 90 agencies who responded to the survey had lost nearly $9.1 million in revenue, with tens of millions more looming.

One organization said it stands to lose $1.1 million every week. Another predicted an imminent $10 million loss.

Others, about a quarter of those who answered the survey, didn’t yet know how much revenue they’d lost. A smaller portion said they hadn’t lost any revenue.

About a third of those who responded to the survey said their mission was at risk. Forty-four per cent reported staff layoffs, reduced hours or wage cuts. Only two per cent said COVID-19 was having no, or limited, impact in the short-term.

Baldwin said the results underline the value of the work these organizations do locally.

“It is about recognizing the importance of the non-profit sector. We need it here, and afterward,” she said. “Social enterprises are both social and economic drivers.”

In many ways, the dramatic numbers are no surprise.

Western grad Brian Emmett – chief economist for the charitable and nonprofit sector with Imagine Canada, a national umbrella organization – estimated the country’s registered charities will see financial losses between $9.5 billion and $15.7 billion this year, depending on how long social distancing lasts. He predicts somewhere between 118,000 and 194,000 people will be laid off.

And those numbers doesn’t include any of the non-profit groups that aren’t registered charities.

Cancelled events and fundraisers hit bottom lines hard in London, as elsewhere.

Those are often key to bringing thousands of dollars in donations through the door. Individual donations may also have dipped as Londoners watched markets tank and layoffs happen in light of COVID-19.

Much of the losses were also rooted in the sale of goods and services that had to be stopped, quickly, after the provincial government declared a state of emergency. Baldwin said earned revenue usually makes up almost half of expected revenue for non-profits and charities.

United Way Elgin Middlesex has also cut funding to agencies for programs that aren’t operating because of the virus, CEO Kelly Ziegner said.

Given the uncertainty now over its own finances, the United Way has also told agencies that funding for them is guaranteed for three months only, and will be provided in monthly installments, Ziegner said.

“We have a number of agencies where their programs simply aren’t operating, for example, school-based programs. We’ve paused that funding. We can’t fund programs that don’t operate. It’s just a reality.”

Those cuts add up to about $75,000 in funding a month, she said.

Usually, the United Way provides agencies stable funding for a year or more, Ziegner said.

But, now,  “It’s very hard for us to commit long-term to our agency partners.”

At the end of three months, the United Way will assess its contributions to agencies, she said.

That should give agencies some time to make additional funding plans, or pivot to services – such as food supply and delivery — that are essential, Ziegner said.

United Way Elgin Middlesex relies on payroll deductions (from corporate campaigns) for about 40 per cent of its funding, she said.

The organization is still assessing what the impact of businesses closing and layoffs will mean for those contributions, Ziegner said.

“If people are not being paid, those contributions and that source of revenue will erode for us.  So we’re just trying to get a handle on that. That would our biggest concern in the short term,” she said.

“Could more cuts come? Potentially. But until we have a bigger understanding of the financial picture, it’s hard to say.”

Government funding commitments have, so far, remained stable, Baldwin said. And some relief has been announced since the survey was sent to Pillar members. One of the agency’s roles is to advocate for its members at all levels of government.

And many organizations are showing the power of resilience and perseverance, pivoting to new virtual strategies and using innovative ideas to stay alive, Baldwin said.

Pillar has started a support group for executive directors to share ideas, successes and worries with one another, in addition to other support for members.

“We always talk about the cross-sector collaboration,” Baldwin said.

“If ever there was a moment for that to be our focus and our way forward, it is needed now more than ever.”

mstacey@postmedia.com

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Bitcoin’s Correlations With Global Financial Assets Soar Amid Coronavirus Crisis

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Many investors hold Bitcoin (BTC) as a hedge against the global financial system. However, as the numbers show, Bitcoin has not been spared from the recent COVID-19 financial crisis.

This article will analyze the movement of global financial markets and its correlation with Bitcoin during the COVID-19 crisis. We’ll consider the following sources as price measures for the following.

The recent crash has really challenged Bitcoin’s claim as “digital gold” and puts its assertion as a financial “safe haven” to the test.

Related: Is Bitcoin a Store of Value? Experts on BTC as Digital Gold

A 21-day rolling correlation graph shows that Bitcoin has recently become increasingly correlated with other global financial assets. 

This statistic should be worrisome for cryptocurrency investors trying to find a respite in the midst of all the financial chaos.

Has gold fared any better?

Before we give “digital gold” such a hard time, we should note that physical gold hasn’t sheltered investors from this financial storm either. 

Correlations between gold and other financial assets have also soared during this time, signaling that the world’s financial markets are more interconnected than ever before.

The importance of low, or negative, correlation

Harry Markowitz, the father of the modern portfolio theory, postulated that the most important aspect of risk to consider is an asset’s contribution to the overall risk of the portfolio, rather than the risk of the asset in isolation.

Therefore, a portfolio is not riskier if it contains Bitcoin, which is a more volatile asset, and it is uncorrelated or negatively correlated with the other holdings in the portfolio.

Uncorrelated assets are the envy of portfolio managers because they can reduce volatility and improve risk-adjusted returns. Many portfolio managers keep Bitcoin as an alternative asset in their portfolio for this reason alone.

If Bitcoin does not remain uncorrelated with the rest of the financial market, then it may be viewed as a significantly less desirable, risky asset by asset managers and the institutional market. A decrease in institutional interest could mean large sell-offs and fewer fiat inflows into the market.

So far, this is not the case

Despite a recent uptick in its correlation, a portfolio comprising 80% stocks and 20% Bitcoin would have outperformed a portfolio of 100% stocks from a risk-adjusted return perspective within the last three months and also within the last year.

However, if we were to just look at the last month, Bitcoin would have been better off avoided.

It is true that Bitcoin has remained a relatively detached and uncorrelated asset in times of economic prosperity. But that is not enough. For it to be considered a true financial safe haven, it must be robust against shocks reverberating through other financial markets. Especially in times of turmoil, the asset’s performance should be placed under heavy scrutiny.

Hopeful for a rally

Nevertheless, Bitcoin’s recent price rally has shown signs of promise. This may provide hope to cryptocurrency holders — especially if other assets continue to tank.

Do cryptocurrency indices provide better diversification?

The HODL30 index, a portfolio comprising the top 30 cryptocurrencies by market cap, was less correlated to the overall financial market than Bitcoin. The correlation between the index and American stocks was significantly lower than the correlation between Bitcoin and U.S. stocks.

If cryptocurrency investors want to shield themselves from global market fluctuations, indices may become increasingly relevant.

Time will tell whether Bitcoin or any cryptocurrency will live up investors’ lofty expectations as a financial safe haven. In a tight-knit, interconnected financial system, such a thing may prove impossible. 

Perhaps the culling of fickle cryptocurrency investors during a time of crisis will leave only the strong and sturdy, dampening future volatility. Or, this price crash will set a precedent for investors to scramble for cash whenever the next financial crisis brews because Bitcoin can no longer be trusted to shelter them. 

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Anthony Xie is the founder of HodlBot, a trading tool that enables cryptocurrency investors to automate their trading strategies.



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‘We are facing the biggest financial crash for 100 years’, economists warn

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‘We are facing the biggest financial crash for 100 years’: Economists warn the UK economy could shrink by 7.8 per cent overall in 2020

  • The economy is now predicted to shrink by an astonishing 7.8 per cent overall
  • It represents the most severe hit to livelihoods since a 13 per cent slump in 1921
  • An economist said this year’s crash would easily surpass 2008 financial crisis

Britain’s economy is set to suffer its worst year for a century as the jobs market is crippled by the coronavirus lockdown and firms go bust, economists warned last night.

The economy is now predicted to shrink by an astonishing 7.8 per cent overall in 2020, analysis by banking giant Nomura has found.

That would represent the most severe hit to livelihoods since a 13 per cent slump in 1921, when Britain’s exports collapsed and the post-First World War boom was ended by a fierce deflationary spiral.

George Buckley, UK economist at Nomura, said this year’s crash would easily surpass the 2008 financial crisis – when the UK economy suffered a 4.2 per cent fall – and the lows of the Second World War. 

The economy is now predicted to shrink by an astonishing 7.8 per cent overall in 2020, analysis by banking giant Nomura has found. Pictured: a London restaurant which has shut

The economy is now predicted to shrink by an astonishing 7.8 per cent overall in 2020, analysis by banking giant Nomura has found. Pictured: a London restaurant which has shut 

‘This will be the worst year for GDP for just shy of a century,’ he added. ‘The worst data we’ve seen since the depression of 1921 was during the final stages of the Second World War, when GDP fell by 4.6 per cent.’

Separate figures obtained by The Mail on Sunday show the jobs market has deteriorated far more quickly than it did after the 2008 crash.

Britain’s largest recruitment website Reed said the number of new vacancies being advertised has fallen by the same amount in three weeks as it did in nine months during the crisis just over a decade ago.

Vacancies on the Reed website last week dived 63 per cent from 59,000 to 22,000. That followed drops of 45 and 55 per cent in the previous two weeks.

George Buckley, UK economist at Nomura, said this year's crash would easily surpass the 2008 financial crisis – when the UK economy suffered a 4.2 per cent fall – and the lows of the Second World War. Pictured: shops are shut in London

George Buckley, UK economist at Nomura, said this year’s crash would easily surpass the 2008 financial crisis – when the UK economy suffered a 4.2 per cent fall – and the lows of the Second World War. Pictured: shops are shut in London

James Reed, chairman of Reed, said: ‘I’ve never seen anything like this. The shock waves now are much larger and faster. This is going to have a seismic impact on employment and we need to make sure it is not catastrophic.’

A memo circulated among bank bosses, seen by the MoS, shows half of the UK’s 5.8 million small and medium-sized businesses face running out of cash in just eight weeks. 

The note, from credit reference firm Experian, also warns of a consumer debt crunch, with borrowers unable to pay off their debts as they lose their jobs, become furloughed or see their earnings slashed.

The report said most families now have little to no savings to fall back on following a decade of record low interest rates. It added: ‘Even those on 80 per cent of salary may see their finances stretched and may need to resort to credit.’

Kristalina Georgieva, head of the International Monetary Fund, said: ‘This is a crisis like no other. Never in the history of the IMF have we witnessed the world economy coming to a standstill. It is way worse than the global financial crisis.’

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