Miller Strategies COVID‐19 – Daily Briefing 14 May 2020

U.S. HEADLINES

The U.S. Navy Mercy has left Los Angeles, ending a seven‐week deployment aimed at easing the burden on the region’s medical system, U.S. Northern Command said. About 60 personnel will remain to work at skilled nursing facilities, according to a statement. Mercy docked at the Port of Los Angeles on March 27. The USNS Comfort spent April in on a similar mission.

Abbott Labs slipped 3% pre‐market on Friday after the FDA issued a warning on possible accuracy issues with the device maker’s ID Now test for Covid‐19 infections. Quidel, the maker of a competing test, rose 2.8%. “Although it remains to be seen if there are repercussions from this study’s results, the headlines come at a time when new rival tests are coming online, including QDEL’s rapid antigen Sofia,” JPMorgan analysts led by Tycho Peterson wrote.

Department store giant J.C. Penney Co. filed for bankruptcy, punctuating a slow, arduous decline for the once ubiquitous mainstay of America’s shopping malls. While the sudden shock of coronavirus‐related sales losses ultimately undid the company, J.C. Penney has struggled for years under a multibillion‐dollar debt load. Its bankruptcy filing in Houston included $900 million of financing to fund the company through its restructuring, including $450 million of fresh capital. The retailer ‐‐ once a favorite of middle‐class suburban consumers ‐‐ had been seeking solutions to address billions of dollars in obligations after revenue evaporated amid government‐imposed lockdowns to help stem the Covid‐19 pandemic. The chain, based in Plano, Texas, skipped debt payments before the filing, putting it on the path toward a default. Management held talks about bankruptcy financing with lenders including KKR & Co., Ares Management Corp. and Sixth Street Partners, Bloomberg has reported. Founded by James Cash Penney in 1902, J.C. Penney operated 846 department stores in 49 states and Puerto Rico as of Feb. 1, according to company filings. Chief Executive Officer Jill Soltau, the company’s first female head, joined in 2018 and embarked on a lofty turnaround plan.

FROM CONGRESS

House Speaker Nancy Pelosi is pushing ahead with a vote this evening on a $3 trillion Democratic‐only virus relief bill despite the misgivings of some liberals and moderates in her party and the fact it has no chance of ever getting signed into law. Lawmakers began consideration of the stimulus package and a measure to allow proxy voting under restrictions that have now become common place during the coronavirus pandemic: face covers and limits on the number of members on the floor at any one time. Senate Majority Leader Mitch McConnell said he’s spoken with Trump and Treasury Secretary Steven Mnuchin about the next phase of stimulus but they’ve set no date for getting it done. He dismissed the House Democratic legislation, known as the Heroes Act, as “a $3 trillion left‐wing wish list.” The White House said President Trump would veto it if it ever got to his desk.

The chairman of the Senate energy committee says to look for a big bipartisan energy package back on the floor this summer, as GOP leaders put a premium on bills that already have substantial bipartisan backing. The energy bill—which stalled on the floor in March over a single amendment to curb HFCs, a “super” climate pollutant used as a refrigerant—still faces a big hurdle as long as the impasse over that issue remains unresolved. Senate leaders have begun fleshing out the summer floor schedule, which thus far includes plans for taking up some must‐pass bills, including the fiscal 2021 defense authorization bill, before the July 4 holiday.  But Energy and Natural Resources Committee Chairman Lisa Murkowski (R‐Alaska) in an interview said she is optimistic opposing sides can break the impasse over phasing down hydrofluorocarbons that sidelined the energy bill (S. 2657) in March. The bill, cosponsored by Sen. Joe Manchin (D‐W.Va.), includes measures to boost battery energy storage, more rapidly deploy more carbon capture and storage and advanced nuclear reactors, and improve energy efficiency.  Senate Majority Leader Mitch McConnell (R‐Ky.) “is looking for those measures that are ready to go,” Murkowski said. McConnell put the energy package on pause during the March impasse. That means it can be reconsidered quickly if an HFC deal is reached.

FROM THE ADMINISTRATION

President on Friday officially introduced a former pharmaceutical executive and a four star‐general who will lead his crash coronavirus vaccine effort. The President named General Gustave Perna, who directs the U.S. Army Materiel Command, as chief operating officer of “,” likening it to the Project effort to develop the atomic bomb. “That means big and that means fast,” Trump said in remarks from the White House Rose Garden.  Former GlaxoSmithKline Plc executive will be the project’s “chief scientist,” Trump said, calling him “one of the most respected men in the world in the production and really the formulation of vaccines.” “I’d love to see if we could do it before the end of the year,” he said. “It’s risky, it’s expensive, but we’ll be saving massive amounts of time, we’ll be saving years.” Operation Warp Speed seeks to accelerate a process that is typically years long into a matter of months. Some health experts have cast skepticism at the idea that a vaccine could be ready for emergency use in at‐risk populations by the end of the year, while others like billionaire Bill Gates have said a vaccine could be ready within months.

The White House wants Congress to require hospitals and insurers to reveal the prices they negotiate for medical services as part of the next round of coronavirus stimulus, in an effort to short‐circuit a legal battle with the health care industry. The U.S. Health and Human Services department published two regulations last year requiring the prices be made public. The industry challenged the rule in court arguing it’s violates the First Amendment, and delayed its implementation. The White House believes making it a law would end the matter, according to people familiar with the issue.

Agriculture Secretary Sonny Perdue, Labor Secretary Gene Scalia, and NIH Dir. Francis Collins are among five new members of the White House Coronavirus Task Force, Vice President ’s office said today. Peter Marks, FDA director of the Center for Biologics Evaluation and Research, and Thomas Engels, administrator of the Health Resources and Services Administration were also named to the panel. The task force is entering a new phase focused on “getting Americans back to work and allowing businesses to re‐open,” according to the Office of the Vice President.

The Federal Reserve further slowed the pace at which it plans to buy Treasuries under the unlimited program that began in March. The U.S. central bank, which has bought more than $1.5 trillion of Treasuries in daily operations over nine weeks in an effort to restore smooth market functioning during the coronavirus pandemic, on Friday said it would buy securities at a pace of about $6 billion a day May 18‐22, down from around $7 billion a day this week. The Treasury purchase operations began March 13 and peaked in size at $75 billion per day from March 19 to April 1. The pace was subsequently reduced in stages. There will be one or two operations each day, targeting either nominal Treasuries or inflation‐protected securities, according to the schedule.

The Federal Reserve in a stark warning said stock and other asset prices could suffer “significant declines” should the pandemic deepen, with commercial real estate being among the hardest‐hit. The Fed’s twice‐yearly financial stability report flagged risks to the banking system and broader economy and highlighted its race to intervene in markets and temporarily dial back rules on financial firms amid the outbreak. The abrupt shutdown of economies triggered market uncertainty that upended trading from Treasury securities to junk bonds and led to dramatic swings in prices. Markets settled as the Fed flooded the financial system with liquidity.

IN THE STATES

Florida gyms can reopen, and retailers and restaurants will be able to operate at 50% indoor capacity, up from 25%, starting Monday, Governor Ron DeSantis said. The state started reopening last week, with DeSantis saying the Sunshine State had dodged the worst‐case scenarios predicted by some analysts. He said Friday that ventilator use and Covid‐19 patients in intensive‐care units have both declined significantly since the start of Florida’s stay‐at‐home order. “The American people never signed up for a perpetual shelter in place,” DeSantis said.

New York City, Long Island and three other regions have failed to meet requirements for reopening, and as a result their lockdowns will remain in effect for at least two more weeks. Five upstate regions ‐‐ the Finger Lakes, Central New York, Mohawk Valley, Southern Tier and North Country ‐‐ met the criteria, according to an executive order signed Thursday night. New York, Long Island and Western New York met four of seven metrics, while the Capital and Mid‐ Hudson regions met five. The metrics include requirements for hospital‐bed capacity, testing and tracing.

Coronavirus cases in the U.S. increased 2% compared with the same time Thursday to 1.43 million, according to data collected by Johns Hopkins University and Bloomberg News. The increase was above the average daily increase of 1.7% over the past week. Deaths rose 2% to 86,744.  New York had 132 deaths, according to Governor . That marked the state’s fifth straight day of deaths below 200 and the first time deaths fell below 150 in seven weeks.  In New Jersey, deaths increased by 201 to 10,138, a 2% increase over 24 hours. New cases rose 1% to 143,905, according to Governor .  Florida reported 44,138 cases, up 2.1% from a day earlier, according to the state’s health department. Deaths rose 2.4% to 1,197.  California’s cases rose 2.4% to 74,936 while deaths rose 2.5% to 3,108, according to the state’s website.

AROUND THE WORLD

All closed Swiss border crossings will be reopened by the first half of next week in coordination with Germany and Austria, Christian Bock, director at the Swiss Federal Customs Administration, told reporters in Bern.

Austria, one of the first countries to ease its lockdown, will allow cultural events again, restarting an important part of its tourism industry. Events with as many as 100 people will be allowed from May 29, rising to 250 in July, when cinemas will reopen as well, and to 1,000 in August. The Salzburg Festival, a major draw for an audience including CEOs and heads of state, will take place in a scaled‐down version.

U.K. pubs shut since late March may be forced to dump 70 million pints of beer ‐‐ enough to fill more than 16 Olympic‐sized swimming pools ‐‐ because much of the brew in storage will spoil before reopening in early July, the British Beer and Pub Association said. Some of the unsold beer is being used as feed for anaerobic digesters to create organic fertilizer for farming, the group said.

People in the North of England and diabetics are far more likely to die from coronavirus, data compiled by the U.K. national health service show. More than a quarter of all fatalities from Covid‐19 were people with diabetes, according to the data, which for the first time breaks down deaths by underlying condition. In Northern England, 7,089 people died, nearly double the number of deaths in the South. Separate data from the Office for National Statistics show that more than 27% of care home deaths in England & Wales from March 2 through May 1 were linked to Covid‐19. There were 73,180 deaths in the facilities from Dec. 28 to May 1, more than 23,000 above the same period a year earlier.

France is at higher risk of a credit downgrade by Fitch after the outlook on the country’s AA rating was revised to negative. Fitch cited the substantial worsening in public finances and economic activity expected this year due to the pandemic. “The combination of much reduced economic activity due to containment measures introduced from March and government policies to support the economy in the period of enforced reduced activity will sharply increase government borrowing and indebtedness.” Fitch said in a statement. France’s general government deficit is expected to widen from 3.0% of gross domestic product in 2019 to 9.3% this year, Fitch said. The nation’s GDP contracted by 5.8% in the first quarter, based on a preliminary estimate, with real GDP expected to drop by 7.0% this year.  Along with countries across Europe, France is spending billions of euros to help its economy through the coronavirus and related lockdowns. That’s stretching the public finances and pushing up debt, which the French government expects to hit 115% of GDP by the end of the year. Emergency fiscal measures will cost at least an extra 110 billion euros for France. The government expects more to come with another budget before summer. In addition to furlough programs, tax cancellations and loan guarantees for companies, France plans aid packages for specific sectors, including state‐financed incentives to buy electric vehicles.

China said it did not know until Jan. 19 how infectious the new coronavirus is, pushing back against accusations that it intentionally withheld information about the severity of the outbreak in Wuhan from the world. While Chinese officials knew that there were signs of human‐to‐ human transmission earlier, it was hard to ascertain the new virus’s level of contagiousness, said Zeng Yixin, vice minister of the National Health Commission, at a press briefing in Beijing on Friday. There are diseases like HIV that while infectious, are not easily transmitted from person to person, he said. It was only on Jan. 19 that Chinese scientists concluded that the virus spreads easily among people and China released that information to the world the next day, said Zeng.  The accounting of events from top officials came as China faces growing blame for a delay in sounding the alarm about the coronavirus, which allowed people to spread it unwittingly for some time. Zeng was responding to an Associated Press report in April that cited confidential documents showing Chinese officials were internally discussing the possibility of widespread infections six days before President Xi Jinping warned the public of the dangers of the virus. The alleged delay resulted in millions of people traveling from Wuhan to elsewhere in the country and the world, seeding a pandemic that has now sickened over 4.4 million people and killed over 300,000.