AB Volvo postpones AGM due to uncertainty over coronavirus impact

STOCKHOLM (Reuters) – Truckmaker AB Volvo (VOLVb.ST) said on Wednesday it had decided to postpone its annual shareholders meeting due to the prevailing uncertainty around the effects from the global coronavirus outbreak.

“Recent developments have a direct effect on economies important for the Volvo Group and the assessment is that the prevailing situation will lead to weaker demand for the Group’s products and services,” the company said in a statement.

Most of Volvo’s manufacturing plants are currently closed and staff in several countries have been temporarily laid off.

“We believe that, in the current situation, it is responsible to postpone the Annual General Meeting, to assess how the situation develops,” said Volvo board chairman Carl-Henric Svanberg.

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Treat with caution: rocketing stocks aren't cause for comfort

NEW YORK (Reuters) – Those pining for a bottom to the gut-wrenching stock market selloff may be disappointed to learn that mega one-day rallies like the historic one witnessed on Tuesday are typically not the start of a durable recovery.

U.S. stocks, that recently entered a bear market – a fall of 20% or more from recent highs – rebounded strongly on Tuesday after U.S. lawmakers said they were close to a deal for an economic rescue package in response to the coronavirus outbreak, injecting optimism to a market grappling with its biggest selloff since the financial crisis.

The Dow Jones Industrial Average .DJI soared 11.37%, its largest one-day percentage gain since 1933, while the S&P 500 .SPX jumped 9.38% to 2,447.33, its biggest one-day percentage rise since 2008.

All the same, data suggest investors should treat the rally in stocks with caution.

Of the twenty past instances when the S&P rallied 8% or more on a single day, thirteen of them took place when stocks were in the embrace of a bear market.

(GRAPHIC: Bear market euphoria – here)

“These 8% rallies are not necessarily signs of health,” said Christopher Murphy, co-head of derivatives at Susquehanna Financial Group.

In a note on Tuesday, Murphy wrote, “It is important to remember that some of the largest one‐day rallies in SPX’s history took place during bear markets, implying that one day pops are not uncommon in a down market.”

Nor are such sharp rallies a herald of better days.

In 2008, for instance, the two biggest gains during the market crash that fall, both in October 2008, were actually followed by five more months of double-digit declines, data showed.

“You can’t take this bounce and say that (the market) will turn around next week or the week after,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

A lot will depend on whether monetary and fiscal response can stave off a prolonged downturn, Krosby said.

Going by history, those looking to time the end of the bear market should be more encouraged by days when investors take modest bites at risky assets rather than great big mouthfuls.

In 2009, the bull market was born with a 6.4% up day for the S&P 500. In 2002/2003 the recovery began with 3% up days.

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G20 leaders to convene by video conference on Thursday about coronavirus

RIYADH (Reuters) – Leaders from the Group of 20 major economies will convene a video conference on Thursday to discuss the coronavirus epidemic, the Saudi secretariat said, amid criticism that the group has been slow to respond to the global crisis.

G20 finance ministers and central bankers agreed during a separate video conference this week to develop an “action plan” to respond to the outbreak, which the International Monetary Fund expects will trigger a global recession. A subsequent statement offered few details.

A separate statement published late on Tuesday said Saudi Arabia’s 84-year-old King Salman would chair the meeting “to advance a coordinated global response to the COVID-19 pandemic and its human and economic implications.”

One source said the G20 sherpas, who are the leaders’ emissaries, would speak on Wednesday to prepare. Summits typically take months to prepare, with deputies gathering in person to hash out differences before leaders arrive but in this case, because of health precautions, they are convening remotely, which could make reaching compromises harder.

The summit will be complicated by an oil price war between two members, Saudi Arabia and Russia, and rising tensions between two others, the United States and China, over the origin of the virus, which has infected nearly 400,000 people globally and killed more than 17,200. Click tmsnrt.rs/3aIRuz7 in an external browser for an interactive graphic on cases.

IMF Managing Director Kristalina Georgieva has welcomed the fiscal and monetary steps taken by some countries, but said more would be needed, especially in the fiscal arena. Surveys show the pandemic is battering the global economy.

Agathe Demarais, global forecasting director at the Economist Intelligence Unit, said given monetary policy constraints, the G20 countries’ only option to support growth might be fiscal stimulus, but that could raise the risk of a debt crisis, with “devastating effect on global growth.”

“This is something that G20 leaders will have in mind if they go for stimulus packages,” Demarais added.

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As customers hoard pot brownies, North American weed firms see lockdown boost

(Reuters) – Cannabis sales are touching new highs as customers across the United States and Canada stockpile weed to prepare for long spells of isolation because of the coronavirus pandemic.

Between March 16 and March 22, sales of recreational cannabis across key U.S. markets, including California, Colorado, Oregon and Alaska, were up 50% and medical marijuana sales rose 41% from the same period last year, figures obtained from cannabis point of sale and data platform Flowhub show.

Several U.S. states and Canadian provinces have taken steps to curb the fast-spreading coronavirus by issuing stay at home orders, restricting business operations, or closing down borders as death toll in both countries approaches 600.

While many businesses have been ordered shut, cannabis stores have been listed as essential services and allowed to remain open.

In Ontario, Canada’s most populous province, online sales on the government-run Ontario Cannabis Store’s (OCS) website have soared over the last two weeks, OCS director of communications Daffyd Roderick, said. For example, last weekend’s orders were more than twice as high as only two weeks ago.

In Nova Scotia, which on Sunday became the latest province to declare coronavirus emergency, cannabis sales spiked 76% last week, according to the province’s liquor commission, which controls sales of cannabis there.

Fears of months of supply disruptions were boosting Canadian sales, Stuart Titus, CEO of California-based Medical Marijuana Inc (MJNA.PK) told Reuters.

“We have seen stockpiling in Canada by consumers who have snapped up products from LPs (licensed producers).”

The surge in demand may offer pot producers a welcome respite after investors sold off cannabis stocks throughout much of last year as profits in the sector remained elusive.

Jamie Pearson, CEO of California-based Bhang Inc BHNG.CD, which makes cannabis-infused beverages, chocolates and other products, said sales were booming and should boost revenue and profits this quarter.

Pearson said edibles such as gummies, brownies, and chocolates, were most popular, probably because they were easier to store and eat, even with gloves on.

Still, Titus and others recommended caution, saying the long-awaited reversal of fortune could prove not much more than a short-lived relief.

“The cannabis industry is showing itself to be recession-proof but at times like this, it’s important to understand that the spike in consumer demand is probably not going to last long,” Avis Bulbulyan, CEO of cannabis consulting firm Siva Enterprises, said.

(This story has been refiled to correct state to Alaska in second paragraph)

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Explainer: Trump has little power to restart U.S. economy

WASHINGTON (Reuters) – U.S. President Donald Trump on Tuesday said he wants the U.S. economy to reopen by Easter Sunday, April 12, despite the rapid spread of the novel coronavirus in some U.S. states and a rising death toll from the disease.

Legal experts say a U.S. president has quite limited power to order citizens back to their places of employment, or cities to reopen government buildings, transportation, or local businesses. Here is why.

What does the Constitution say about who makes decisions about public welfare?

The United States is a federalist system, meaning power is shared between a national and state governments.

Under the 10th Amendment of the U.S. Constitution, state governments have power to police citizens and regulate public welfare. In the country’s early years, it was up to state and local authorities to lead the response to the yellow fever epidemic, not the federal government.

Reflecting these principles, “disaster response and aid is typically state-led and federally supported,” said Steve Bunnell, the former top lawyer at the U.S. Department of Homeland Security (DHS) and a partner at O’Melveny & Myers.

This bottom-up, rather than top-down, approach to disaster relief makes sense from a policy perspective, said John Cohen, a former DHS official who teaches at Georgetown University.

“Usually, state and local officials on the ground have the best understanding of the issues affecting people in their states,” Cohen said.

Can a U.S. president override state-mandated “shelter in place” orders?

No. The Trump administration can issue nationwide guidance, but it would be unconstitutional for the president to override stay-at-home orders from governors, said Robert Chesney, a professor of national security law at the University of Texas. Mayors or county commissioners are on the same footing as governors, he said.

The social distancing policies Trump announced on March 16 for slowing the spread of the novel coronavirus over 15 days were merely guidelines, and the same goes for any newer, less restrictive policies he unveils, Chesney said.

“Those are guidelines. He can change his advice,” Chesney said. “He is free to advocate. And that is an important part of the presidency — the bully pulpit.”

Bunnell said many people look to the president for guidance, so Trump’s advice will still affect the economy.

“The federal government has a role to play in setting recommendations, and the daily press briefings obviously have an effect on how people react,” Bunnell said. “But in terms of legal authorities to override health and safety measures, I’m not sure there are any direct tools that would accomplish that.”

Can a U.S. president order a business to stay open?

A federal agency that’s a subset of DHS deemed some businesses “essential” on March 19. But the federal memo itself notes that state and local authorities are “ultimately in charge of implementing and executing response activities in communities under their jurisdiction.”

The memo: here

“That means the president really has no authority to ‘order’ anyone who doesn’t work directly for the federal government to do anything by Easter,” said Anthony J. Oncidi, a partner with the law firm Proskauer Rose.

The Defense Production Act, which lets the president “expedite and expand the supply of resources from the U.S. industrial base,” will be used to procure more tests and other medical equipment from companies, an administration official said on Tuesday. But that represents a fraction of the U.S.’s consumer-driven economy.

What about a U.S. president’s emergency powers?

A federal law known as the National Emergencies Act (NEA) gives the president broad powers to respond to national emergencies, including the authority to redirect funds and suspend laws.

Trump invoked the Stafford Act and the NEA on March 13, as he declared a national emergency.

But the NEA is a poor fit for a president trying to encourage business as usual, Cohen said.

“It tends to give the president the authority to be more restrictive, not less restrictive,” Cohen said. “It does not let the president say ‘disregard the restrictions of your state and local leaders.’”

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What is lockdown? Britons, including senior minister, are confused

LONDON (Reuters) – The minister tasked with explaining lockdown to Britons sowed more confusion on Tuesday as he contradicted himself on children moving between households, was unclear about the status of construction sites and said toy and clothes deliveries could carry on.

Prime Minister Boris Johnson ratcheted up Britain’s attempt to slow the spread of coronavirus on Monday, announcing strict curbs on ordinary life. He ordered people to stay at home, shops to close and all non-essential interaction to halt.

Senior minister Michael Gove appeared on radio and television shows on Tuesday to say people “wherever possible” should stay at home to try to prevent the state-run NHS health service being overwhelmed.

But when asked if people could order toys and clothes online and have them delivered, requiring work by distribution center workers and drivers, Gove said: “yes”.

The government’s restrictions say that people should only travel to work when “absolutely necessary”.

Gove had to correct the advice he gave on air about whether children of separated parents could move from one household to the other, initially saying it should stop but then saying it was allowed.

Major construction work could also continue, he said, but work in homes that involved “intimate contact” with the householder would not be appropriate, he told ITV, adding that the rules were “clear”.

Photographs on Tuesday showed builders congregating at sites such as housing developments.

“Construction work that takes place in the open air on new sites, that is appropriate,” Gove said.

Later on Tuesday, London’s transport authority temporarily suspended work on construction sites for the capital’s new Crossrail project.

Rebecca Long-Bailey, a candidate to be leader the opposition Labour Party, said the government urgently needed to provide more clarity, including a tightly defined list of workplaces.

“There’s a whole range of essential functions, and then there are non-essential functions like ordering nice things online,” she told BBC radio.

When asked about people who did not do an essential job, but whose employer insisted they went to work, Gove said: “Wherever people can work from home, they should.”

Britain has lagged other European countries in introducing strict curbs on ordinary life.

Italy, where more people have died as a result of the epidemic than anywhere else, ordered the closure of all industrial production and almost all private and public offices on Sunday.

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South Korea says Trump asked for equipment to fight coronavirus

SEOUL (Reuters) – President Donald Trump asked South Korea to send medical equipment to the United States to fight the coronavirus, promising to help Korean companies gain U.S. government approval, South Korea’s presidential office said.

South Korea’s President Moon Jae-in offered to send the equipment if his country has any spare, his Blue House office said in a statement late on Tuesday, after the 23 minute phone call, which it said was arranged at Trump’s urgent request.

The request for help highlights the diverging paths the two countries took since both discovered their first coronavirus cases on the same day.

South Korea rolled out widespread testing within days, swiftly launching an aggressive program to isolate confirmed cases and trace their contacts.

After a big early outbreak, it won praise for slowing the spread of the disease with comparatively little disruption and just 125 deaths, and has brought the number of new infections per day to below 100 for the past 13 straight days.

The United States did little testing initially, and has now been shutting parts of the country en masse, with fast-growing outbreaks in a number of states and thousands of new cases per day.

Moon told Trump that South Korea “will provide as much support as possible, if there is spare medical equipment in Korea”.

Trump told Moon he would help Korean producers obtain approval from the U.S. Food and Drug Administration (FDA) for their equipment, the Korean statement said.

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U.S. could be next 'virus epicenter', as India locks down, global recession looms

GENEVA/NEW DELHI (Reuters) – The United States could become the global epicenter of the coronavirus pandemic, the World Health Organization said on Tuesday, as India announced a full 24-hour, nationwide lockdown in the world’s second-most populous country.

India joined the ranks of Britain and other countries clamping down to hold back the virus as business activity collapsed from Japan to the United States at a record pace in March.

The highly contagious coronavirus has caused entire regions to be placed on lockdown. In some places soldiers are patrolling the streets to keep consumers and workers indoors, halting services and production and breaking supply chains.

“The global health crisis is rapidly morphing into a global recession, as there is a clear tension between preventing infections and ruining the economy,” said Edoardo Campanella, an economist at UniCredit Bank in Milan.

But Wall Street bounced from three-year lows as investors pin their hopes on the U.S. Senate passing a $2 trillion stimulus bill.

Confirmed coronavirus cases around the world exceeded 377,000 across 194 countries and territories as of early Tuesday, according to a Reuters tally, more than 16,500 of them fatal.

In Geneva, WHO spokeswoman Margaret Harris said infections in the United States had greatly increased.

Over the previous 24 hours, 85 percent of new cases were in Europe and the United States, and of those, 40 percent were in the United States.

As of Monday, the virus had infected more than 42,000 people there, killing at least 559.

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Asked whether the United States could become the new epicenter, Harris said: “We are now seeing a very large acceleration in cases in the U.S. So it does have that potential.”

Some U.S. state and local officials have decried a lack of coordinated federal action, saying that having localities act on their own has put them in competition for supplies.

President Donald Trump acknowledged the difficulty.

“The World market for face masks and ventilators is Crazy. We are helping the states to get equipment, but it is not easy,” he tweeted.

Indian Prime Minister Narendra Modi said on Tuesday the government would impose a nationwide lockdown from midnight for 21 days.

Health researchers have warned that more than a million people in India could be infected with the coronavirus by mid-May, prompting the government to shut down all air and train travel, businesses and schools.

On Tuesday, Modi, leader of the world’s biggest democracy, went further, saying nobody would be allowed to leave their homes.

“The only way to save ourselves from coronavirus is if we don’t leave our homes, whatever happens, we stay at home,” Modi said.

India has so far reported 482 confirmed cases of the coronavirus and nine deaths.

OLYMPIC ORGANIZERS GIVE IN

Olympic Games organizers and the Japanese government had clung to the hope that the world’s biggest sporting event could go ahead, but finally bowed to the inevitable to make Tokyo 2020 the latest and biggest victim of a ravaged sporting calendar.

After a call with International Olympic Committee (IOC) president Thomas Bach, Japan’s Prime Minister Shinzo Abe said the July 24-Aug. 9 event would be rescheduled for the summer of 2021 at the latest – as proof of victory over the coronavirus.

“President Bach said he is in agreement, 100%.”

It was the first time in the Olympics’ 124-year history that they had been postponed, though they were canceled outright three times during the two 20th-century world wars.

Of the top 10 countries by case numbers, Italy has reported the highest fatality rate, at around 10%, which at least partly reflects its older population. The fatality rate globally – the ratio of deaths to confirmed infections – is around 4.3%, though national figures can vary widely according to how much testing is done.

Britain, believed by experts to be about two weeks behind Italy in the outbreak cycle, on Tuesday began curbs on movement without precedent in peacetime after Prime Minister Boris Johnson ordered the country to stay at home.

The streets of the capital were quiet as all but essential shops closed and people only went to work if it was unavoidable.

Johnson had resisted pressure to impose a full lockdown even as other European countries had done so, but was forced to change tack as projections showed the health system could become overwhelmed.

Meanwhile China’s Hubei province, the original center of the outbreak, will lift curbs on people leaving the area, but other regions will tighten controls as new cases double due to imported infections.

The provincial capital Wuhan, which has been in total lockdown since Jan. 23, will lift its travel restrictions on April 8.

However, the risk from overseas infections appears to be on the rise, prompting tougher screening and quarantine measures in cities such as the capital Beijing.

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General Motors to draw down $16 billion in credit, suspends 2020 outlook

(Reuters) – General Motors Co said on Tuesday it will draw about $16 billion from its credit lines in a bid to beef up liquidity amid rising business impact from the fast-spreading coronavirus outbreak.

The No.1 U.S. automaker, which also suspended its 2020 outlook, said it was evaluating its quarterly dividend, but has not yet decided to suspend it. As of the end of 2019, GM had $34.6 billion in liquidity, including $17.3 billion in cash.

Companies across the globe are tapping their credit lines to shore up liquidity and help them cover their costs amidst a crisis which has brought many elements of the global economy to a complete standstill.

“We are aggressively pursuing austerity measures to preserve cash and are taking necessary steps in this changing and uncertain environment to manage our liquidity,” Chief Executive Officer Mary Barra said.

The pandemic has already hit other automakers as well and more are expected to cut their expectations.

Last week, rival Ford abandoned its 2020 forecast and said it drew down $15.4 billion from two credit facilities to bolster its balance sheet. Its more than $37 billion in cash now dwarfs its market capitalization of about $16 billion.

Analysts believe that corporate liquidity is paramount and the U.S. automakers have strong enough balance sheets to weather the outbreak’s impact.

Both GM and Ford have seen U.S. employees test positive for the virus, leading them to shutdown their North American plants to prevent its spread among factory workers.

Meanwhile. U.S. new vehicle demand dropped 13% in the first 19 days of March, according to research firm J.D. Power, while brokerage Morgan Stanley expects auto sales to decline 9% this year, a first in many years.

Shares of both Ford and GM were up 7.5% to 11% in premarket trading.

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Exclusive: Citadel turns 2020 profit after spotting virus risk early

BOSTON (Reuters) – Citadel, the Chicago-based hedge fund giant led by billionaire Ken Griffin, has so far weathered the coronavirus market storm well, turning a slight profit in its flagship Wellington hedge fund for the year through Monday, according to a person familiar with the situation.

The fund, which practices a so-called multi-strategy array of bets on stocks, bonds, commodities and other securities using teams of traders, was as of Friday down 5.25% for March, the person said, who requested anonymity because the information is private. The exact year-to-date gain, which is net of fees, was not finalized.

By comparison, Goldman Sachs’ prime services division estimated that the average equity-focused hedge fund is down 15.5% for the month through Thursday, with average year-to-date losses at nearly 16%.

Citadel’s multi-strategy competitors are still down for the year amid the coronavirus-led market rout. Millennium Management LLC’s main hedge fund is down about 4.3% for 2020 through March 20, while Schonfeld Strategic Advisors LLC is down about 15% through March 16, according to people briefed on the returns.

The exact drivers of Citadel’s relative outperformance were unclear. The Wall Street Journal previously reported that Citadel’s fixed-income portfolio recently lost hundreds of millions of dollars, in part from so-called basis trades on pricing gaps between U.S. Treasuries and futures, although those unrealized losses were recovered within days. The Citadel Global Fixed Income Fund is now positive for the year through Monday, the person with knowledge of Citadel said.

SPOTTING RISK

Citadel showed it was thinking about coronavirus and its market impact relatively early.

On Feb. 6, Griffin called the coronavirus “probably the most concrete short-run risk we see in the financial markets globally” during an appearance at The Economic Club of New York.

“It’s not a Chinese health crisis. It is a global health crisis,” he said.

Citadel had three days earlier announced that its executives had mobilized $7.5 million to support relief efforts in the United States and China, including more than $1 million in medical supplies to a hospital in hard-hit Wuhan.

The firm recently set up the Citadel Relative Value Fixed Income Fund, according to a March 13 filing with the U.S. Securities and Exchange Commission (SEC), a bid to take advantage of new market volatility.

Citadel has placed an emphasis on risk management since the last financial crisis, when its main funds lost 55% over 2008 and were forced to temporarily limit client withdrawals.

Its website touts “a quarter of a century establishing risk management as a core discipline” and a global risk management center in Chicago, anchored by a 27 foot by 8 foot data visualization touchscreen.

The firm still uses significant leverage, or borrowed money, to amplify its potential profits. A Jan. 17 SEC filing notes regulatory assets under management of about $194 billion as of Dec. 31, 2018, implying leverage of approximately six and a half times Citadel’s $30 billion in invested assets as of February, according to its website.

2020 marks 30 years since Citadel was founded by Griffin, who famously started the firm after trading from his Harvard College dorm room. The annualized return for Citadel’s Wellington fund, launched in 1990, was 18.78% net of fees through 2019, the person said, more than double the S&P 500 Index.

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