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Economy

Could the COVID-19 pandemic be an environmental inflection point?

Our cars are sitting in our driveways as many of us work from home, huge airlines are mothballing their fleets, and businesses around the world have closed their doors due to the novel coronavirus pandemic.

It is a semi-apocalyptic scenario that no one could have foreseen just two months ago.

The spiraling death toll is hard to fathom, and the grief for those in mourning doesn’t bear thinking about.

After the worst is over, our public health systems will certainly change forever, but could the fallout also result in us changing our consumption-heavy lifestyles in ways that could prevent a future outbreak, or in ways that improve the air we breathe?

The UN’s environment chief hopes so, saying in an interview with The Guardian newspaper that “nature is sending us a message.”

The Executive Director of the UN Environment Programme Inger Andersen said the way we are exploiting the planet’s resources is making it easier for “pathogens to pass from wild and domestic animals to people.”

“There are too many pressures at the same time on our natural systems and something has to give,” she said.

“We are intimately interconnected with nature, whether we like it or not.

“If we don’t take care of nature, we can’t take care of ourselves.”

Scientists believe that an animal market in Wuhan, China was the source of the novel coronavirus outbreak.

China has since temporarily banned the trade and consumption of live animals.

Some experts believe that climate change and the destruction of wildlife habitats can change the way viruses spread between species.

Pollution reduction

If Covid-19 serves as a reminder from Mother Nature of how poorly we are treating her, then paradoxically, it is also giving us a glimpse into how healthy she used to be.

The pandemic has revealed a remarkable change in pollution levels in the places worst-affected by the virus.

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Fish can be more-easily seen swimming in the now-clear canals of Venice, and air pollutants have dropped noticeably in China, Italy and New York.

“For the about four-week period after the lockdowns in China started, everything from coal-fired power plants, to oil consumption for transport, to industries like cement were heavily affected,” said Lauri Myllyvirta, Lead Analyst at the Centre for Research on Energy and Clean Air.

“We saw operating rates that were about a quarter lower than usual at that time of the year. And all of that meant that CO2 (carbon dioxide) emissions were reduced by about 25 per cent.”

CO is an indirect contributor to global warming and climate change.

Commane said the CO levels have dropped by half, with the changes being most striking at rush hour.

“I fully expect that the air quality is going to get worse in some places (after the pandemic) because people are throwing regulations out the window to get things moving again,” she warned.

The question is: which places will make the decision to take a different path when it comes to air quality and climate change?

Inflection point

Fellow Columbia academic Amy Turner specializes in climate law at the Sabin Center for Climate Change Law.

“We’re at an inflection point in the sense that we’ve seen massive collective action around the pandemic,” said Turner.

“We also have the opportunity to reset the economy in a way that mitigates climate change.”

She thinks a glimpse into a world where fewer people drive to work every day could help influence how lawmakers shape our future.

“Governments could offer incentives to employers to allow their employees to work from home some of the time,” she said.

“That is something that we may see come out of this. And, you know, I think that would be a good thing if at least some transportation emissions were able to be reduced, because people are now more comfortable working from home at least some of the time.”

Turner says pandemics, just like pollution and climate change, tend to affect the poorest the most.

“They’re more likely to live near big highways, near bus depots, near power stations, and so there’s much more local air pollution,” she said.

“Often those communities are located in places that are particularly susceptible to disasters.”

Climate change aside, the direct, short-term health benefits of reducing emissions would most likely see lives improved and saved.

“Air pollution is responsible for millions of premature deaths globally, and in fact the reduction in pollutant levels means that tens of thousands of deaths will be avoided,” said Myllyvirta.

“That’s not to say that this crisis, with all the suffering that it entails, is a good thing, but it does highlight how normalized these public health impacts of air pollution have become.”

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Economy

South Africa's treasury announces tax relief for business hit by coronavirus

JOHANNESBURG, March 29 (Reuters) – South Africa’s National Treasury said on Sunday it was introducing a new tax subsidy of 500 rand ($28) per month to employers for the next four months to cushion financial losses suffered by firms due to the coronavirus.

In a statement the treasury said it would also permit businesses with revenue of 50 million rand or less to delay paying 20% of their employees’ tax liabilities over the next four months.

The measures would take effect on April 1, the treasury said in a statement. ($1 = 17.6250 rand) (Reporting by Mfuneko Toyana, editing by Louise Heavens)

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Economy

China's $43 trillion market promise beckons global wealth firms

HONG KONG (BLOOMBERG) – China’s trillion dollar asset-management market opens wider this week, forcing BlackRock, Vanguard Group and other global firms to make a strategic decision: Go it alone or work with an entrenched local partner.

While the further liberalisation of the investment banking and money management industries in China has been overshadowed by the coronavirus crisis, wealth firms are nonetheless laying out plans to tap a market poised to reach US$30 trillion (S$42.8 trillion) in assets by 2023, according to consultant Oliver Wyman.

Starting April 1, they can apply for licenses to set up wholly-owned mutual fund management firms for the first time.

Vanguard and BlackRock are among firms going that route, people familiar have said.

Other options include boosting ownership of existing joint venture partnerships to 100 per cent, as JPMorgan Chase & Co. plans to do, people familiar have said.

“With so many license options and changing policies, one of the biggest questions all foreign players face is where to allocate their resources,” said Jasper Yip, a principal in the financial services practice at Oliver Wyman in Hong Kong.

“Asset management could be one of the most competitive sectors because of the opportunities.”

Here are the different paths asset managers can pursue in China and how some of them plan to proceed:

WEALTH MANAGEMENT SUBSIDIARIES

The China Banking and Insurance Regulatory Commission has been encouraging foreign asset managers to work with the wealth management subsidiaries of Chinese banks or insurers.

Global players are expected to bring to the table product design expertise, while the Chinese firms provide a vast distribution network and relationship managers.

BlackRock is in talks with China Construction Bank to set up a joint venture for a wealth management subsidiary, according to people familiar with the matter.

Goldman Sachs Group has discussed a similar structure, people familiar have said.

“Chinese banks have great distribution channels and client relationships, but many of them lack expertise to create long-term investment products with sufficient risk controls, so they would benefit from working with foreign players,” said Harry Qin, a partner at PricewaterhouseCoopers LLP in Beijing.

WHOLLY-OWNED COMPANIES

This is the go-it-alone option.

China is planning to allow applications for foreign-owned fund management licenses that would grant control of mutual funds.

At least six firms, including BlackRock and Vanguard, have told regulators they intend to apply to the Chinese securities watchdog, people familiar with the matter have said.

China regulators are trying to shift consumers away from shadow banking products underpinned by loans sitting outside banks’ balance sheets.

That’s creating an opportunity for mutual funds that are expected to increase assets by more than 10 per cent annually, according to Oliver Wyman, a unit of New York-based Marsh & McLennan Cos.

The fund management licenses will allow global asset managers to sell mutual funds to individual investors.

Some firms already hold private asset management licenses that let them target institutional investors and high-net-worth individuals, much like hedge funds.

“Wholly-owned fund management licenses will be one of the most sought after options for foreign companies,” said Rachel Wang, director of manager research for China at Morningstar.

“It allows them to offer more products and have a wide outreach to different types or sizes of customers.”

The potential is significant.

Even with the market opening, foreign players are expected to only account for 6 per cent of revenue generated in the asset management space by 2023, according to Oliver Wyman. Still, that small piece of the market could be worth US$8 billion.

“Chinese regulators are very eager to attract foreign players in the financial sector,” said James Chang, China consulting leader at PricewaterhouseCoopers.

“The government thinks the market is big enough for the local players to handle the competition.”

JOINT VENTURES

This is the legacy option.

Several investment banks already have mutual fund joint ventures in China. With foreign companies now free to control operations on the ground, it’s unclear whether partnerships still provide value.

“Many of the joint venture asset management firms that foreign players set up with their Chinese counterparts have not been performing as expected, partly due to limited product offerings and less than ideal collaboration with the Chinese brokerages,” said Qin from PwC.

The solution for some is to buy out their partners.

JPMorgan is seeking 100 per cent ownership of its fund management joint venture, people familiar have said.

The New York-based bank is in talks with Shanghai International Trust to acquire its stake in China International Fund Management, which oversees 150 billion yuan (S$30 billion).

Vanguard meanwhile has a robo-advisory joint venture with Jack Ma’s Ant Financial Services Group that started providing mutual-fund recommendations to Alipay app users in late March.

PRIVATE FUNDS

A go-slow approach.

Foreign companies were first allowed to apply for private fund licenses in 2016. Some 25 firms, ranging from banks to hedge funds and insurance companies, have won these licenses, according to Natasha Xie, a Shanghai-based partner at the JunHe law firm.

The private funds run three types of assets: stocks, private equity and pilot programs introduced by the Shanghai and Shenzhen governments that allow global asset managers to raise yuan-denominated funds from qualified clients to invest overseas.

“It would make sense for players who can’t commit significant investment or headcount to apply for the private fund management license,” said Xie.

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Economy

Oklahoma energy producer Chaparral seeks debt advice – sources

March 27 (Reuters) – Chaparral Energy Inc is working with debt restructuring advisers as it looks to shore up its cash position at a time of financial distress for U.S. oil and gas producers, people familiar with the matter said on Friday.

The economic fallout of the coronavirus pandemic and an oil price war between Russia and Saudi Arabia have led to the price of crude oil dropping by half since the beginning of March. This is putting pressure on debt-laden energy companies such as Chaparral, which is focused on producing oil and gas in shale plays in Oklahoma.

Chaparral has hired financial advisers for advice on how to improve its balance sheet, the sources said, adding that no debt restructuring move is imminent.

Chaparral did not immediately respond to a request for comment.

The Oklahoma City-based company has around $421 million of debt outstanding, with its 8.75% bonds due in July 2023 currently trading at 25 cents on the dollar with a presumptive yield of 68.9%, indicating investor concerns about repayment, according to Refinitiv Eikon data.

In December, the company appointed Charles Duginski as chief executive and announced an agreement with Strategic Value Partners, which allowed the hedge fund to nominate two directors to Chaparral’s board. Strategic Value Partners owned 30% of Chaparral as of December.

Chaparral went through a bankruptcy process during the last oil price slump in 2014-16, emerging from Chapter 11 protection in March 2017.

A number of companies, including Chesapeake Energy Corp and Gulfport Energy Corp, have brought in restructuring professionals. (Reporting by Jessica DiNapoli, Mike Spector and David French in New York Editing by Sonya Hepinstall)

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Economy

US weekly jobless claims surge to record 3.28 million as coronavirus spurs mass layoffs

WASHINGTON (REUTERS) – The number of Americans filing claims for unemployment benefits surged to a record of more than three million last week as strict measures to contain the coronavirus pandemic ground the country to a sudden halt, unleashing a wave of layoffs that likely brought an end to the longest employment boom in US history.

The weekly jobless claims report from the Labor Department on Thursday (March 26) offered the clearest evidence yet of the coronavirus’ devastating impact on the economy, which has forced the Federal Reserve to take extraordinary steps and the US Congress to assemble a record US$2 trillion (S$2.9 trillion) stimulus package.

The jobless blowout was announced shortly after Federal Reserve chairman said on NBC’s Today Show that the US “may well be in recession” but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen. His remarks were an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Initial claims for unemployment benefits rose 3,001,000 to a seasonally adjusted 3.28 million in the week ending March 21, eclipsing the previous record of 695,000 set in 1982, the Labour Department said.

Economists polled by Reuters had forecast claims would rise to 1 million, though estimates were as high as 4 million.

The Labour Department attributed the surge to Covid-19, the respiratory illness caused by the coronavirus.

“During the week ending March 21, the increase in initial claims are due to the impacts of the Covid-19 virus,” the department said. “States continued to cite services industries broadly, particularly accommodation and food service. Additional industries heavily cited for the increases included the healthcare and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries.”

Governors in at least 18 states, accounting for nearly half the country’s population, have ordered residents to stay mostly indoors. “Non-essential” businesses have also been ordered closed. According to economists, a fifth of the workforce is on some form of lockdown.

Last week’s claims data likely will have no impact on March’s employment report as it falls outside the period during which the government surveyed employers for non-farm payrolls, which was the week to March 14. Economists, however, say the rush for benefits in that survey week suggests that payrolls declined this month, which would end nearly 9½ years of job growth.

Mr Mark Zandi, chief economist at Moody’s Analytics, said: “There are numerous reports of laid-off workers unable to file for unemployment insurance because so many people are trying to file at the same time. Millions of job losses are likely in coming weeks.”

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Economy

Calgary Zoo, YMCA announce layoffs amid COVID-19 pandemic

YMCA Calgary said it has plans for offering new ways to support citizens. A small team of staff is developing resources to support the community during the COVID-19 crisis. There is also a new online resource available from the YMCA’s website. 

Calgary Zoo

After closing its gates on March 16, the Calgary Zoo confirmed Friday it has laid off 60 per cent of its employees.

Officials said a total of 253 full-time and auxiliary positions were impacted.

“We temporarily laid off 157 hourly positions directly tied to serving customers and 96 positions related to program development and operations,” said Alison Archambault, the zoo’s director of marketing, sales and communications.

“We still have 149 positions focused on caring for our animals and advancing our conservation work locally and globally.”

Care will still be provided for the animals, the zoo said.

“While this situation is unprecedented, our beloved animals remain in exceptional care and we’ll continue to stay connected online,” the zoo said on social media, adding that alternate bamboo suppliers are in place for the pandas.

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Economy

Russia's RDIF: New OPEC+ deal possible to address demand if others join

MOSCOW, March 27 (Reuters) – Kirill Dmitriev, the head of the Russian Direct Investment Fund (RDIF), believes a new OPEC+ deal to balance oil markets might be possible if other nations joined it and that countries should cooperate to mitigate the economic fallout from coronavirus.

“Joint actions by countries are needed to restore the(global) economy… They (joint actions) are also possible in OPEC+ (group of the Organization of Petroleum Exporting Countries and non-OPEC members) deal’s framework,” Dmitriev told Reuters in a phone interview.

Russia is a leading non-OPEC member and Saudi Arabia is a key OPEC player. A deal between OPEC and other oil producing nations to curb production to support prices fell apart earlier this month after a failure to agree how to address falling oil demand hit by coronavirus, sending global oil prices into a tailspin.

Dmitriev was one of the Russian masterminds of the original production cuts deal with OPEC.

“We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets,” he said.

Dmitriev declined to say who the new deal’s members should or could be.

U.S. President Donald Trump said last week he would get involved in the oil price war between Saudi Arabia and Russia at the appropriate time. (Reporting by Maria Tsvetkova, Gleb Stolyarov and Katya Golubkova Editing by Andrew Osborn)

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Economy

We are not crashing the economy over coronavirus, Britain says

LONDON, March 27 (Reuters) – The British government is not crashing the economy with its multi-billion pound schemes to help businesses and workers as both companies and citizens needed support to survive the coronavirus crisis, its business minister said on Friday.

“I don’t think we are crashing the economy,” British Business Minister Alok Sharma told Sky News. “I hope the downturn, if I can put it like that, and the impact on the economy will be short term.”

“This is a global issue that is affecting countries across the world and we are providing support, as indeed other are, for their businesses and their citizens,” he said. (Reporting by Guy Faulconbridge; editing by Michael Holden)

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Economy

UPDATE 1-Saudi king to G20: let's unite against coronavirus

* Saudi ruler urges funding for vaccine research, aid to poor

* Says trade must restart as soon as possible to boost confidence

* Under strain, G20 has been criticised for slow response (Recasts with King Salman opening statement)

By Stephen Kalin

RIYADH, March 26 (Reuters) – Saudi Arabia’s King Salman called on Thursday for G20 leaders to boost funding for a coronavirus vaccine, resume the normal flow of goods and services as soon as possible, and help developing countries overcome the global health crisis.

His remarks came at the opening of an extraordinary video conference convened by the world’s major economies to coordinate action over the outbreak and its economic impacts, as worldwide infections exceeded 470,000 with more than 21,000 dead.

“We must have an effective and coordinated response to this pandemic and restore confidence in the global economy,” the king said.

“On the trade front, the G20 must send a strong signal to restore confidence in the global economy by resuming, as soon as possible, the normal flow of goods and services, especially vital medical supplies.”

The G20, currently chaired by Saudi Arabia, has faced criticism of a slow response to the worsening crisis, which is expected to trigger a global recession.

Some member countries have announced economic stimulus packages to offset broad suspensions of air travel and shutdowns of many businesses.

But there are growing concerns about protectionist measures being discussed or adopted as countries scramble to respond. The U.S. Chamber of Commerce urged G20 leaders to match a pledge by countries like Australia and Canada to keep supply chains open and avoid export controls.

HEALTH SHORTAGES

World Health Organization director-general Tedros Adhanom Ghebreyesus was to address the G20 to seek support for ramping up funding and production of personal protection equipment for health workers amid a global shortage.

“We have a global responsibility as humanity and especially those countries like the G20,” Tedros told a news conference in Geneva late on Wednesday. “They should be able to support countries all over the world.”

King Salman urged cooperation in financing research and development for therapeutics and a vaccine, ensuring the availability of vital medical supplies and equipment, and helping less developed countries build capacities.

Despite calls for cooperation, the 90-minute call risked entanglement in an oil price war between Saudi Arabia and Russia and tensions between the United States and China over the origin of the virus.

In preparatory meetings, Beijing and Washington agreed to call a timeout on their coronavirus blame game, the South China Morning Post reported, citing diplomatic sources.

But talks among U.N. Security Council nations have stalled over U.S. insistence that any joint statement call attention to the coronavirus’ origins in China, NBC News reported. Outbreaks, which began in central China late last year, have been reported in 196 countries.

“The U.S.-China dynamic is pivotal to successful G20 coordination, never more so than now as countries grapple 24/7 to confront and contain a pandemic we do not yet fully understand,” former acting U.S. Trade Representative Miriam Sapiro said.

Meanwhile, Washington may use the summit to launch a debate about ending an oil price war between Riyadh and Moscow that has pushed crude prices to near 20-year lows as the pandemic destroyed global demand, The Wall Street Journal reported. (Reporting by Nayera Abdallah in Cairo, Stephen Kalin in Riyadh, Stephanie Nebehay in Geneva, Andrea Shalal in Washington, and Alaa Swilam and Yousef Saba in Dubai; Writing by Stephen Kalin; Editing by Toby Chopra and Andrew Cawthorne)

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Economy

GLOBAL MARKETS-Asia stocks ride stimulus hopes higher but dollar left behind

* Asian stock markets: tmsnrt.rs/2zpUAr4

* Markets take U.S. jobless claims in stride

* European shares set for softer opening

* Investors pinning hopes on stimulus

* Interactive graphic tracking global spread of coronavirus: open tmsnrt.rs/3aIRuz7 in an external browser

By Stanley White

TOKYO, March 27 (Reuters) – Asian stocks rose on Friday as investors wagered policymakers will roll out more stimulus measures to combat the coronavirus pandemic after U.S. unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, while Japan’s Nikkei rose 3.88%, capping its biggest weekly gain on record. Australian shares gave up gains to fall 5.3% after a strong week.

E-Mini futures for the S&P 500 reversed course and fell 0.88% following three consecutive days of gains in the S&P 500 on Wall Street.

Pan-regional Euro Stoxx 50 futures were down 0.51%, German DAX futures fell 0.61%, and FTSE futures were down 1.31%, suggesting gains in Asian shares will not carry over into Europe.

The dollar fell against major currencies as central banks’ repeated steps to solve a dollar shortage in funding markets started to gain traction.

The U.S. House of Representatives is expected to pass a $2.2 trillion stimulus package that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The U.S. Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the United States “may well be in recession”, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Chinese shares, battered this month because of the virus, rose 0.32% on Friday. Shares in South Korea, another country hit hard by the pandemic, rose 1.87%.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus.

CURRENCY MARKET

In the currency market, the greenback fell 0.94% to 108.58 yen in Asia, on pace for a 2% weekly decline.

The dollar was also headed for steep weekly declines against the Swiss franc, pound, and euro.

The U.S. currency’s fall after two weeks of gains suggests the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes fell to 0.7948%, while the two-year yield edged up to 0.2809%.

Yields were headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the huge stimulus package.

U.S. crude ticked up 1.64% to $22.97 a barrel, but Brent crude fell 0.19% to $26.29. Energy markets have been caught in a tug-of-war between falling fuel demand, hopes for stimulus spending and worries about excess oil supplies.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.5% to $1,623.40 per ounce.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.

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