COVID-19 Daily Update: March 19, 2020

The coronavirus has infected more than 240,000 people (with more than 9,800 deaths) globally, according to John Hopkins University. The pandemic has disrupted daily life with city- and countrywide lockdowns and quarantines.

In addition, misinformation is spreading on social media platforms, creating a surplus of inaccurate information that makes it difficult for people to find appropriate guidance and pressuring social media giants including Facebook and Twitter to act.

While the complete long-term effects that COVID-19 will have on business are unknown, companies and corporations are already feeling the impact.

Marriott International Inc. President and CEO Arne Sorenson acknowledged that many market participants are wondering if the hotelier will survive the pandemic. Sorenseon said the company is taking dramatic steps to conserve cash until business recovers.

Much of Europe – now the epicenter of the outbreak – is locked down. The total return in euros from the S&P Europe Broad Market Index, which tracks the share prices of more than 1,500 listed European companies, has fallen 33.3% since Jan. 1. The S&P BMI for the real estate sector has fallen 38.4%.

S&P Global Ratings is publishing a regularly updated list of public rating actions on nonfinancial corporations. As the economic effects of the coronavirus have sent stocks spiraling, oil and gas companies have fallen harder than most. The price war between Saudi Arabia and Russia has inflicted further damage, putting most U.S. producers at much higher probability of defaulting on their debt. Global oil demand continues to shrink, but crude futures appear to be rebounding. Major Latin American petrochemical producers say they haven’t been severely affected by the pandemic so far. The Port of Houston shut down both of its container terminals after a worker who had been at the sites tested positive for COVID-19.

Today is Thursday, March 19, and here is essential insight on COVID-19 and the markets.

HUMAN AND BUSINESS IMPACTS OF CORONAVIRUS

Social media giants face balancing act for tackling coronavirus misinformation

Major social media platforms have been flooded with misinformation about the coronavirus outbreak, but industry experts are mixed about how internet sites should tackle the issue.

The World Health Organization recently dubbed the spread of rumors and sensationalism online about the coronavirus an "infodemic," citing an over-abundance of information — some accurate and some not — making it hard for people to find reliable guidance. Facebook Inc., Twitter Inc., Alphabet Inc.'s Google LLC, Microsoft Corp., LinkedIn Corp. and Reddit Inc. responded with a joint statement, saying the companies are working closely together to combat fraud and elevate authoritative content. But experts warn it will be difficult, if not impossible, for companies to crack down on disinformation while still protecting the free flow of communication that is fundamental to their business models.

—Read the full article from S&P Global Market Intelligence

Marriott CEO details 'heart-wrenching' cost cutting in COVID-19 response

Marriott International Inc.'s CEO acknowledged that many market participants are wondering if the hotelier will survive the coronavirus pandemic, but said the company is taking dramatic steps to conserve cash until business recovers.

The virus is "fast becoming the most significant event to ever impact our business," including the global financial crisis and the year after the Sept. 11, 2001, terrorist attacks, President and CEO Arne Sorenson said in a special conference call to discuss the company's response. Sorenson said he has been to the White House and in contact with congressional leaders in recent days to lobby for near-term assistance.

In particular, he said, he and other industry figures are focused on requesting emergency assistance for employees; initiatives to preserve business liquidity that would support the owners of franchised and managed hospitality properties; and tax relief to ease near-term cash flow challenges. The company is negotiating with the Italian government and labor unions in that country to obtain financial aid for company associates from a national security fund.

Amid broader uncertainty, "the markets are understandably looking for assurance that we will survive," Sorenson said. "Why do I say this? Because there is no other rational explanation for the selloff in our stock, even if you assume this crisis lasts many quarters."

—Read the full article from S&P Global Market Intelligence

Medical malpractice carriers giving, getting leeway in face of COVID-19 pandemic

Medical malpractice insurers have responded with flexibility as their clients deal with liability concerns produced by the COVID-19 pandemic. Medical malpractice insurance covers physicians and other healthcare workers from claims that their services led to patient injury or death. Misdiagnosis and prescription and surgical errors are among the most common medmal claims filed against healthcare workers.

Chris Zuccarini, managing director of healthcare for Risk Strategies Inc. said carriers like Doctors Co. An Interinsurance Exchange and Berkshire Hathaway Inc. subsidiary Medgroup Inc. are communicating with their insureds and trying to help any way they can. "I told my team that carriers are going to be as flexible as they can they be, especially in this environment and knowing the potential crisis here," Zuccarini said in an interview. "They understand the gravity of the situation."

—Read the full article from S&P Global Market Intelligence

Health insurers in UAE, Saudi face added profit squeeze from COVID-19

Health insurers in Saudi Arabia and the United Arab Emirates face a profit squeeze that the coronavirus pandemic will exacerbate. Citizens of the two largest Arab countries receive free state healthcare, but foreign residents — who constitute an estimated 38% and 88% of the Saudi and UAE populations respectively — rely on private insurance, which is usually provided by their employer. Coverage typically extends to an employee's dependents.

Insurance premiums are failing to keep pace with the rising value of medical claims, Fitch Ratings warned in a February 2020 report. In Saudi Arabia, this medical inflation was 8.2% in 2019, according to a survey by Mercer Marsh Benefits. The introduction of 5% VAT in January 2018 was a big cause of these cost increases, which are three to four times the rate of inflation. The outlook in neighboring United Arab Emirates is even gloomier, with Fitch warning that the country's health insurers will struggle to generate underwriting profits. That's because of tough competition and medical inflation, which was 12.2% in 2019 — the fourth straight year it has hit double digits.

—Read the full article from S&P Global Market Intelligence

Coronavirus forces pharma industry to cut back clinical trials, in-person sales

Like many global companies during the ongoing coronavirus pandemic, the biopharmaceutical industry is cutting back or halting some operations such as sales and clinical trials to mitigate the spread of COVID-19. Companies like Amarin Corporation PLC, Amgen Inc. and Pfizer Inc. have suspended face-to-face marketing interactions and turned instead to virtual interactions as employees work from home.

Product launches are also being delayed due to scaled-back marketing campaigns and a decrease in patient-physician interactions. Executives from Aimmune Therapeutics Inc., which received approval from the U.S. Food and Drug Administration for peanut allergy treatment Palforzia in January, said on a March 16 investor call that the launch may slow in the near-term, but sales are currently on track due to remote appointments.

—Read the full article from S&P Global Market Intelligence

Coronavirus-Related Public Rating Actions On Non-Financial Corporations To Date

In response to investors' growing interest in the COVID-19 coronavirus and its credit effects on companies, S&P Global Ratings is publishing a regularly updated list of rating actions we have taken globally on nonfinancial corporations and summary table. These are public ratings where we mention the COVID-19 coronavirus as one factor or in combination with others.

—Read the full article from S&P Global Ratings

Market selloff reveals opportunities, vulnerabilities among US cable stocks

The U.S. cable industry has not been immune to Wall Street's recent dive in the wake of the coronavirus. But the size of the drop has varied company to company, exposing different vulnerabilities and creating potential buying opportunities, according to analysts.

Year to date, the S&P 500 was down 25.8% as of market close on March 18, with fears over the spread of the coronavirus producing the fastest bear market in stock-market history. Share prices in the top five publicly traded U.S. cable operators have similarly fallen, though some have seen a steeper drop than others. Comcast Corp., the largest U.S. cable company both in terms of subscribers and diversification, has seen its share price drop 20.7% from the start of the year as of market close March 18. By contrast, WideOpenWest Inc., a much smaller operator, is down 54.7% over the same period.

Analysts say there are a variety of factors driving these different performances, including stronger balance sheets at some firms when compared to others. But they note that broadly speaking, cable operators are insulated by consumers' persistent need for broadband.

—Read the full article from S&P Global Market Intelligence

March retail market: US sales slip in February as coronavirus fears intensify

Experts predict rough months ahead for U.S. consumer spending as fears over the coronavirus outbreak contributed to a drop in retail sales in February over the previous month.

Retail and restaurant sales dropped by 0.5% compared to January, according to government data. Consumer companies have curtailed operations in recent weeks as the virus continues to spread and government officials urge people to stay home. Retailers like Target Corp. and The Kroger Co. have cut hours, while department store chains such as Macy's Inc. and Nordstrom Inc. temporarily closed their doors to keep the virus from spreading. The dramatic cutback is all but certain to hurt the industry in March, April and beyond, experts said.

—Read the full article from S&P Global Market Intelligence

European real estate reels as lockdowns drag it to center of coronavirus storm

Real estate finds itself at the center of the storm once more. In 2008, overstretched homeowners, speculative property developers, and loose lenders combined to trigger the most severe economic downturn since the Great Depression. This time, the rapid spread of a deadly virus is forcing the shutdown of spaces upon which the real estate industry relies to survive.

As the crisis in Europe escalates, the scale of the losses is dumbfounding stock-watchers. "Company fundamentals have almost become irrelevant given where prices have moved in the last couple of days," Colm Lauder, a real estate equity analyst at stockbroker Goodbody, said in an interview. "It's phenomenal."

The uncertainty around how many victims the virus will claim, how long lockdowns will remain in place, and how many businesses will survive this most extraordinary of situations, means forecasting for the sector and individual businesses is an almost impossible task.

—Read the full article from S&P Global Market Intelligence

LATEST OIL & ENERGY NEWS

US Energy Department requests purchase of up to 30 million barrels of US crude

The US Energy Department on Thursday formally requested to buy up to 30 million barrels of sweet and sour crude from US producers for the Strategic Petroleum Reserve, the initial step in the Trump administration's plan to lessen the impact of low oil prices on domestic operators by filling government stocks to capacity.

Deliveries of the crude were expected to begin as soon as April and will likely run through June, DOE said. The department plans to eventually purchase a total of 77 million barrels of US crude to fill the SPR's four storage sites along the US Gulf Coast.

—Read the full article from S&P Global Platts

PODCAST OF THE DAY

Listen: Will Trump's plan to fill the SPR be enough of a lifeline for US producers?

US Energy Secretary Dan Brouillette joined Capitol Crude hours after his department announced it was seeking an initial 30 million barrels of US crude oil to store in the country's emergency stockpile.

This is part of President Donald Trump's pledge to fill the Strategic Petroleum Reserve "right up to the top."

It's being seen as an economic stimulus for US oil producers who are getting hammered by historic low prices caused by plummeting coronavirus demand and breakdown of OPEC+ supply cooperation. The Energy Department said it plans to solicit another 47 million barrels of US crude for the SPR, but it needs Congress to approve the funding.

Capitol Crude spoke with Secretary Brouillette about how this attempt to help US oil producers will work. We asked him about the fate of US production and exports and where he ultimately sees global oil demand bottoming out.

—Listen to the Capitol Crude episode from S&P Global Platts

More drillers expected to cut executive payouts as oil rout persists

While several North American independent oil and gas drillers have announced significant spending cuts in response to collapsing commodity prices, fewer have publicly acknowledged any changes to executive compensation packages for 2020. So far, Parsley Energy Inc. executive officers have elected to reduce their annual cash compensation by at least 50%, while both Canadian Natural Resources Ltd. and Matador Resources Co. C-suite members will see base salary cuts of at least 15%.

Christopher Earnest, a partner at independent executive compensation consulting firm Compensation Advisory Partners, said other companies are taking action on bonus payouts and long-term incentive awards like stock options. Earnest estimates that around 25% to 30% of independent producers have taken measures to adjust executive compensation in some way, and that there will be a wave of announcements over the next month.

—Read the full article from S&P Global Market Intelligence

CHART OF THE DAY

Independent oil, gas producers facing increased chance of default as stocks tank

The economic effects of the COVID-19 virus have sent stocks spiraling, but oil and gas companies have fallen harder than most. The price war between Saudi Arabia and Russia has inflicted extra pain, putting most U.S. producers at much higher probability of defaulting on their debt.

Eleven of the biggest independent oil producers reviewed have seen their chances of default spike in recent weeks, according to the S&P Global Market Intelligence perception of default signal model that calculates the likelihood of a company defaulting on its debt or entering bankruptcy protection over a one- to five-year horizon.

—Read the full article from S&P Global Market Intelligence

Oil futures: Crude sees support from ECB rescue package

Crude oil futures were supported early afternoon in Europe Thursday following large monetary announcements overnight, but remained weighed on by COVID-19 demand concerns at a time of increasing supply by OPEC kingpin Saudi Arabia, among others.

May ICE Brent crude futures -- the front-month contract hit its lowest since 2003 on Wednesday -- were up 80 cents/b at $25.68/b, with the April NYMEX crude contract up $1.77/b at $22.14/b.

Futures saw support from the European Central Bank's launch of its response to the coronavirus pandemic, including a Eur750 billion ($805 billion) package to buy government and company debt across Europe.

—Read the full article from S&P Global Platts

Renewable energy groups hope for coronavirus-tied help from US Congress

Renewable energy trade groups are seeking support from the U.S. Congress as lawmakers consider possible federal aid for businesses and industries hit by the coronavirus-driven market downturn. The push for federal aid contrasts with the stance of many U.S. oil and gas companies, which fear that government assistance to their sector will prop up less-efficient producers and bring more output into an already oversupplied market.

The U.S. Senate on March 18 passed a multibillion-dollar coronavirus relief bill that will provide paid sick leave, unemployment insurance and other assistance for workers sidelined by the outbreak. The vote came after the U.S. House of Representatives passed the legislation March 14 and following Congress' approval of an earlier coronavirus relief package in early March. The bill now heads to the president's desk for his expected signature.

Senate Majority Leader Mitch McConnell, R-Ky., nevertheless said he wants to immediately craft a "far bolder" third package to support the U.S. economy and workers. That legislation could include "targeted relief for key industries that are shouldering an outsized burden from the public health directives and which our nation will need to be operational on the other side of this," McConnell said March 18. McConnell did not give specifics on potential aid, but airlines and the hospitality sector could be beneficiaries.

—Read the full article from S&P Global Market Intelligence

Latin American petrochemical producers say not severely affected by pandemic

Major Latin American petrochemical producers have not been severely affected by the coronavirus pandemic so far, the companies say. Most companies said all non-critical travel had been postponed and administrative employees were working from home, and they were closely following all recommendations from the World Health Organization.

—Read the full article from S&P Global Platts

US lawmakers press Saudis to stabilize oil prices, but aren't likely to get any satisfaction

With capex cuts and layoffs looming for the shale patch, US lawmakers from top oil-producing states have appealed to Saudi Arabia to reconsider its plans to flood the market with crude - likely receiving a polite, but firm rebuff.  The kingdom, which has said it intends to surge its crude exports and supply a record 12.3 million b/d to the market once its OPEC production quota expires at the end of March, shows no signs of backing off its price war against Russia.

Saudi Aramco "has already stated that they are maintaining April production levels into May, so it doesn't look like much can be done at this stage apart from economic pressures to play out in the oil market," said Faiza al-Husseini, vice president and lead geopolitical analyst for Saudi-based consultancy Husseini Energy.

The aggressive moves have caused oil prices to crater to 17-year lows this week, sparking panic in industry boardrooms, which have responded by dramatically slashing budgets and delaying projects. That, in turn, has prompted several lawmakers from Texas, North Dakota, Alaska and other oil states to directly lobby Saudi Arabia, stressing the two countries' decades-long ties.

—Read the full article from S&P Global Platts

Port of Houston shuts container terminals after worker tests positive for COVID-19

The Port of Houston has shut down both of its container terminals after a worker who had been at the sites tested positive for COVID-19, the port said late Wednesday. "In light of this information, and in an abundance of caution, both public terminals are closed and operations are temporarily suspended while a thorough investigation is being conducted," the port said in a statement.

The port had no timeline on how long the shutdowns of its Bayport and Barbour's Cut terminals would last. Decisions on demurrage, or extra costs incurred by ships waiting to dock, and all others "will be determined as soon as possible," the port said.

The closure will come as a blow to those shipping lines that operate trans-Atlantic services which had been largely been unaffected by the coronavirus outbreak in recent weeks compared to those from North Asia, which have had to deal with lockdowns at Chinese ports. This is on top of the slow return to work for Chinese manufacturing as a result of lengthy quarantine periods. These appear to have eased significantly over the last few days, with China almost back to pre-Lunar New Year manufacturing, and exports starting to increase to fulfill the backlog of orders.

—Read the full article from S&P Global Platts

VIDEO OF THE DAY

Watch: How and Why S&P Dividend Aristocrats Work

Explore how a focus on quality dividend growth influences risk/return and take a closer look at S&P Dividend Aristocrats’® legacy of stability and strength.

—Share this video from S&P Dow Jones Indices

This article was written and compiled by Molly Mintz.