by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EST]

It’s Monday.  Global markets remain in risk-off mode after the Senate’s first swing at the third phase of the rescue package fails.  BREAKING: FED GIVEN BROADER POWERS TO INTERVENE IN FINANCIAL MARKETS—MORE BELOW—S&P FUTURES RECOVER.  We update the COVID-19 virus news. Here are the details:

COVID-19:  The world now has 349,211 reported cases of COVID-19, with 15,308 fatalities and 100,165 recoveries.  Here is another link to a new site we have found on tracking the virus, along with a chart of infections from the FT:

The U.S. pace of infections is rising rapidly; this is probably more about increased testing. Sadly, there is no evidence of the bend we usually see when a country is getting on top of the spread.

The virus news:

• In a disturbing development, there has been a rise of new cases in Asia. It appears the majority of these cases are from travelers.  We would expect this development to encourage further steps to restrict travel.
• India has gone into lockdown as the virus begins to spread.
• Chancellor Merkel is in self-quarantine after meeting with a doctor who tested positive for the virus.
• The National Guard has been activated in three states.
• Rand Paul (R-KY) is the first senator to test positive for COVID-19.
• The limited amount of testing for the virus has led to a dearth of information about how it spreads. Only South Korea has engaged in massive testing.  An interesting natural experiment has emerged in the NBA.  After Utah Jazz center Rudy Gobert fell ill from the virus, eight other teams were tested and 13 players, coaches or staff were found to be infected.  Of these 13, seven were asymptomatic.  If we had better testing, it would be easier to limit isolation to only those most vulnerable and also allow us to isolate those who are not infected from those who are but are asymptomatic.  In the end, the real lesson from the pandemic may be that aggressive testing is the secret to containing the virus with the least economic damage.
• Iran is getting clobbered by the virus. Much of this is because it needed new trading partners after sanctions returned and those partners have been hit by the disease.
• British pubs have been closed. European isolation measures escalate as infections rise.  New Zealand and Australia join the rest of the world in restrictions; Greece, too.
• There is great hope that the onset of spring and summer will lead to a decline in the infection rate. Opinion is divided among epidemiologists.  However, even if it does, COVID-19 may return in the fall.

The policy news:

• As expected, the first attempt at a fiscal response has failed. Although this is a disappointment, we do expect a package before Friday.  McConnell crafted a law for his caucus and calculated that either (a) the opposition would swallow the bill, or (b) he could hang the disappointment on the Democrats.  He may have miscalculated.  Much has changed since TARP.  The narrative that emerged from 2008 was that the bailouts were only for the Establishment and the less affluent were left to bear the burden of adjustment.  This time around, the Democrats are pushing for a much broader set of measures that will help lower paid workers.  In order to do this, we expect the final bill to create restrictions for business that will make it much more labor friendly.
  • Uber (UBER, 21.33) is asking for its drivers to get help in the final package. The current package did not offer any support for “gig” workers.
  • More support for small business, including loans, will likely need to be expanded. There is nearly universal support among mainstream conservative and liberal economists on this issue.
• With apologies for burying the lede, the Fed is wheeling out the nuclear option, getting a mandate to buy debt broadly. This is a clear attempt to narrow credit spreads.  Signs of stress in the financial markets have become numerous:
  • Reports of stress in money markets have emerged. At least two sponsors have been forced to inject funds into money markets to prevent the “breaking of the buck.”  Money market fund shares falling below $1 is a modern-day version of a bank run.
  • A subprime mortgage specialist is seeking buyers for assets, a sign of stress.
  • Pimco is backing away from corporate bonds.
  • Blackrock (BLK, 354.72) and Vanguard (VTI, 115.19) announced higher costs for cash redemptions for some ETFs, an indication of tighter liquidity.
  • S&P projects junk bond defaults of 10% over the next year, a three-fold increase.
  • Dollar strength is a clear indication of funding strains globally.
  • In Britain, regulators are pressing companies to delay releasing earnings.
  • Complicated trades designed to offer higher yields in a low rate environment are being exposed to the risks they have taken.
• The recovery in equity futures suggests that much of the worry in the stock market was less about the drop in economic growth and more about the lack of liquidity. The Fed’s decision to expand its mandate to add other bonds to its balance sheet should quell some of these concerns and narrow credit spreads to more manageable levels.  This link discusses details of the Fed’s actions; it looks massive, although some of the plans will require additional support from the Treasury.  In our recent report updating the 2020 Outlook, we noted three threats—COVID-19, the oil shock and a looming financial crisis.  The Fed may now have the tools to prevent the third element.  This is good news but it doesn’t eliminate the other two risks.
• One of the problems policymakers face is the tradeoff between managing the spread of COVID-19 and the severe damage the mitigation measures have on the economy. There are signs that the White House may be concluding it is going to lean policy toward the economy at the risk of propagating the spread of the virus.  This is a difficult tradeoff; if restrictions are relaxed and infections and deaths surge, it would be catastrophic.  But, maintaining these restrictions could lead to economic outcomes that rival the Great Depression.

The economic news:

• Dire forecasts are becoming the norm. St. Louis Fed President Bullard made headlines suggesting that unemployment could hit 30%.  Millions of jobs are projected to be lost.  Firms are announcing mass layoffs.  We have been expecting a 10% drop in annualized real GDP for Q2; our forecast is looking rather conservative compared to others.
• Even if the U.S. government relaxes restrictions, state and local governments may not comply. After all, it is those governments that bear the cost of adjustment.  The key to saving the economy is massive fiscal stimulus—probably in the order of $2.0 trillion at least.  There are risks to doing this, which we will discuss in the coming weeks.  But, the risk of doing too little is very high.
• Despite everything, the Atlanta FRB GDPNow forecast for Q1 is still running at 3.1%. Given the problems seen in March, we expect that to come down but the real falloff won’t emerge until Q2.

Odds and ends:  The Marines are retooling their planning, preparing for war in the Asia-Pacific and reducing training for the Middle East.  Saudi Arabia intends to maintain the oil share war through borrowing.

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by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EST]

Good morning and happy Friday!  “There are decades where nothing happens, and there are weeks where decades happen.”  This quote, misappropriated to Lenin, seems to capture much of how things feel right now.  It’s a “green screen day” with equity futures rebounding around the world and the dollar finally taking a pause from its recent strength.  We update COVID-19 news, including comments about global stimulus activities.  Here are the details:

COVID-19:  The world now has 246,275 reported cases of COVID-19, with 10,038 fatalities and 86,035 recoveries.  Here is a chart of infections from the FT:

The U.S. pace of infections is rising rapidly; this is probably more about increased testing.  Sadly, there is no evidence of the bend we usually see when a country is getting on top of the spread.

The virus news:

• States are announcing lockdowns. California has done so in the U.S., while Bavaria just announced it is doing the same in Germany.
• China is boosting its stature by providing medical equipment to Europe.
• Both the chief negotiators for Brexit appear to have contracted COVID-19.
• Nursing homes in the U.S. are being hit with outbreaks of the virus.
• Iran is about to celebrate its biggest holiday of the year. That will do nothing but spread the virus further.
• The U.S. warns against international travel.

The policy news:

• We have seen nations attempt to control the news flow about the virus. China is notable in this area.  The U.S. is engaging in some of this as well.  The White House is asking states to stop issuing early information on initial jobless claims.  We are watching this news with great interest.  As we have been working through the data, we are seeing other economists suggesting historic declines in Q2 GDP of over 10% and perhaps a 2.0 million jump in jobless claims.  If the government decides to stop the release of the data, we will all be “flying blind.”  In addition, it won’t work; organization theory suggests that if you stop the flow of real information, people simply make up their own.  Not only will it probably not be accurate, it will likely be worse.
• The Senate leadership is putting together a fiscal package of at least $1.0 trillion. Already, there is speculation this level will fall short.  And, the chance of getting something done quickly is starting to fade.  As one would expect, there is already squabbling over the details.  The White House has suggested that companies that take aid must give the government equity.  There is strong opposition to that idea, suggesting conditions haven’t gotten bad enough yet.
• One of the tensions in the Senate bill is where the benefits fall. The establishment (both left and right) tend to favor support for businesses first, on the idea that if businesses fail, the job losses will be even worse.  Populists counter that businesses have squandered support after 2008 and recent tax cuts by merely repurchasing stock to aid the capital-owning establishment.  As we noted yesterday, we would use the same tactic we employ when confronting a dessert table—try everything!  However, we do note a set of reports that will give the establishment a black eye: a couple of senators, briefed on COVID-19 in February, dumped their equity holdings.  These reports will tend to undermine the establishment’s case; look for aid to be tied to equity.
• Meanwhile, Germany and the U.K. have set up fiscal expansions.
• The central banks continue to expand their activities. The BOE has cut rates to record lows and is increasing QE.  The Fed is moving aggressively as well, buying $250 billion of the $500 billion of new QE this week.  This almost certainly looks like more will be coming.  The ECB has also indicated it will consider boosting its balance sheet
• Oil prices rallied on a few reports. First, President Trump suggested he may intervene in the conflict between Russia and the KSA.  There is some precedent for this action.  VP Bush reportedly did the same during the 1986 oil price collapse.  However, we note his intervention came after oil prices neared $10 per barrel and the parties were already in talks to end the overproduction war.  Second, as already announced, the U.S. will increase buying for the Strategic Petroleum Reserve.  Third, Texas is apparently considering dusting off its old production allocation mechanism used from the 1930s into 1970 which regulated the amount of oil that the state would produce.  Meanwhile, U.S. production remains at record levels.  As we noted in this week’s Weekly Energy Update, due to hedging, production will likely remain near record levels for the rest of the year without intervention.  What is unclear—if the Texas Railroad Commission restricts output, how will that affect debt servicing by oil companies?
• The PBOC surprised us by not cutting rates overnight. China’s stimulus thus far has been modest.

The economic news:

• Food logistics have become paramount. As shoppers stock up to stay home, it has increased demand and strained supplies.  For the most part, the U.S. is managing this rather well.  The U.K. is another matter.  Food shortages could seriously undermine public order.  In addition, the delivery of restaurant food remains with the most vulnerable.
• Not all the employment news is bad. Retailers are increasing hiring.
• We continue to closely monitor strains in the financial markets. The dollar surge is worrisome, although we are seeing some relief  Corporate indebtedness is an area of concern.

Expect continued market swings.  Policymakers are moving in the right direction but the economic impact of battling the virus has been significant.  Enjoy the weekend.  We will talk to you on Monday.

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by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EST]

Today is the spring equinox; it’s hard to say if this is a good or bad omen.  We update COVID-19 news.  Although there is much to say about the financial markets, to some extent, it can be summed up succinctly—there is a dash for cash.  Equities are falling again this morning.  Congress is working on a $1.0 trillion stimulus bill.  Don’t be surprised in a few weeks when we will marvel at how timid this action was.  We are paying close attention to today’s initial claims data as it is expected to show a massive increase in layoffs.  The weekly energy report is updated on our website.  Here are the details:

COVID-19: The world now has 222,643 reported cases of COVID-19 with 9,115 fatalities and 84,506 recoveries.  Here is a chart of infections from the FT:

The U.S. pace of infections is rising rapidly; this is probably more about increased testing.

The virus news:

• A disturbing trend is developing in infections. Although it is documented that COVID-19 has a higher mortality rate among older people, that doesn’t mean young people (a) can’t get seriously ill from the disease, and (b) can’t die from the virus.  In fact, 40% of hospitalizations are between the ages of 20-54.  It is clear that some are not taking social distancing seriously.  Sadly, they can become vectors of the disease.
• China had no new indigenous infections.
• Two members of Congress have tested positive. There are concerns that if the virus spreads among members of Congress, voting on critical bills may be affected.
• The U.S. is pushing social distancing to combat the virus and downplaying testing.
• Iran may be the hardest hit nation from COVID-19. There are warnings that “millions” may succumb to the disease.  Some of this development is due to Iranian government mismanagement.  As we have seen elsewhere, Tehran initially tried to downplay the pandemic.  In addition, the political class everywhere tries to use crises to boost their own agendas.  Internal fights have slowed the response.  However, sanctions have also played a role, undermining its economy and weakening its medical system.  The S. is adding additional sanctions in a bid to get Iran to release U.S. citizens being held by Tehran.  Our fear over Iran is twofold.  First, Iran sends operatives throughout the Middle East to project power; it is possible these operatives will become vectors for COVID-19.  Second, as political pressure rises on the Iranian leadership, the country may try an external war to distract its citizens.  Although it is evident that neither the U.S. nor Iran wants a direct conflict, as desperation grows in Iran, starting a conflict with the U.S. while Washington is distracted could occur.  We think this is a low probability outcome, but lately we have been seeing a lot of low probability outcomes occurring.
• The U.S. and Canada have closed its border.
• Putin is apparently using the virus as an excuse to clamp down on protests and ease his term extension.
• Another downside to just-in-time inventories is emerging; reports suggest that basic items required for COVID-19 testing are become scarce. These inventory models are great when everything is functioning well, but they fail miserably under stress.  Another worry: ventilators are in short supply in the U.S. and Europe.

And now, financial market news related to COVID-19:

• There have been a series of curious moves in financial markets, which we will discuss below. But, as noted above, they are all tied to a singular desire—cash is king and there is a scramble to acquire it.  Risk-off assets have been falling in price.  The dollar is on a tear as those who have dollar obligations are scrambling to acquire the greenback.  Emerging markets are getting hammered.  Mortgage REITS are being hit on funding concerns.
• The ECB announced a €750 billion bond-buying program to narrow the spreads between the north and the south of Europe. We are seeing a rally in bonds this morning in both Europe and the U.S.
• The Fed announced a new backstop for the money market industry. The White House is asking Congress to support money markets as well, likely to prevent a run on this part of the market to prevent a repeat of 2008.
• The administration and Congress are working on programs to support the economy. Paid leave has passed both houses.  The president has invoked the Defense Production act.  There is a growing sense that the economy needs a massive stimulus package.  One of the lessons of 2008 is that it is easy to undershoot stimulus.  Another is that cash injections, either in the form of grants, transfers, loans or equity stakes, are the most efficient way to prop up the economy.  Shovel-ready projects are a myth.  It is politically difficult to execute stimulus in a crisis.  The fastest way to deliver funding is to businesses via the financial system.  However, if businesses hoard the cash and layoffs occur anyway, it appears that the government doesn’t care about the less affluent.  But, getting cash to households, although effective, is slow.  Perhaps the best way to attack this problem is to use the same method as dealing with a dessert table—try everything!  This will entail a larger stimulus, but, given the sudden stop the economy is facing, it may not be possible to overdo it.  In fact, that may be what the financial markets are waiting for.  It is worth noting that, similar to what we saw in 2008, state and local governments are facing a major cash crunch; this would be a good time for the Federal government to step in.  The claims data, as we show below, is likely to deteriorate further.  Households are going to face a serious cash crunch.  Again, offering support for firms to keep employees on the payrolls would be good for business and workers.  We are starting to also see articles worrying about U.S. debt capacity.  This fear is profoundly misplaced.  As WWII showed, the Fed could simply set the interest rate across the yield curve and buy any bonds the public didn’t want.  Will this eventually be inflationary?  Probably, but this is a problem that can be dealt with later.
• The other problem this virus event has illustrated is that the financial markets are not functioning well. The industry has become so obsessed with speed that it ignored the problem of depth.  In other words, we have an industry full of algorithmic trading that wants to buy fast but feels no need to support a broadly functioning market.  This factor is contributing to market volatility.  This issue will be exacerbated tomorrow; we are seeing a quarterly “quadruple witching day.”

Odds and ends: The journalism spat between the U.S. and China continues, with Beijing expelling some U.S. reporters.  The trade war continues as the U.S. increases tariffs on European aircraft.

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by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EST]

Well, it’s Wednesday, and we face another day right out of a post-apocalyptic zombie movie.  While there is still no sign of zombie armies marching on Washington, there is a more worrying sign that global financial markets are seizing up in a desperate scramble for liquidity.  Policymakers around the world are pledging in unison to do “whatever it takes” to rescue the global economy, which is a good thing, but markets will remain volatile until real results are visible.  Below we review all the key news from the crisis and beyond.

COVID-19:  Official data show confirmed cases have risen to 203,529 worldwide, with 8,205 deaths and 82,107 recoveries.  In the United States, confirmed cases rose to 6,496, with 114 deaths and 17 recoveries.  Most disconcerting, the slowdown in the real economy is exposing or exacerbating financial weaknesses.  There are increasing worries about businesses and individuals not only having trouble paying their everyday bills, but also covering the high levels of debt they took on during the boom of the last decade.

• Real Economy Impact.  In a Financial Times Op-Ed, former Fed Chairs Yellen and Bernanke warned the world’s central bankers and governments to focus on making the virus crisis as short-lived as possible.  In their view, the main danger is that if the crisis is prolonged, established economic relationships will get broken and healthy businesses will go bankrupt.  Then, it would be difficult for people to find the same jobs, for businesses to get new credit lines, and for the economy to get back to the way it was.  They emphasized that the central banks need to make sure credit remains widely available for firms and individuals under stress.  The Yellen/Bernanke warning comes as reports show imported infections spiking in some Asian countries where it previously seemed the pandemic had been brought under control.  Preventing imported cases will likely become even more difficult now that the pandemic is spreading even in Africa and Latin America.  Even as imported infections loom, a survey shows one-third of manufacturers in southern China are facing supply shortages despite the recent sense that the country had passed the worst of the crisis.
• Financial System Impact.  Despite the loosened monetary policy around the world, we continue to see signs of a desperate dash for dollars.  Fund managers are selling even the most liquid safe-haven assets to raise cash, so government bond prices are slumping all over the world this morning.  The selling is reportedly being exacerbated by investors’ concern about burgeoning debt issuance in the coming months as governments seek to fund their crisis fiscal plans.  At the same time, heavy selling has left both Vanguard’s and Blackrock’s total bond market ETFs trading at steep discounts to NAV.  Commodities, including gold and other precious metals, are also being sold off to raise cash.  As long as margin calls and debt repayment concerns persist, even the supposedly safe-haven assets could remain volatile and under pressure.
• Fiscal Policy Response.  The Trump administration yesterday said it was working with Senate Republicans on a Phase III economic support package totaling some $1 trillion.  That would include up to two direct payments to individuals costing $250 billion each, some $50 billion in aid to the airline industry and as much as $500 billion to help small businesses and cover other expenses.  The first payment to individuals would come around the end of April and would be means tested so it doesn’t advantage the wealthy.  Some Republicans are still uncomfortable with the provisions, but Senate Majority Leader McConnell is pushing for passage, saying, “My counsel is to gag and vote for it anyway.”  The Phase III legislation would supplement the Phase II package consisting mostly of paid sick leave, which has already passed the House, and the earlier Phase I package of about $8 billion focused on vaccine research and other medical initiatives.  In contrast, investors are increasingly worried that Chinese policymakers don’t have the stomach to launch a big, new monetary or fiscal stimulus like they did in 2008.
• Monetary Policy Response.  To help ease financial conditions, yesterday the Fed said it would revive the Primary Dealer Credit Facility used in the 2008 financial crisis.  The facility is designed to expand cheap loans to primary dealers (the 24 large financial institutions that serve as the Treasury’s exclusive counterparties in financial transactions), by allowing them to borrow against some stocks, municipal debt and higher-rated corporate bonds.  However, just as with fiscal policy, some major institutions are hesitating about how far to push monetary measures.  In controversial remarks published today, Austrian Central Bank Governor Holzmann said that the ECB shouldn’t step in to support the bonds of heavily indebted countries like Italy, and that a recession might have a useful “cleansing” effect on the economy.  In a stunning throwback to the traditional Austrian school of economics, Holzmann said, “One should be careful that only the firms capable of surviving do survive, and that others that would have failed even without a crisis don’t survive.”  Eurozone leaders are also at odds over using the ECB’s massive, €500 billion “European Stability Mechanism” to offer credit lines to multiple states.  Germany and the Netherlands, in particular, are resisting the move.

United States:  In yesterday’s Democratic Party primary elections, former Vice President Biden won all three key races.  With his wins in Florida, Illinois and Arizona, it appears he would only have to win 42.8% of the remaining delegates to the party’s summer convention in order to win outright in the first ballot.  The wins heap even more pressure on Vermont Sen. Bernie Sanders to drop out of the race.

Argentina:  President Alberto Fernández has proposed a further hike in the country’s soybean export tax to 33%, just months after he increased the tax to 30% from the previous 25%.  However, the powerful farmers’ lobby is now starting to push back by launching protests.  Along with the global coronavirus panic, the tension is negative for Argentine stocks and bonds.

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by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EST]

Happy St. Patrick’s Day!  To celebrate the holiday, we think it would be great if the markets could end the day “in the green.”  However, much will depend on news flow related to the COVID-19 “black swan.”  With so many fast-moving developments, equities could easily turn back into the red.  On that colorful note, we review the latest news on the epidemic and a few odds and ends related to the oil market, Russia and Israel.

COVID-19:  Official data show confirmed cases have risen to 185,067 worldwide, with 7,330 deaths and 80,236 recoveries.  In the United States, confirmed cases rose to 4,661, with 85 deaths and 17 recoveries.

• Real Economic Impact.  Continuing recent trends, governments around the world keep ratcheting up the required or suggested restrictions on mobility and public gatherings.  Yesterday President Trump suggested avoiding groups of more than 10 people for the next couple of weeks, and he warned that the crisis could last until July or August.  The statements, coming right before market close, helped send equities plunging.  Separately, the European Commission proposed a 30-day restriction on nonessential travel to the EU, and French President Macron ordered a nationwide quarantine that bars people from leaving their homes.  Many airline companies are in danger of bankruptcy if they can’t slash jobs and nail down state support by the end of May.  Companies ranging from Volkswagen (VWAGY, 11.52) to Airbus (EADSY, 18.46) have now imposed temporary shutdowns on all their European manufacturing facilities.
• Financial System Impact.  As we’ve been discussing recently, a key issue with the disruptions in the real economy and the Saudi-Russian price war is that they’re producing or exposing strains in the financial system.  For firms trying to borrow in the commercial paper markets, spreads over Treasury obligations have blown out to their highest level since the 2008 financial crisis.  That helps explain the rush of firms to draw down bank credit lines, which in turn helped spark the weekend’s liquidity moves by the Fed.  The scramble for dollars is also producing stress in the cross-currency basis-swap markets that many foreign borrowers rely on to access greenbacks.  While the Fed eased the terms on which it provides swaps to five major central banks on Sunday, it may need to offer help for more countries in the near future.  Separately, the Australian government has asked brokers to trade less frequently to avoid taxing an exchange system under stress from reduced staffing and people working from home.  That raises a concern that major financial markets may even be closed at some point.  In fact, the Philippines has already halted all stock, bond and currency trading until further notice.
• Fiscal Policy Response.  The House of Representatives yesterday approved “technical corrections” to the coronavirus bill that it rushed through on Saturday, after Senate Republicans complained about aspects of the emergency program.  For example, the new bill scales back the paid leave provisions to ease the burden on businesses.  The new measure would still provide two weeks of sick leave to a wide swath of workers affected by the pandemic (including those who are in quarantine, caring for family members with COVID-19 and those with children whose schools or daycare centers have closed).  However, an additional 10 weeks of paid leave would be limited to workers caring for a child whose school or daycare has been shut down.  Healthcare providers and emergency responders, as well as workers who had been in quarantine or caring for a family member affected by the virus, wouldn’t be eligible for the additional 10 weeks of leave.  Reports this morning say the Trump administration will also seek an additional $850 billion in stimulus spending.  Separately, EU Competition Commissioner Vestager released a draft state-aid proposal that would allow EU governments to make direct grants or tax concessions to companies, provide subsidized bank loan guarantees and allow subsidized public and private loans to companies.  On the other hand, when aid is offered, it’s important to keep an eye on any strings attached.  Ominously, French Finance Minister Le Maire not only laid out a €45 billion economic rescue plan, but also said the government might have to nationalize firms in order to save them.
• Monetary Policy Response.  Pressure continues to build on the ECB to further ramp up its bond purchases in order to arrest surging borrowing costs for Italy and other Eurozone countries.  Separately, Turkey’s central bank today slashed its benchmark short-term interest rate to 9.75% from 10.75% previously.  To pump liquidity into the banking system, it also launched new 91-day repo auctions at a rate 1.50% lower than the benchmark rate.  It also cut bank reserve requirements and broadened a lira-dollar swap arrangement for banks.

Oil market:  The International Energy Agency has warned that the Saudi-Russian price war and the COVID-19 epidemic will cut the revenues of “vulnerable” producing countries like Iraq and Nigeria by up to 85%.  The warning highlights how the combined crises could spark significant fiscal stress for many less developed countries.

Russia:  The highest Russian court approved President Putin’s constitutional changes, which were passed by parliament last week.  The court’s approval removes one of the final barriers to Putin potentially staying in power until 2036.

Israel:  President Rivlin has given former military chief Gantz the first crack at forming a government after this month’s inconclusive election.  However, Prime Minister Netanyahu is appealing to legislators in Gantz’s coalition to join with him to form a broad coalition in which Gantz and Netanyahu share power.

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