Trump pledges $8.3bn to combat virus outbreak
AP
US PRESIDENT Donald Trump is expected to sign an $8.3 billion (R130bn) measure to help tackle the coronavirus outbreak. The legislation would provide federal public health agencies money for vaccines, tests and potential treatments, and help state and local governments prepare for and respond to the threat.
The Senate passed the measure on Thursday. The money would pay for a multifaceted attack on a virus that is spreading more widely every day, sending financial markets spiralling again on Thursday.
Thursday’s sweeping 96-1 vote sends the bill to the White House for President Donald Trump’s signature. Republican Senator Rand Paul cast the sole “no” vote. The House passed the bill on Wednesday by a 415-2 vote.
The plan would more than triple the $2.5bn amount outlined by the White House 10 days ago. The Trump proposal was immediately discarded by members of Congress from both parties.
Instead, the bipartisan leadership of the House and Senate Appropriations committees negotiated the increased figure and other provisions of the legislation in a burst of bipartisan co-operation that’s common on the panel but increasingly rare elsewhere in Washington.
DESPITE other economic data and financial market news, Covid-19 overshadows all and is dominant in asset prices on financial markets across the globe.
The biggest volatility on share and bond markets was experienced last week as share indices varied from gains of about 4 percent on one day, only for a sell-off of more than 4 percent the next day.
It seems that the decision of the US Federal Reserve to lower its bank rate by 0.5 percent contributed – contrary to what would have been anticipated by the Fed – to more volatility, with bond yields tumbling and the dollar staying under pressure.
At the close on Friday, the S&P 500 index traded 7 percent lower than the previous Friday.
Emerging markets were hit hard as investors were desperately looking for safe havens.
Even the gold price had some volatile movements and traded in a range of close to $100 (R1 567) per ounce over the past 10 trading days. The metal, however, ended the week higher at levels about $1 655 per ounce.
Brent crude stayed under huge pressure as the price for Brent tumbled,
“In situations like this, I believe no expense should be spared to protect the American people, and in crafting this package none was,” said Appropriations Committee chairperson Richard Shelby, Republican, Alabama. “It’s an aggressive plan, a vigorous plan that has received an overwhelming positive reaction.”
Trump was sure to sign the measure, which has almost universal support.
It is intended to project confidence and calm as anxiety builds over the impact of the virus, which has claimed 12 lives in the US.
“The American people are looking for leadership and want assurance that their government is up to the task of protecting their health and safety,” said Democrat Senator Patrick Leahy.
The impact of the outbreak continues to mount. The British government is considering suspending Parliament for five months in hope of limiting the spread of the virus in the United Kingdom.
The legislation would provide federal public health agencies money for vaccines, tests and potential treatments, including $300 million to deliver such drugs to those who need it.
More than $2bn would go to help federal, state and local governments prepare for and respond to the coronavirus threat.
An additional $1.3bn would be particularly on Friday to $46.84 per barrel. This was more than $6 or 11 percent lower than the level of $53 per barrel the previous week.
Locally, the announcement by Statistics SA that the economy was in a technical recession for a second time in two years came as a shock.
Not only had the economy grown negatively by -1.4 percent during the fourth quarter last year, but had a record contraction for three of the four quarters in 2019.
Power cuts had a devastating effect on output, as business and consumer used to help fight the virus overseas.
There’s also funding to subsidise $7bn in small business loans.
Other dollars would be directed to help local officials prepare for the potential worsening of the outbreak and subsidise treatment by community health centres.
Medicare rules would be loosened to enable remote “telehealth” consultations whereby sick people could get treatment without visiting a doctor.
Democrat Senator Maria Cantwell, whose state is at the centre of the crisis, praised the bill, because it “will increase access for public lab testing, help pay for isolation and quarantine, help pay for sanitising in public areas, confidence dropped. Companies have indicated that they are likely to cut jobs by more than 10 000 in 2020.
Together with the news that Covid19 was detected for the first time in South Africa on Wednesday, the rand depreciated and bond rates increased at the end of last week, after a recovery earlier in the week.
The exchange rate against the dollar ended the week mostly flat, at R15.67/$, the same as the previous Friday.
Despite the contraction on international equity markets, shares on the JSE started to recover last week. The FTSE/JSE All Share Index closed on 52 065 points on Friday or 1 027 points (2 percent) higher than the 51 038 of the previous Friday.
The industrial board had a very good week, as the Industrial 25 index improved by 3.6 percent.
The Resources 10 index improved by 1.9 percent and the Listed Property index, for the first time this year was on the winning side with an improvement of 2 percent.
The weaker rand took its toll on the financial board, as the Financial 15 index lost another 1.4 percent last week and was down by 12.6 percent better track the virus and those who might come into contact with it, help labs who are trying to identify hot spots, and limit exposure.”
The legislation contains a hardwon compromise that aims to protect against potential price gouging by drug manufacturers for vaccines and other medicines developed with taxpayer funds.
Health and Human Services Secretary Alex Azar would have the power to make sure commercial prices are reasonable. Azar is a former drug industry lobbyist.
Democrats said other steps may be needed if the outbreak continues to worsen. since the outbreak of Covid-19.
Due to the sharp decrease in the oil price it is expected that the price of petrol and diesel will decrease sharply at the beginning of April, despite the levy of 25 cents per litre that will come into effect on April 1.
On Friday, the Central Energy Fund had published in their daily report on fuel prices, that since February 28 (when the previous prices were set) 95 octane petrol was over-recovered by 62 cents and diesel by 77 cents.
Although the rand had depreciated strongly at the end of last week, the price of Brent crude had dropped by more than the weakening of the currency. A sharp decrease in fuel prices at the beginning of April (the second consecutive month) might just be the spark for a turn-around in consumer spending.
The positive effect of such a decrease on inflation expectations might just contribute to a possible large cut in the repo rate by the Monetary Policy Committee at their meeting at the end of the month – a cut that is long overdue.
Dr Chris Harmse is an economist and chief investment officer.
SANLAM’S share price declined by more than 5 percent on the JSE on Friday morning, after the financial services group flagged a fall in earnings for the year to end December, impacted by a once-off expense of R1.7 billion related to its broad-based black economic empowerment scheme (B-BBEE).
As a result, Sanlam said it expected its headline earnings per share (Heps) to decline by between 15 percent and 25 percent to between 334.2 cents a share and 378.8c, down from last year’s Heps of 445.6c.
The share price closed 3.86 percent lower at R64.22 on the JSE on Friday.
The group said its earnings were also likely to take a knock on an additional amortisation charge of about R250 million on the business acquired in 2018, as well as a net loss of R868m on the consolidation of the Sanlam Foundation, and the B-BBEE entity.
Its diluted Heps was also expected to decline by between 15 percent and 25 percent to between 330.8c and 374.9c, down from 441.1c last year.
Sanlam said earnings attributable to equity holders were further impacted by the profit on deemed disposal of Saham and Nucleus of R2.8bn in 2018.
“These were one-off earnings that increased the comparative base, contributing to an expected decrease in earnings attributable to equity holders of between 35 percent and 45 percent compared to 2018,” the group said.
Its earnings per share (Eps) are expected to decline by between 35 percent and 45 percent to between 311c and 367.5c, down from last year’s 565.4c, while diluted Eps was also expected to decline by 35 percent and 45 percent to between 307.8c and 363.8c, down from 559.7c reported a year earlier.
The group said excluding the once-off IFRS 2 charge, the additional amortisation of intangible assets, the fund transfers and the profit on disposal of Saham and Nucleus, headline earnings and earnings attributable to equity holders of the group would have increased by between 10 percent and 20 percent.
But Sanlam said it had achieved satisfactory growth in net results from financial services, as well as the investment return earned on its capital portfolios during the year, contributing to an estimated combined growth of between 8 percent and 18 percent from these sources of earnings.
Sanlam expects to release its annual results on Thursday.