Plus, the EU won’t allow travelers from the U.S. as it reopens its external borders amid the surge of coronavirus cases, Wells Fargo is the only major bank reducing its quarterly dividend following the Fed’s latest stress test, and Royal Dutch Shell said it will write down as much as $22 billion in the second quarter.
Stocks were mostly flat to start Tuesday with the Dow falling just 52 points, or 0.2%. The S&P 500 and Nasdaq traded around the flatline.
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As confirmed cases of the coronavirus surpass 2.6 million, CDC principal deputy director Dr. Anne Schuchat said yesterday that the deadly virus is spreading too rapidly for the U.S. to bring it under control. “We’re not in the situation of New Zealand or Singapore or Korea where a new case is rapidly identified and all the contacts are traced and people are isolated who are sick and people who are exposed are quarantined and they can keep things under control,” Schuchat said in an interview. “We have way too much virus across the country for that right now, so it’s very discouraging.” With cases in the U.S. surging higher, the EU said it is not on the list of countries that will be allowed entry into the bloc as it reopens its borders to travelers. European Union member governments decided today that their external borders will be opened for travelers from Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia, and Uruguay. The EU said travelers from China will also be allowed, but only if China announces that it will also accept European visitors.
Speaking of China, President Xi Jinping signed a landmark national security law for Hong Kong, in a sweeping attempt to quell dissent that drew fresh U.S. retaliation last month and could endanger the city’s appeal as a financial hub. The National People’s Congress Standing Committee today adopted the legislation into law, which will come into effect later today. Prime minister Boris Johnson said the U.K. is “deeply concerned” about China’s decision on Hong Kong, and said to reporters, “We will be looking at the law very carefully, we will want to scrutinize if it’s in conflict with the Joint Declaration between the U.K. and China.” The Trump administration escalated pressure on Beijing yesterday by ending some special treatments for Hong Kong regarding the export of sensitive technology in reaction to China’s move. “With the Chinese Communist Party’s imposition of new security measures on Hong Kong, the risk that sensitive U.S. technology will be diverted to the People’s Liberation Army or Ministry of State Security has increased, all while undermining the territory’s autonomy,” said U.S. Commerce Secretary Wilbur Ross. “Further actions to eliminate differential treatment are also being evaluated.”
As banks wrapped up the Federal Reserve’s latest stress test, all but one of the major banks said they performed well enough to maintain their current quarterly dividend. Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley all said they will maintain their dividend, while Wells Fargo said the Fed’s assessment of its business warrants a reduction of its quarterly payout. “We expect our second quarter results will include an increase in the allowance for credit losses substantially higher than the increase in the first quarter,” said CEO Charlie Scharf. “Wells Fargo continues to have one of the strongest capital positions relative to regulatory minimums among the world’s financial services firms as demonstrated by our stress test results. These are certainly extremely challenging times for many and we remain committed to supporting our customers and communities, and we will continue to take appropriate measures to maintain strong capital and liquidity levels and to improve the earnings capacity of the company.”
Royal Dutch Shell shares are down more than -3% this morning after the oil giant said it will write down the value of its assets by up to $22 billion in the second quarter as the coronavirus has a lasting impact on demand for oil and gas. Shell said in a statement that it had reviewed a significant portion of its business and the “ongoing challenging commodity price environment,” and said it would take aggregate post-tax impairment charges of between $15 billion and $22 billion in the second quarter. The oil company also said it expected international benchmark Brent crude prices to average $35 a barrel in 2020, down from a previous forecast of $60.
And Uber is again trying to capture market share in the food delivery arena. Following its failed deal for Grubhub earlier this month, Uber is now courting Postmates with an acquisition offer valued at around $2.6 billion. Postmates is also considering going public through a special purpose acquisition company, and is expected to make a decision between the two routes in the coming days. Postmates is the fourth largest food delivery service in the U.S. and has struggled to compete nationally against DoorDash, GrubHub, and Uber Eats, though it has had success in specific urban areas including Los Angeles and Miami. Postmates reportedly filed for an IPO confidentially early last year, but called off its offering later in 2019 amid deteriorating market conditions and tough competition.
Stocks We’re Watching
Immunoprecise Antibodies Ltd (OTC: IPATF): Immunoprecise Antibodies shares rallied as much as 16% yesterday after the company announced the identification of numerous lead candidate antibodies with highly-potent neutralizing activity in vitro, which are being manufactured for further testing and possible inclusion in its PolyTope mAB Therapy to combat COVID-19. “Arriving at this critical point in our preliminary research with many lead, functional therapeutic candidates is indicative of the broad scientific scope of IPA’s anti-COVID-19 programs,” said Dr. Jennifer Bath, CEO and President of IPA. “An effective cocktail therapy for COVID-19, targeting multiple epitopes on the virus, could prove fundamental in combating this pandemic in an effective and enduring way.”
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