>>> Weekly Market Update

Weekly Market Update: World governments open stimulus floodgates and impose more lockdowns in efforts to flatten the curve on coronavirus spread and stabilize yield curves


Markets were forced to deal with the reality the coronavirus crisis has landed in the US full bore. Cases surged as testing ramped up significantly, and high population density areas in Europe and the US began to institute full lock down measures to fight the spread. Central bankers and politicians threw literally everything including the kitchen sink at the ongoing pandemic (“wash your hands frequently!”). Central banks led by the US Federal Reserve slashed rates back to or near the zero bound while simultaneously adding trillions of dollars in liquidity to support the functioning of distorted overnight lending markets. Governments introduced and began the process of implementing trillions of dollars of fiscal stimulus to fight what will almost assuredly be a deep global recession. By the end of the week, forecasts for Q2 GDP prints of -20% or more were common place alongside expectations that US initial jobless claims for the current week will rise into the millions for the first time ever when numbers are tallied next week.

No surprise then it was another wild week in terms of trading. US stocks tumbled back through the lows of December 2018 and the VIX soared above 80 midweek, leading to the liquidation of at least one hedge fund (Ronin Capital). US Treasury yields shot up mid-week after days staggering volatility that indicated serious dysfunction in overnight lending markets. The Dollar index surged more than 5% as turmoil in the lending markets ignited a fresh dash for US dollars. The Fed was forced to bring back the commercial paper backstop facility from the financial crisis while simultaneously injecting billions through multiple repo operations on a daily basis. Global central banks came together to reactivate billions in currency swap lines as they did during the financial crisis as well. Crude prices served as a further anchor to both equity markets and investor sentiment overall, despite some reports the US was trying to twist arms in Saudi Arabia and Russia. Demand destruction from a world economy in lockdown mode along with no signs of thawing between the Saudis and Russians sent WTI crude down more than 25% to below $25 barrel, to levels not seen since 2002. Late in the week, Senate Republicans pushed out a $1 trillion stimulus plan centered on cash payments to lower- and middle-income Americans, with the hope to negotiate a deal with Democrats over the weekend. Meanwhile the UK government promised to pay up to 80% of worker salaries if firms avoid layoffs. For the week, the S&P fell 15%, the DJIA lost 17.3%, and the Nasdaq declined 12.6%.

Most corporate news this week related to how companies are adjusting to the new normal amid the coronavirus outbreak. Bank of America unveiled plans to cushion the blow for customers, announcing clients with auto loans, small business loans, mortgages, and credit cards can defer payments while confirming pauses in foreclosure sales, evictions, and repossessions. The New York Stock Exchange said it would temporarily move to fully electronic trading and close its trading floors, starting next week. Reports said Amazon would only receive ‘high-demand products’ from third-party sellers until April 5th. Kohl’s, Ross, and Gap announced they would temporarily close all their North American stores to wait out the virus. FedEx’s revenue for the quarter beat expectations but, like dozens of other big firms, the company suspended its FY20 outlook amid coronavirus uncertainty. Lennar beat consensus on its top and bottom line, but the homebuilder said it expects traffic to decline and a decline in sales to follow, withdrawing its guidance, as well. Mylan ramped up its U.S. manufacturing of hydroxychloroquine sulfate tablets in order to meet potential COVID-19 patient needs, and promised to be in a position to begin supplying product by mid-April. Russia’s Sistema-Biotech said it plans to register its own testing system, which could make it possible to detect coronavirus within two hours.

SUN 3/15
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE (OCR) BY 75BPS TO 0.25% (intra-meeting move); delays higher capital requirement for banks
*(US) FOMC CUTS TARGET RANGE BY 100BPS TO 0.00-0.25%; (2nd intra-meeting policy move); effective Monday, March 16th
*(CN) CHINA FEB YTD INDUSTRIAL PRODUCTION Y/Y: -13.5% V -3.0%E (1st decline since Jan 1990)
*(CN) CHINA FEB YTD RETAIL SALES Y/Y: -20.5% V -4.0%E

MON 3/16
*(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED FROM -0.10%; STRENGTHEN STANCE ON ASSET BUYING (intra-policy decision)
*(KR) BANK OF KOREA (BOK) CUT 7-DAY REPO RATE BY 50BPS TO 0.75% (intra-meeting move)
(EU) German financial regulator BAFIN sees "No systematic risk" for financial sector due to coronavirus
*(US) MAR EMPIRE MANUFACTURING: -21.5 V +4.9E (lowest since 2009)
(US) Treasury Sec Mnuchin: US banking system can handle this after the Fed's action; Trump administration's goal is to ensure businesses have liquidity, not to bail them out - press interview
(UK) Ukraine Pres Zelenskiy: plans to restrict travel inside the country - press
(FR) France Pres Macron: social restrictions will be strengthened; will step up measures to limit people's movements; Citizens should stay at home and only go out for essential things - national address
(US) CDC reports 3,536 cases of coronavirus as of today (up from 1,678 prior report)
LUV Withdraws FY20 guidance due to coronavirus; Entered into a new $1B 364-day term loan credit facility and fully draws down; reducing capacity by at least 20% through June 5th, suspends share buybacks
BA S&P cuts rating 2 notches to BBB from A- (one notch above junk), outlook watch negative
XOM Consider 'significant' cut to its planned CAPEX program, to provide details on the cuts at a later date

TUES 3/17
*(DE) GERMANY MAR ZEW CURRENT SITUATION SURVEY: -43.1 V -30.0E; EXPECTATIONS SURVEY: -49.5 V -30.0E; Says German economy is on red alert
*(TR) TURKEY CENTRAL BANK (CBRT) CUTS ONE-WEEK REPO RATE BY 100BPS TO 9.75% (intra-meeting move)
*(US) FEB ADVANCE RETAIL SALES M/M: -0.5% V +0.2%E; RETAIL SALES (EX-AUTO) M/M: -0.4% V +0.1%E
*(US) FEB INDUSTRIAL PRODUCTION M/M: 0.6% V 0.4%E; CAPACITY UTILIZATION: 77.0% V 77.1%E
AMZN Warehouses reportedly are only currently receiving high-demand products until April 5th - Business Insider
*(US) JAN JOLTS JOB OPENINGS: 6.963M V 6.400ME
(US) OCC reportedly considering relaxing leveraged lending rules to free up bank liquidity - CNBC
*(US) FEDERAL RESERVE INVOKES EMERGENCY AUTHORITIES TO REINSTATE ITS COMMERCIAL PAPER FUNDING FACILITY (CPPF)
(US) Atlanta Fed cuts Q1 GDP growth to 2.9% from 3.1%
(US) Treasury Sec Mnuchin: Proposal would inject $1T into economy on top of $300B in deferred tax payments; this is not the time to worry about the deficit
*(US) NEW YORK FED TO OFFER $1T IN OVERNIGHT REPOS EVERY DAY THIS WEEK
FDX Reports Q3 $1.41 v $1.69e, Rev $17.5B v $17.1Be; suspends FY20 outlook

WED 3/18
700.HK Reports Q4 (CNY) Net 21.6B v 22.8Be, Op 28.6B v 17.3B y/y, Rev 105.8B v 103.7Be
*(EU) EURO ZONE FEB FINAL CPI Y/Y: 1.2% V 1.2%E; CPI CORE Y/Y: 1.2% V 1.2%E
NIO Reports Q4 (CNY) -2.73 v -3.20 y/y, Rev 2.85B v 3.44B y/y
*(US) FEB HOUSING STARTS: 1.599M V 1.500ME; BUILDING PERMITS: 1.464M V 1.500ME
(EU) Europe now reporting more coronavirus cases than China - press
JPM To temporarily close 1K Chase branches on virus concerns (out of 5.1K branches) - Financial Times
FNMA Assistance Options for Homeowners Impacted by COVID-19
(US) White House econ adviser Kudlow: may take equity positions in companies as part of aid
ICE *(US) NYSE TO MOVE TEMPORARILY TO FULLY ELECTRONIC TRADING; EQUITIES AND OPTIONS TRADING FLOORS TO TEMPORARILY CLOSE, BEGINNING MARCH 23RD
*(EU) ECB ANNOUNCES €750B PANDEMIC PURCHASE PROGRAM (PPP); to cover private and public sector securities; will consider revising QE limits to extent necessary
*(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH TARGET RATE BY 25BPS TO 0.25%; to target yield on 3-year Australian Government bonds of around 0.25%; announces A$90B funding facility

THURS 3/19
*(CH) SNB LEAVES SIGHT DEPOSIT INTEREST RATE UNCHANGED AT -0.75%; AS EXPECTED; steps up FX interventions
LEN Reports Q1 $1.27 v $0.83e, Rev $4.51B v $4.38Be; Withdraws guidance
AFKS.RU Sistema-Biotech plans to submit the registration dossier for its own SBT-DX-nCoV test system; makes it possible to detect coronavirus within 2 hours - Russian press
*(EU) ECB ALLOTS €115.0B IN TLTRO-3 OPERATION
(US) Trump administration said to consider selling ultra-long bonds to pay for $1.3T stimulus response - press
*(US) MAR PHILADELPHIA FED BUSINESS OUTLOOK: -12.7 V +8.0E (record decline index in month and lowest since July 2012)
AA Asset-backed 30-Day Commercial Paper rates ticked DOWN to 1.83% v 1.85% yesterday; 90-day 1.67% v 1.89% yesterday - NY Fed
(US) New York Fed to adjust purchases of mortgage backed securities (MBS) to address 'highly unusual disruptions in the market'; to conduct an additional $10B in purchases
*(UK) BANK OF ENGLAND (BOE) CUTS INTEREST RATE BY 15BP TO 0.10% (2nd intra-meeting move in Mar and lowest level in 325 years)
(US) VP Pence: we have identified tens of thousands of ventilators that can be 'converted to treat patients'
KSS Plans to temporarily close its stores nationwide - press
MYL Ramps up U.S. Manufacturing of Hydroxychloroquine Sulfate Tablets to meet potential COVID-19 patient needs; To be in a position to begin supplying product by mid-April
BAC Introduces new assistance for clients: clients with auto loans, small business loans, mortgages, credit cards can defer payments; confirms pauses foreclosure sales, evictions and repossessions
(US) Preliminary data reports this week from 15 states indicate initial total US jobless claims will skyrocket next week - press
*(PE) PERU CENTRAL BANK (BCRP) CUTS REFERENCE RATE BY 100BPS TO 1.25% (intra-meeting decision)

FRI 3/20
(DE) German Govt said to be planning a €500B rescue package for companies and banks to combat virus impact - German press
AA Asset-backed 30-Day Commercial Paper rates ticked higher to 1.98% v 1.83% yesterday; 90-day n/a v 1.67% yesterday - NY Fed
(US) FED acts with BOE, BOC, BOJ, ECB and SNB to provide daily swap line operations
(US) NY Gov Cuomo: 100% of non-essential workforce must stay home starting Sunday; only essential businesses can have commuting workers; this is not 'shelter in place' order, it is a 'pause' order
(US) NY Fed: afternoon $500B overnight repos will continue daily for the rest of the month; Will conduct total daily repos of $1T for the rest of March
(UK) PM Johnson: telling restaurants and pubs to close tonight, should only provide takeout and delivery orders
UK Fin Min Sunak: For the first time in history the government will help to pay wages; UK is lending unlimited sums of money interest free

>>> US Close Dow -4.55% S&P -4.34% Nasdaq -3.79% Russell -4.22%

Closing Stock Market Summary

An early rebound effort quickly turned into losses on this quadruple-witching expiration Friday, as investors continued to grapple with the persistent shutdown of the economy. The S&P 500 (-4.3%), Dow Jones Industrial Average (-4.6%), and Russell 2000 (-4.2%) declined more than 4.0%, while the Nasdaq Composite declined 3.8%. 

California ordered residents to stay at home, except for essential needs, until further notice last night, but stocks started today's session on a higher note amid hopes for a rebound. It wasn't until New York announced similar stay-at-home restrictions that optimism started to unravel, as it contributed to the notion that more states will follow suit to limit the spread of the coronavirus.  

Later, London announced the closure of pubs and restaurants, New Jersey ordered non-essential businesses to close, and the Chicago Tribune reported that Illinois will issue its own shelter-in-place order. President Trump also said that the southern border with Mexico will be closed to non-essential travel. 

Washington continued to work on a $1 trillion+ stimulus package to soften the economic impact caused by these disruptions, but today's orderly retreat suggested that it might not be enough to meaningfully address the magnitude of these shutdowns. According to Bloomberg, Treasury Secretary Mnuchin believes the stimulus bill is too small.

Losses were widespread, but the energy sector (+1.0%) was able to buck the broader trend, and trim its huge weekly decline, despite an 8% decline in oil prices ($23.73/bbl, -2.17, -8.4%). The utilities (-8.2%) and consumer staples (-6.5%) sectors were today's weakest performers. 

The Fed remained active in trying to further support the financial system. On Friday, the Fed expanded its Money Market Mutual Fund Liquidity Facility (MMLF) to accept municipal debt and stepped up its purchases of Treasury and mortgage-backed securities. The New York Fed said it will now conduct two repo operations totaling $1 trillion for the rest of the month. 

U.S. Treasuries gained buying interest amid the selling in equities and actions taken by the Fed. The 2-yr yield declined three basis points to 0.37%, and the 10-yr yield declined 18 basis points to 0.97%. The U.S. Dollar Index finished flat at 102.72. 

Friday's economic data was limited to Existing Home Sales, which increased 6.5% m/m in February to a seasonally adjusted annual rate of 5.77 million units (consensus 5.50 million). This follows a downwardly revised 5.42 million (from 5.46 million) in January.

  • The key takeaway from the report is that existing home sales activity was robust in February based on contract signings that happened in December and January. Next month could look reasonably good, too, but the excitement over this report has been tempered by expectations that a meaningful slowdown will soon follow because of the coronavirus impact.

Looking ahead, the NYSE will temporarily shift to fully electronic trading on Monday and investors will not receive any notable economic data. 

  • Nasdaq Composite: -23.3%
  • S&P 500: -28.7%
  • Dow Jones Industrial Average: -32.8%
  • Russell 2000: -39.2%

REuters - Italy Treasury sees 2020 GDP falling around 3% amid coronavirus chaos

Italy Treasury sees 2020 GDP falling around 3% amid coronavirus chaos - sources - Reuters News
20-Mar-2020 14:08:14

Italy has world's biggest coronavirus death toll
In nationwide lockdown since March 9
Treasury estimates assume restrictions eased from end-April
By Giuseppe Fonte and Gavin Jones

ROME, March 20 (Reuters) - The Italian Treasury currently expects the economy to contract around 3% this year, hit by the lockdown imposed to fight the country's coronavirus outbreak, two sources familiar with the matter told Reuters on Friday.

The sources stressed that the situation is highly uncertain, saying the internal Treasury estimates are based on a scenario in which the restrictive measures that have hit activity begin to be gradually eased around the end of April.

Among a raft of measures intended to keep Italians in their homes, the government has closed all schools, bars, restaurants, sporting events and public gatherings.

The measures are officially due to be lifted between March 25 and April 3, but with coronavirus deaths continuing to grow, Prime Minister Giuseppe Conte said on Thursday the curbs will be extended, without giving further details.

Both sources, who asked not to be named, said the government's annual forecasting exercise that forms the basis of its budget commitments to the European Union could be delayed from the usual end-April deadline, as part of a broad EU-wide decision.

"The whole EU budget planning exercise could be scrapped and in this case Italy wouldn't have to present the forecasts by the end of next month, this is something being discussed at the EU level," one of the sources said.

The Economy Ministry declined to comment.

Given the uncertainty over when lockdowns will be lifted both in Italy and abroad, the Treasury is working within a wide GDP forecasting range. One of the sources said this spanned around -2% in a best-case scenario to -3.7% is a worst-case one.

The projections incorporate the effect of an emergency, 25-billion euro stimulus package adopted by the government earlier this week, which is expected to reduce the GDP drop by around 0.4 percentage points, both sources said.

More than 3,400 people have died in Italy since its coronavirus outbreak came to light on Feb. 21, the highest death toll of any country. More than 41,000 people have tested positive for the virus.

Earlier on Friday, the Milan-based think-tank REF forecast the euro zone's third largest economy would shrink by 3% in the first quarter from the previous three months, and contract by a further 5% in the second quarter. (Full Story)

"A rebound is possible from the third quarter," REF said in research note, adding that this would depend on "the evolution of the epidemic and the economic policies adopted."

It said it was too soon to make a forecast for 2020 as a whole.

One of the sources who spoke to Reuters said the REF projection may be too pessimistic for the first quarter, as growth appeared to be holding up quite well in the first half of the quarter, before the restrictions were gradually imposed.

NYT : Before Virus Outbreak, a Cascade of Warnings Went Unheeded

Before Virus Outbreak, a Cascade of Warnings Went Unheeded
Government exercises, including one last year, made clear that the U.S. was not ready for a pandemic like the coronavirus. But little was done.

WASHINGTON — The outbreak of the respiratory virus began in China and was quickly spread around the world by air travelers, who ran high fevers. In the United States, it was first detected in Chicago, and 47 days later, the World Health Organization declared a pandemic. By then it was too late: 110 million Americans were expected to become ill, leading to 7.7 million hospitalized and 586,000 dead.

That scenario, code-named “Crimson Contagion” and imagining an influenza pandemic, was simulated by the Trump administration’s Department of Health and Human Services in a series of exercises that ran from last January to August.

The simulation’s sobering results — contained in a draft report dated October 2019 that has not previously been reported — drove home just how underfunded, underprepared and uncoordinated the federal government would be for a life-or-death battle with a virus for which no treatment existed.

The draft report, marked “not to be disclosed,” laid out in stark detail repeated cases of “confusion” in the exercise. Federal agencies jockeyed over who was in charge. State officials and hospitals struggled to figure out what kind of equipment was stockpiled or available. Cities and states went their own ways on school closings.

Many of the potentially deadly consequences of a failure to address the shortcomings are now playing out in all-too-real fashion across the country. And it was hardly the first warning for the nation’s leaders. Three times over the past four years the U.S. government, across two administrations, had grappled in depth with what a pandemic would look like, identifying likely shortcomings and in some cases recommending specific action.

In 2016, the Obama administration produced a comprehensive report on the lessons learned by the government from battling Ebola. In January 2017, outgoing Obama administration officials ran an extensive exercise on responding to a pandemic for incoming senior officials of the Trump administration.

The full story of the Trump administration’s response to the coronavirus is still playing out. Government officials, health professionals, journalists and historians will spend years looking back on the muddled messages and missed opportunities of the past three months, as President Trump moved from dismissing the coronavirus as a few cases that would soon be “under control” to his revisionist announcement on Monday that he had known all along that a pandemic was on the way.

What the scenario makes clear, however, is that his own administration had already modeled a similar pandemic and understood its potential trajectory.

The White House defended its record, saying it responded to the 2019 exercise with an executive order to improve the availability and quality of flu vaccines, and that it moved early this year to increase funding for the Department of Health and Human Services’ program that focuses on global pandemic threats.

“Any suggestion that President Trump did not take the threat of COVID-19 seriously is false,” said Judd Deere, a White House spokesman.

But officials have declined to say why the administration was so slow to roll out broad testing or to move faster, as the simulations all indicated it should, to urge social distancing and school closings.

Asked at his news briefing on Thursday about the government’s preparedness, Mr. Trump responded: “Nobody knew there would be a pandemic or epidemic of this proportion. Nobody has ever seen anything like this before.”

The work done over the past five years, however, demonstrates that the government had considerable knowledge about the risks of a pandemic and accurately predicted the very types of problems Mr. Trump is now scrambling belatedly to address.

Crimson Contagion, the exercise conducted last year in Washington and 12 states including New York and Illinois, showed that federal agencies under Mr. Trump continued the Obama-era effort to think ahead about a pandemic.

But the planning and thinking happened many layers down in the bureaucracy. The knowledge and sense of urgency about the peril appear never to have gotten sufficient attention at the highest level of the executive branch or from Congress, leaving the nation with funding shortfalls, equipment shortages and disorganization within and among various branches and levels of government.

The October 2019 report in particular documents that officials at the Departments of Homeland Security and Health and Human Services, and even at the White House’s National Security Council, were aware of the potential for a respiratory virus outbreak originating in China to spread quickly to the United States and overwhelm the nation.

“Nobody ever thought of numbers like this,’’ Mr. Trump said on Wednesday, at a news conference.

In fact, they had.

From Ebola, Lessons Learned
As early as the George W. Bush administration, homeland security and health officials focused on big gaps in the American response to a biological attacks and the growing risk of pandemics. The first test came in April 2009, just a few months after the start of President Barack Obama’s first term. A 10-year-old California girl was diagnosed with a contagious disease that would be called swine flu or H1N1, the first flu pandemic in more than 40 years.

The Centers for Disease Control and Prevention estimates that ultimately there were about 60.8 million cases in the United States, along with 274,304 hospitalizations and 12,469 deaths associated with H1N1.

The virus turned out to be less deadly than first expected. But it was a warning shot that officials in the Obama administration said they took seriously, kicking off a planning effort that escalated in early 2014, with the outbreak of Ebola in West Africa and ensuing fear that it could spread to the United States.

Ebola was less contagious than the flu, but far more deadly. It killed 11,000 people in Africa. But it could have been far worse. The United States sent nearly 3,000 troops to Africa to help keep the disease from spreading. While the containment effort was considered a success, inside the White House, officials sensed that the United States had gotten lucky — and that the response had revealed gaps in preparedness.

Christopher Kirchhoff, a national security aide who moved from the Pentagon to the White House to deal with the Ebola crisis, was given the job of putting together a “lessons learned” report, with input from across the government.

The weaknesses Mr. Kirchhoff identified were early warning signals of what has unfolded in the past three months.

His report concluded that the United States assumed more ability on the part of the World Health Organization than the agency actually had.

The United States had its own issues. There was no airplane in the U.S. fleet capable of evacuating an American doctor who was infected while treating patients in Liberia. The Pentagon was largely unprepared for the intervention that Mr. Obama ordered.

While the United States rapidly developed a way to screen air passengers coming into the country — borrowing from intelligence tools developed after the Sept. 11, 2001, attacks to track possible terrorists — Mr. Kirchhoff found deficiencies in even measuring how fast the virus was spreading.

On the plus side, the Obama White House had created an Ebola Task Force, run by Ron Klain, Vice President Joseph R. Biden Jr.’s former chief of staff, before a single case emerged in the United States. Congress allocated $5.4 billion in emergency funding to pay for Ebola treatment and prevention efforts in the United States and West Africa.

The money helped fund a little-known agency inside the Department of Health and Human Services in charge of preparing for future contagious disease outbreaks, the same office that in 2019 ran the Crimson Contagion exercise and other similar events in the years since.

After a man named Thomas Duncan, a Liberian citizen, became the first person given a diagnosis of Ebola on American territory in September 2014, errors resulted in the infection of two nurses and fear of a wider spread in the United States. (Mr. Duncan died, but the two nurses recovered.)

What is striking in reading Mr. Kirchhoff’s account today, however, is how few of the major faults he found in the American response resulted in action — even though the report was filled with department-by-department recommendations.

There were deficiencies “in personal protective equipment use, disinfection” and “social services for those placed under quarantine.”

There was confusion over travel restrictions, and the need “for a smoother sliding scale of escalation of government response, from local authorities acting on their own to local authorities acting with some federal assistance” to the full activation of the federal government.

The report concluded that “a minimum planning benchmark might be an epidemic an order of magnitude or two more difficult than that presented by the outbreak of Ebola in West Africa, with much more significant domestic spread.”

But one big change did come out of the study: The creation of a dedicated office at the National Security Council to coordinate responses and raise the alarm early.

“What I learned most is that we had to stand up a global biosecurity and health directorate, and get it enshrined for the next administration,” said Lisa Monaco, Mr. Obama’s homeland security adviser.

Getting the Trump Team’s Attention

John F. Kelly and Rex W. Tillerson were part of a high-level pandemic exercise, but both men left the administration before the Covid-19 outbreak.Credit...Al Drago for The New York Times
After Mr. Trump’s election, Ms. Monaco arranged an extensive exercise for high-level incoming officials — including Rex W. Tillerson, the nominee for secretary of state; John F. Kelly, designated to become homeland security secretary; and Rick Perry, who would become energy secretary — gaming out the response to a deadly flu outbreak.

She asked Tom Bossert, who was preparing to come in as Mr. Trump’s homeland security adviser, to run the event alongside her.

“We modeled a new strain of flu in the exercise precisely because it’s so communicable,” Ms. Monaco said. “There is no vaccine, and you would get issues like nursing homes being particularly vulnerable, shortages of ventilators.”

Ms. Monaco was impressed by how seriously Mr. Bossert, her successor, appeared to take the threat, as did many of the 30 or so Trump team members who participated in the exercise, details of which were reported by Politico.

But by the time the current crisis hit, almost all of the leaders at the table — Mr. Tillerson, Mr. Kelly and Mr. Perry among them — had been fired or moved on.

In 2018, Mr. Trump’s national security adviser at the time, John R. Bolton, ousted Mr. Bossert and eliminated the National Security Council directorate, folding it into an office dedicated to weapons of mass destruction in what Trump officials called a logical consolidation.

Asked about that shift on March 13, Mr. Trump told a reporter that it was “a nasty question,” before adding: “I don’t know anything about it.” Writing on Twitter the next day, Mr. Bolton lashed out at critics who said the shift had reflected disinterest in pandemic threats.

“Claims that streamlining NSC structures impaired our nation’s bio defense are false,” Mr. Bolton tweeted. “Global health remained a top NSC priority.”

In a statement, the National Security Council said it “has directors and staff whose full-time job it is to monitor, plan for, and respond to pandemics, including an infectious disease epidemiologist and a virologist.”

But in testimony to Congress last week, Dr. Anthony S. Fauci, the director of the National Institute of Allergy and Infectious Diseases, suggested that ending the stand-alone directorate was ill-advised. “It would be nice if the office was still there,” he said.

On Feb. 10, nearly three weeks after the first coronavirus case was diagnosed in the United States, Mr. Trump submitted a 2021 budget proposal that called for a $693.3 million reduction in funding for the C.D.C., or about 9 percent, although there was a modest increase for the division that combats global pandemics.

‘Crimson Contagion’

The Crimson Contagion planning exercise run last year by the Department of Health and Human Services involved officials from 12 states and at least a dozen federal agencies. They included the Pentagon, the Department of Veterans Affairs and the National Security Council. Groups like the American Red Cross and American Nurses Association were invited to join, as were health insurance companies and major hospitals like the Mayo Clinic.

The war game-like exercise was overseen by Robert P. Kadlec, a former Air Force physician who has spent decades focused on biodefense issues. After stints on the Bush administration’s Homeland Security Council and the staff of the Senate Intelligence Committee, he was appointed assistant secretary of Health and Human Services for Preparedness and Response.

“He recognized early that we have a big problem and we needed much bigger budgets to prepare,” said Richard Danzig, the secretary of the Navy in the Clinton administration, who had worked with Mr. Kadlec.

The exercise played out in four separate stages, starting in January 2019.

The events were supposedly unspooling in real time — with the worst-case scenario underway as of Aug. 13, 2019 — when, according to the script, 12,100 cases had already been reported in the United States, with the largest number in Chicago, which had 1,400.

The fictional outbreak involved a pandemic flu, which the Department of Health and Human Services says was “very different than the novel coronavirus.” The staged outbreak had started when a group of 35 tourists visiting China were infected and then flew home to Australia, Kuwait, Malaysia, Thailand, Britain and Spain, as well as to the United States, with some developing respiratory symptoms and fevers en route.

A 52-year-old man from Chicago, who was on the tour, had “low energy and a dry cough” upon his return home. His 17-year-old son on that same day went out to a large public event in Chicago, and the chain of illnesses in the United States started.

Many of the moments during the tabletop exercise are now chillingly familiar.

In the fictional pandemic, as the virus spread quickly across the United States, the C.D.C. issued guidelines for social distancing, and many employees were told to work from home.

But federal and state officials struggled to identify which employees were essential and what equipment was needed to effectively work from home.

There also was confusion over how to handle school children. The C.D.C. recommended that states delay school openings — the exercise took place toward the end of the summer. But some school districts decided to go ahead with the start of school while others followed the federal advice, causing the same types of confusion and discrepancies that have marked the response to the coronavirus.

The exercise from last year then went on to predict how the situation on the ground in the United States would worsen as the weeks passed.

Confusion emerged as state governments began to turn in large numbers to Washington for help to address shortages of antiviral medications, personal protective equipment and ventilators. Then states started to submit requests to different branches of the federal government, leading to bureaucratic chaos.

Friction also emerged between the Federal Emergency Management Agency, which is traditionally in charge of disaster response, and the Department of Health and Human Services, another scenario playing out now.

But the problems were larger than bureaucratic snags. The United States, the organizers realized, did not have the means to quickly manufacture more essential medical equipment, supplies or medicines, including antiviral medications, needles, syringes, N95 respirators and ventilators, the agency concluded.

Congress was briefed in December on some of these findings, including the inability to quickly replenish certain medical supplies, given that much of the product comes from overseas.

These concerns turned more urgent at a hearing last Thursday on Capitol Hill, as lawmakers peppered officials with the Department of Health and Human Services with questions that sounded almost as if they had read the script from the fictional exercise, reflecting the shortage of respirators and protective gear.

Senator Mitt Romney, Republican of Utah, said last week that he blamed Congress and prior administrations for not increasing stockpiles of this type of equipment.

“That is an area we ought to consider making an investment in,” he added, making a point, apparently unknown to him, that the administration’s own simulation had made clear five months earlier.

The Time : Hong Kong Records Its Biggest Rise in Coronavirus Cases as New Wave o

Hong Kong Records Its Biggest Rise in Coronavirus Cases as New Wave of Infections Crashes Into Asia

Hong Kong recorded what is by far its biggest daily jump in coronavirus cases on Friday—the latest in a new phase of infected travelers, many of whom are returning to the city from Europe, the United States and Southeast Asia.

The city is not alone in facing the increasing threat of imported cases. Taiwan, which also saw a daily record increase in the number of new cases, reported 27 additional infections on Friday—most of which are travel-related. In Singapore, 24 out of 32 newly infected patients had a history of travel to Southeast Asia, Europe and North America.

All three places managed to fend off the first wave of the coronavirus outbreak, when it was spreading across mainland China—despite having close economic ties and a large number of travelers from the mainland.

The new wave is crashing across the region as the number of officially reported new cases in the mainland has dropped to just a handful. On Thursday, Chinese officials reported zero new domestic coronavirus infections.

Read more: What We Can Learn From Singapore, Taiwan and Hong Kong About Handling Coronavirus

In Hong Kong, 36 of the 48 COVID-19 cases reported Friday had overseas travel records, Dr. Chuang Shuk-kwan, head of the communicable disease branch of Hong Kong’s Centre for Health Protection, said during an afternoon press conference. The cases involve travel to over a dozen countries, including Singapore, the Philippines, Austria, Portugal, United Kingdom, Canada and the United States. The newly confirmed cases brings the total in Hong Kong to 256.

Among the infected is a four-year-old girl whose father is believed to have contracted the virus during a trip to London. A taxi driver who did not travel abroad recently, but takes one or two trips to and from the airport daily, has also been diagnosed with the coronavirus.

Experts are concerned that the wave of sick travelers returning to Asia could mean a surge in local infections and the risk of a community outbreak.

“We’re moving into a new phase,” Ben Cowling, a professor of infectious disease epidemiology at the University of Hong Kong, tells TIME.

“In one or two weeks time, we could see outbreaks where we don’t really know where people got [the virus]. Maybe someone who came in with the infection wasn’t identified, spreads it to a family member, who spreads it to the community. That’s going to happen in Hong Kong, and in other parts of Asia,” Cowling adds.

In Hong Kong, over 90% of the new cases in the past two weeks had links to overseas travel, according to the South China Morning Post.

Globally, almost 245,000 cases of the novel coronavirus have been confirmed, according to John Hopkins University’s virus tracker. Earlier this week, the total number of infections outside mainland China surpassed the number in the country. On Thursday, the death toll in Italy, which has more than 41,000 cases, exceeded the number of fatalities in China. Worldwide, the virus has killed more than 10,000 people.

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In reaction to disappointing earnings/guidance:

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Other news:

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Analyst comments:

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>>> US Gapping up

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In reaction to strong earnings/guidance:

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Analyst comments:

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  • LULU +4.1% (upgraded to Buy from Neutral at Citigroup)
  • JPM +2.8% (upgraded to Buy from Hold at DZ Bank)
  • DLTR +2.3% (upgraded to Overweight from Sector Weight at KeyBanc Capital Markets)
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  • GILD +1.8% (upgraded to Overweight from Neutral at Piper Sandler)