FT : Yuval Noah Harari: the world after coronavirus

Yuval Noah Harari: the world after coronavirus
This storm will pass. But the choices we make now could change our lives for years to come

Humankind is now facing a global crisis. Perhaps the biggest crisis of our generation. The decisions people and governments take in the next few weeks will probably shape the world for years to come. They will shape not just our healthcare systems but also our economy, politics and culture. We must act quickly and decisively. We should also take into account the long-term consequences of our actions. When choosing between alternatives, we should ask ourselves not only how to overcome the immediate threat, but also what kind of world we will inhabit once the storm passes. Yes, the storm will pass, humankind will survive, most of us will still be alive — but we will inhabit a different world. 

Many short-term emergency measures will become a fixture of life. That is the nature of emergencies. They fast-forward historical processes. Decisions that in normal times could take years of deliberation are passed in a matter of hours. Immature and even dangerous technologies are pressed into service, because the risks of doing nothing are bigger. Entire countries serve as guinea-pigs in large-scale social experiments. What happens when everybody works from home and communicates only at a distance? What happens when entire schools and universities go online? In normal times, governments, businesses and educational boards would never agree to conduct such experiments. But these aren’t normal times. 

In this time of crisis, we face two particularly important choices. The first is between totalitarian surveillance and citizen empowerment. The second is between nationalist isolation and global solidarity. 

Under-the-skin surveillance
In order to stop the epidemic, entire populations need to comply with certain guidelines. There are two main ways of achieving this. One method is for the government to monitor people, and punish those who break the rules. Today, for the first time in human history, technology makes it possible to monitor everyone all the time. Fifty years ago, the KGB couldn’t follow 240m Soviet citizens 24 hours a day, nor could the KGB hope to effectively process all the information gathered. The KGB relied on human agents and analysts, and it just couldn’t place a human agent to follow every citizen. But now governments can rely on ubiquitous sensors and powerful algorithms instead of flesh-and-blood spooks. 


In their battle against the coronavirus epidemic several governments have already deployed the new surveillance tools. The most notable case is China. By closely monitoring people’s smartphones, making use of hundreds of millions of face-recognising cameras, and obliging people to check and report their body temperature and medical condition, the Chinese authorities can not only quickly identify suspected coronavirus carriers, but also track their movements and identify anyone they came into contact with. A range of mobile apps warn citizens about their proximity to infected patients. 

This kind of technology is not limited to east Asia. Prime Minister Benjamin Netanyahu of Israel recently authorised the Israel Security Agency to deploy surveillance technology normally reserved for battling terrorists to track coronavirus patients. When the relevant parliamentary subcommittee refused to authorise the measure, Netanyahu rammed it through with an “emergency decree”.

You might argue that there is nothing new about all this. In recent years both governments and corporations have been using ever more sophisticated technologies to track, monitor and manipulate people. Yet if we are not careful, the epidemic might nevertheless mark an important watershed in the history of surveillance. Not only because it might normalise the deployment of mass surveillance tools in countries that have so far rejected them, but even more so because it signifies a dramatic transition from “over the skin” to “under the skin” surveillance. 

Hitherto, when your finger touched the screen of your smartphone and clicked on a link, the government wanted to know what exactly your finger was clicking on. But with coronavirus, the focus of interest shifts. Now the government wants to know the temperature of your finger and the blood-pressure under its skin. 

The emergency pudding
One of the problems we face in working out where we stand on surveillance is that none of us know exactly how we are being surveilled, and what the coming years might bring. Surveillance technology is developing at breakneck speed, and what seemed science-fiction 10 years ago is today old news. As a thought experiment, consider a hypothetical government that demands that every citizen wears a biometric bracelet that monitors body temperature and heart-rate 24 hours a day. The resulting data is hoarded and analysed by government algorithms. The algorithms will know that you are sick even before you know it, and they will also know where you have been, and who you have met. The chains of infection could be drastically shortened, and even cut altogether. Such a system could arguably stop the epidemic in its tracks within days. Sounds wonderful, right?

The downside is, of course, that this would give legitimacy to a terrifying new surveillance system. If you know, for example, that I clicked on a Fox News link rather than a CNN link, that can teach you something about my political views and perhaps even my personality. But if you can monitor what happens to my body temperature, blood pressure and heart-rate as I watch the video clip, you can learn what makes me laugh, what makes me cry, and what makes me really, really angry. 

It is crucial to remember that anger, joy, boredom and love are biological phenomena just like fever and a cough. The same technology that identifies coughs could also identify laughs. If corporations and governments start harvesting our biometric data en masse, they can get to know us far better than we know ourselves, and they can then not just predict our feelings but also manipulate our feelings and sell us anything they want — be it a product or a politician. Biometric monitoring would make Cambridge Analytica’s data hacking tactics look like something from the Stone Age. Imagine North Korea in 2030, when every citizen has to wear a biometric bracelet 24 hours a day. If you listen to a speech by the Great Leader and the bracelet picks up the tell-tale signs of anger, you are done for.


You could, of course, make the case for biometric surveillance as a temporary measure taken during a state of emergency. It would go away once the emergency is over. But temporary measures have a nasty habit of outlasting emergencies, especially as there is always a new emergency lurking on the horizon. My home country of Israel, for example, declared a state of emergency during its 1948 War of Independence, which justified a range of temporary measures from press censorship and land confiscation to special regulations for making pudding (I kid you not). The War of Independence has long been won, but Israel never declared the emergency over, and has failed to abolish many of the “temporary” measures of 1948 (the emergency pudding decree was mercifully abolished in 2011). 

Even when infections from coronavirus are down to zero, some data-hungry governments could argue they needed to keep the biometric surveillance systems in place because they fear a second wave of coronavirus, or because there is a new Ebola strain evolving in central Africa, or because . . . you get the idea. A big battle has been raging in recent years over our privacy. The coronavirus crisis could be the battle’s tipping point. For when people are given a choice between privacy and health, they will usually choose health.

The soap police
Asking people to choose between privacy and health is, in fact, the very root of the problem. Because this is a false choice. We can and should enjoy both privacy and health. We can choose to protect our health and stop the coronavirus epidemic not by instituting totalitarian surveillance regimes, but rather by empowering citizens. In recent weeks, some of the most successful efforts to contain the coronavirus epidemic were orchestrated by South Korea, Taiwan and Singapore. While these countries have made some use of tracking applications, they have relied far more on extensive testing, on honest reporting, and on the willing co-operation of a well-informed public. 

Centralised monitoring and harsh punishments aren’t the only way to make people comply with beneficial guidelines. When people are told the scientific facts, and when people trust public authorities to tell them these facts, citizens can do the right thing even without a Big Brother watching over their shoulders. A self-motivated and well-informed population is usually far more powerful and effective than a policed, ignorant population. 

Consider, for example, washing your hands with soap. This has been one of the greatest advances ever in human hygiene. This simple action saves millions of lives every year. While we take it for granted, it was only in the 19th century that scientists discovered the importance of washing hands with soap. Previously, even doctors and nurses proceeded from one surgical operation to the next without washing their hands. Today billions of people daily wash their hands, not because they are afraid of the soap police, but rather because they understand the facts. I wash my hands with soap because I have heard of viruses and bacteria, I understand that these tiny organisms cause diseases, and I know that soap can remove them. 


But to achieve such a level of compliance and co-operation, you need trust. People need to trust science, to trust public authorities, and to trust the media. Over the past few years, irresponsible politicians have deliberately undermined trust in science, in public authorities and in the media. Now these same irresponsible politicians might be tempted to take the high road to authoritarianism, arguing that you just cannot trust the public to do the right thing. 

Normally, trust that has been eroded for years cannot be rebuilt overnight. But these are not normal times. In a moment of crisis, minds too can change quickly. You can have bitter arguments with your siblings for years, but when some emergency occurs, you suddenly discover a hidden reservoir of trust and amity, and you rush to help one another. Instead of building a surveillance regime, it is not too late to rebuild people’s trust in science, in public authorities and in the media. We should definitely make use of new technologies too, but these technologies should empower citizens. I am all in favour of monitoring my body temperature and blood pressure, but that data should not be used to create an all-powerful government. Rather, that data should enable me to make more informed personal choices, and also to hold government accountable for its decisions. 

If I could track my own medical condition 24 hours a day, I would learn not only whether I have become a health hazard to other people, but also which habits contribute to my health. And if I could access and analyse reliable statistics on the spread of coronavirus, I would be able to judge whether the government is telling me the truth and whether it is adopting the right policies to combat the epidemic. Whenever people talk about surveillance, remember that the same surveillance technology can usually be used not only by governments to monitor individuals — but also by individuals to monitor governments. 

The coronavirus epidemic is thus a major test of citizenship. In the days ahead, each one of us should choose to trust scientific data and healthcare experts over unfounded conspiracy theories and self-serving politicians. If we fail to make the right choice, we might find ourselves signing away our most precious freedoms, thinking that this is the only way to safeguard our health

We need a global plan
The second important choice we confront is between nationalist isolation and global solidarity. Both the epidemic itself and the resulting economic crisis are global problems. They can be solved effectively only by global co-operation. 

First and foremost, in order to defeat the virus we need to share information globally. That’s the big advantage of humans over viruses. A coronavirus in China and a coronavirus in the US cannot swap tips about how to infect humans. But China can teach the US many valuable lessons about coronavirus and how to deal with it. What an Italian doctor discovers in Milan in the early morning might well save lives in Tehran by evening. When the UK government hesitates between several policies, it can get advice from the Koreans who have already faced a similar dilemma a month ago. But for this to happen, we need a spirit of global co-operation and trust. 

Countries should be willing to share information openly and humbly seek advice, and should be able to trust the data and the insights they receive. We also need a global effort to produce and distribute medical equipment, most notably testing kits and respiratory machines. Instead of every country trying to do it locally and hoarding whatever equipment it can get, a co-ordinated global effort could greatly accelerate production and make sure life-saving equipment is distributed more fairly. Just as countries nationalise key industries during a war, the human war against coronavirus may require us to “humanise” the crucial production lines. A rich country with few coronavirus cases should be willing to send precious equipment to a poorer country with many cases, trusting that if and when it subsequently needs help, other countries will come to its assistance. 

We might consider a similar global effort to pool medical personnel. Countries currently less affected could send medical staff to the worst-hit regions of the world, both in order to help them in their hour of need, and in order to gain valuable experience. If later on the focus of the epidemic shifts, help could start flowing in the opposite direction. 

Global co-operation is vitally needed on the economic front too. Given the global nature of the economy and of supply chains, if each government does its own thing in complete disregard of the others, the result will be chaos and a deepening crisis. We need a global plan of action, and we need it fast. 

Another requirement is reaching a global agreement on travel. Suspending all international travel for months will cause tremendous hardships, and hamper the war against coronavirus. Countries need to co-operate in order to allow at least a trickle of essential travellers to continue crossing borders: scientists, doctors, journalists, politicians, businesspeople. This can be done by reaching a global agreement on the pre-screening of travellers by their home country. If you know that only carefully screened travellers were allowed on a plane, you would be more willing to accept them into your country. 


Unfortunately, at present countries hardly do any of these things. A collective paralysis has gripped the international community. There seem to be no adults in the room. One would have expected to see already weeks ago an emergency meeting of global leaders to come up with a common plan of action. The G7 leaders managed to organise a videoconference only this week, and it did not result in any such plan. 

In previous global crises — such as the 2008 financial crisis and the 2014 Ebola epidemic — the US assumed the role of global leader. But the current US administration has abdicated the job of leader. It has made it very clear that it cares about the greatness of America far more than about the future of humanity. 

This administration has abandoned even its closest allies. When it banned all travel from the EU, it didn’t bother to give the EU so much as an advance notice — let alone consult with the EU about that drastic measure. It has scandalised Germany by allegedly offering $1bn to a German pharmaceutical company to buy monopoly rights to a new Covid-19 vaccine. Even if the current administration eventually changes tack and comes up with a global plan of action, few would follow a leader who never takes responsibility, who never admits mistakes, and who routinely takes all the credit for himself while leaving all the blame to others. 

If the void left by the US isn’t filled by other countries, not only will it be much harder to stop the current epidemic, but its legacy will continue to poison international relations for years to come. Yet every crisis is also an opportunity. We must hope that the current epidemic will help humankind realise the acute danger posed by global disunity. 

Humanity needs to make a choice. Will we travel down the route of disunity, or will we adopt the path of global solidarity? If we choose disunity, this will not only prolong the crisis, but will probably result in even worse catastrophes in the future. If we choose global solidarity, it will be a victory not only against the coronavirus, but against all future epidemics and crises that might assail humankind in the 21st century. 

FT : Germany’s coronavirus anomaly: high infection rates but few deaths

Germany’s coronavirus anomaly: high infection rates but few deaths
Widespread testing may explain low fatality figures in country that is bucking trend in Europe

The coronavirus crisis has hit Germany with full force. Infections are increasing rapidly, schools, factories and bars have closed across the country, and government measures to slow the outbreak are becoming more draconian by the day.

In one crucial way, however, the country is proving remarkably resilient: relative to known infections, the number of deaths has so far been minuscule. 

According to data from Johns Hopkins University, there were 13,979 coronavirus infections in Germany on Thursday afternoon, more than in any other country except China, Italy, Iran and Spain.

At the same time, Germany had only registered 42 deaths. Neighbouring France, by contrast, reported 9,058 infections and 243 deaths. Spain had 17,395 infections and 803 deaths. The US, the UK, Italy and even South Korea all show case fatality rates significantly higher than Germany.

The apparent anomaly has sparked debate in Germany and beyond, though experts warn against drawing sweeping conclusions. They argue that the country’s low fatality rate most likely reflects the fact that the outbreak is still at a relatively early stage, and that the age profile of those affected has so far been younger than that in other countries. Younger patients without previous ailments have a much better chance of surviving Covid-19 than elderly patients. 

Another factor that may help explain the variance is the unusually high number of tests being carried out in Germany. According to Lothar Wieler, the president of the Robert Koch Institute, German laboratories are now conducting about 160,000 coronavirus tests every week — more than some European countries have carried out in total since the crisis started. Even South Korea, which is conducting 15,000 tests a day and has been held up by virologists as an example to follow, appears to be testing less than Germany. 

“This is about capacity. The capacity in Germany is very, very significant. We can conduct more than 160,000 tests per week, and that can be increased further,” Prof Wieler told journalists this week. Test capabilities would be boosted not least in part by switching laboratories that specialise in animal health towards coronavirus checks. There was no sign that test kits were running low, Prof Wieler added. 

In the short term at least, mass testing feeds through into a lower fatality rate because it allows authorities to detect cases of Covid-19 even in patients who suffer few or no symptoms, and who have a much better chance of survival. It also means that Germany is likely to have a lower number of undetected cases than countries where testing is less prevalent. Indeed, one notable feature of the coronavirus outbreak in Germany so far is the high number of relatively young patients: according to data from the Robert Koch Institute, more than 80 per cent of all people infected with the coronavirus are younger than 60. 

“Especially at the beginning of the outbreak in Germany we saw many cases connected to people returning from skiing trips and similar holidays,” said Matthias Stoll, a professor of medicine at the University of Hanover. “These are predominantly people who are younger than 80 and who are fit enough to ski or engage in similar activities. Their risk of dying is comparatively low.” 

Hans-Georg Kräusslich, a professor of medicine and the head of virology at the University Hospital in Heidelberg, said: “In most cases the illness is mild and shows few symptoms, and we assume that the detection of such mild cases varies from country to country. In statistical terms that leads to a difference in case fatality rates.” 

However, Prof Kräusslich cautioned that the picture in Germany was likely to change in the weeks and months ahead: “We are still at a relatively early stage in the outbreak in Germany. The overwhelming share of patients became infected only in the last week or two, and we will probably see more severe cases in the future as well as a change in the fatality rate.” 

That note of caution is echoed by virologists and epidemiologists across the country. Most expect the different national case fatality rates to converge as time passes and more countries uncover the true number of infections. But experts also point out that Germany has at least had the chance to prepare for a surge in serious infections, with hospitals across the country expanding intensive care capacity and boosting staff numbers and the government buying up as much critical equipment as it can.

Last week, the federal government ordered an extra 10,000 life-saving ventilators from a German manufacturer, on top of the 25,000 that are already in place in hospitals across the country. The city state of Berlin, which has so far recorded 391 cases of Covid-19, is converting parts of the local trade fair ground into a 1,000-bed hospital for future coronavirus patients. Similar steps have been taken across the country.

“We are at the beginning, so we can still implement all the measures that have been called for,” said Prof Wieler. “We can still ensure that severely ill people can get treatment in the hospital.” 

>>> Asian Update

Asia Market Update: Asian indices opened higher after Thursday’s gains in the US, US stimulus talks remain in focus; AU and NZ bond yields decline after rise on prior session, RBA and RBNZ moved to increase funding for banks; RBA made first purchases under QE program


General Trend:
- Shanghai Composite rises during morning session, banks rise as PBOC left rates unchanged
- Japan markets are closed today for holiday
- Kospi rises over 4% after declining by over 8% on Thursday; BOK and Fed announced FX swap agreement
- Sectors moving higher in Australia include Energy and Financials
- Aussie rises as RBA announced first bond purchases under QE program; Aussie bonds rise after volatility seen on Thursday’s session
- RBA purchased the maximum of A$5.0B in bonds in first QE operation (purchased bonds due in 2022, 2023, 2027 and 2028)
- USD/JPY drops amid holiday in Japan, Fed announced multiple currency swap agreements with central banks; California has issued statewide ‘shelter in place order’
- PBOC unexpectedly left its loan prime rates unchanged [also left the 1-year MLF rate unchanged on March 16th]
- PBOC fixed yuan reference rate at weakest level since March 2008
- South Korea said to be considering measures for commercial paper market (press)

***Headlines/Economic Data***
Australia/New Zealand
-ASX 200 opened +1.5%
- (AU) Reserve Bank of Australia (RBA) purchases A$5.0B in 2-8-year bonds (1st bond buying operation)
- (NZ) Reserve Bank of New Zealand (RBNZ): Offering NZ$2.0B in 3 or 6 month term loans to banks via the TAF Facility
- (NZ) Reserve Bank of New Zealand (RBNZ) lends NZ$200M under prior announced NZ$2.0B TAF facility
- (AU) Reserve Bank of Australia (RBA) adds A$4.25B to banking system through repos v A$12.7B prior
- (NZ) Reserve Bank of New Zealand (RBNZ): committed to ensuring smooth market function; financial system remains sound
- VAH.AU CEO Joyce: Nationalizing Virgin would create an unfair advantage in the sector and reward Virgin for previous mismanagement - Aussie press
- (AU) Reserve Bank of Australia (RBA): Surplus cash at exchange settlement (ES) accounts at A$30.12B (record high) v ~A$18.8B prior
- (AU) Australian Banking Association: Banks to defer loan repayments for 6-months for small business amid coronavirus; banks to alos consider emergency relief for mortgages
- (AU) Australia Finance Ministry: To stop bond buybacks follow RBA announcement to buyback bonds (yesterday)
- TLS.AU Guides FY20 Underlying EBITDA at bottom end of guidance; will not announce any further job cuts over the next 6 months
- (AU) Reserve Bank of Australia (RBA) establishes $60B FX swap agreement with US Fed
- (AU) Australia PM: Will not hand down budget until Oct 6th [delayed from May 12th], idea that you can put together forecast around economy at this time is not sensible
(NZ) Reserve Bank of New Zealand (RBNZ) Assistant Gov Hawkesby: we are already buying small amount of bonds to ease tension; RBNZ made it clear next stimulus tool is QE

Japan
-Nikkei 225 opened closed for holiday
- (JP) Japan Gov, ruling party and opposition all met yesterday to consider a "record breaking" stimulus package - Nikkei
- 7751.JP Canon Medical to begin development of a rapid genetic test for COVID-19 in partnership with Nagasaki University
- 9984.JP Said to be seeking $10B to shore up its vision fund, amid crisis - press

Korea
-Kospi opened +2.8%
- (KR) Bank of Korea (BOK): to immediately inject dollar liquidity to onshore markets using $60B bilateral currency swap with US
- 005380.KR Hyundai and Kia Motors both halt production in US and Europe due to coronavirus
- (KR) South Korea Feb PPI Y/Y: 0.7% v 1.1% prior
- 005930.KR Due to travel restrictions imposed by Vietnam, production of the newest Galaxy Note smartphones may be negatively impacted – Nikkei
- (KR) Bank of Korea (BOK) Gov Lee: Ready with all measures on the table; swap line with Feb expected to help stabilize FX markets
- (KR) South Korea reports 84 additional coronavirus cases in the last 24-hours; Total 8,652
- (KR) South Korea FSC: Banks have agreed to participate in KRW10T bond fund and will help expand it if needed
- (KR) South Korea met with brokerage firms on commercial paper - local press

China/Hong Kong
-Hang Seng opened +2.0%; Shanghai Composite opened +0.9%
- (CN) CHINA PBOC SETS 1-YEAR LOAN PRIME RATE (LPR) AT 4.05% V 4.05% PRIOR (4.00%E); SETS 5-YEAR LPR AT 4.75% V 4.75% PRIOR (4.70%E)
- (CN) PBoC adviser Ma Jun: Have relatively large room for further broad and targeted RRR cuts; Can ramp up open market operations if needed
- (HK) Macau cuts 2020 gaming Rev outlook to MOP130B due to coronavirus – press
- (CN) China National Health Commission Coronavirus Update for March 19th: 39 additional cases v 34 prior; Additional deaths: 3 v 8 prior; Hubei: 0 additional cases v 0 prior; additional deaths: 2 v 8 prior
- 1.HK Reports FY19 (HK$) Net 39.8B v 39.0B y/y, Total Rev 439.9B v 453.2B y/y
- (CN) China PBOC sets Yuan reference rate: 7.1052 v 7.0522 prior (weakest fix since March 2008)
- (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for the 23rd consecutive session, Net CNY0B v CNY0B prior

Other Asia
- (TW) Taiwan Central Bank to stop guiding overnight rate at the open, to allow the market to set it

North America
- (US) Sen McConnell coronavirus relief plan reportedly includes direct payments of $1,200 per person, $2,400 per couple
- (US) US Treasury Sec Mnuchin: Goal is to get 'bill' passed and signed by Trump on Monday (March 23rd); Mnuchin and White House Adviser Kudlow are expected to meet with US Senators on Friday (March 20th) regarding stimulus
- (US) Federal Reserve Board encouraged by increase in discount window borrowing to support the flow of credit to households and businesses
- AAL Announces will operate cargo only flights to help keep business operating with currently grounded passenger plans between US and Europe
- (US) NIH's Fauci: There is no magic drug for coronavirus (reference to malaria drug that could be a possible treatment) – CNN
- (US) FEDERAL RESERVE ESTABLISHES $30-60B DOLLAR SWAP LINES WITH ADDITIONAL CENTRAL BANKS
- (US) California Gov has issued statewide shelter in place order
- (US) President Trump said to have asked states to delay releasing jobless claims data - NYT
- (US) Pres Trump: I will get involved in the oil market dispute at the appropriate time; Low oil prices are devastating to Russia

Europe
- (ES) ECB's De Guindos (Spain): ECB will prevent economic crisis from becoming financial crisis; ECB can always do more; reiterates European fiscal response is needed - TV interview
- (ES) Spain government has ordered hotels and lodging establishments to close due to coronavirus - US financial press

***Levels as of 1:20 ET***
- Nikkei 225, closed, ASX 200 +0.7%, Hang Seng +2.6%; Shanghai Composite +0.2%; Kospi +5%
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.8%, Dax +1.5%; FTSE100 flat
- EUR 1.0749-1.0652 ; JPY 111.36-109.98 ; AUD 0.5911-0.5662 ;NZD 0.5807-0.5608
- Gold +0.3% at $1,484/oz; Crude Oil +3.7% at $26.85/brl; Copper -0.8% at $2.135/lb

FT : Hedge fund Schonfeld hit as investors slash risk

Hedge fund Schonfeld hit as investors slash risk
NY-based computer-driven hedge fund manager suffers double-digit losses this year

Schonfeld Strategic Advisors, a prominent computer-driven hedge fund manager, has recorded double-digit losses this year, as hedge funds across the board are hit by a scramble to cut risk amid tumbling markets and the coronavirus pandemic.

The New York-based manager, which is one of the largest and fastest-growing computer-driven hedge funds in the US, manages a roughly $35bn portfolio of trades betting on rising and falling prices in equities and other assets. Its Partners fund has lost approximately 15 per cent this year, and part of those losses have come in recent days, said people familiar with its performance. 

Schonfeld declined to comment.

The firm was founded by trader Steven Schonfeld as a family office before it converted into a hedge fund manager running external investors’ capital about four years ago. It is a large player in the so-called statistical arbitrage space. ‘Stat arb’ funds use computer algorithms to scour markets for tiny mispricings in shares to exploit. They borrow to magnify their positions in an attempt to boost returns.

The fund has delivered annualised returns of nearly 20 per cent since its launch. However, in recent days it has, like many hedge funds, been hit as some of the biggest managers try to slash risk in order to limit losses in slumping markets. It has cut its own risk levels, said a person familiar with its positioning.

Hedge fund “deleveraging is now accelerating,” wrote Morgan Stanley in a recent note to clients. “The bears are in total control of a market paralysed by its inability to decipher the true economic impact of the virus.”

Like firms such as Millennium Management and Citadel, Schonfeld employs a range of trading teams to wager on different areas of the market. Its Partners fund also includes non-quant strategies that take bets on corporate events such as mergers and acquisitions.

The firm, which opened an office in London’s St James’s in late 2018, has been aggressively adding portfolio managers as its asset base has expanded. Two years ago, when it was running a portfolio of more than $20bn, it took over investment firm Folger Hill Asset Management.

Schonfeld also runs a non-quant fund, called the Fundamental Equity fund, which has suffered small losses, said a person who had seen the numbers.

The FT reported earlier on Thursday that Millennium, a $40bn multi-strategy firm, has closed a double-digit number of its “trading pods” in response to performance losses.

>>> US CLose Dow +0.95% S&P +0.47% Nasdaq +2.30% Russell +6.82%

Closing Stock Market Summary

The S&P 500 advanced 0.5% on Thursday in a volatile session that saw the benchmark index fall as much as 3.3% in early action and gain as much as 2.9% in the afternoon. The Dow Jones Industrial Average rose 1.0%, while the Nasdaq Composite (+2.3%) and Russell 2000 (+6.8%) were the big movers today amid strong gains in technology and small-cap stocks.

The news cycle wasn't entirely positive with the number of COVID-19 cases continuing to surge globally, leading more companies to withdraw guidance, suspend dividends, and temporarily lay off workers. The latter started to be quantified in the weekly initial claims, which increased by 70,000 to 281,000 (Briefing.com consensus 220,000) for the week ending March 14.

To mitigate the negative impact of the coronavirus, central banks continued to amplify stimulus efforts, Congress continued to deliberate the proposed $1.3 trillion fiscal stimulus package, and clinical trials for new therapies remained in progress, according to President Trump. 

The latest central bank moves included the Fed establishing a Money Market Mutual Fund Liquidity Facility (MMLF), the ECB and Bank of Japan announcing emergency bond-buying programs, and the Bank of England issuing a surprise rate cut and raising its daily asset purchases. Although not market-moving, there was an appreciation for the urgency to ease the intense strains on financial markets.

Investors also welcomed the respite from the recent days of heavy selling, but the S&P 500 remained down 11.1% for the week and not all sectors participated in today's advance. The S&P 500 consumer discretionary (+3.4%) and energy (+6.8%) sectors presumably outperformed amid tactical trading opportunities and, specifically for the energy space, the 23% spike in WTI crude ($20.42/bbl, +4.71, +23.1%). 

Oil prices were aided by comments from President Trump, who said that he will get involved in the price war between Russia and Saudi Arabia at "the appropriate time." An afternoon report from The Wall Street Journal noted that Texas is considering cutting oil production. Today's move in oil follows a 24% price drop yesterday. 

Left out of today's advance were the defensive-oriented S&P 500 utilities (-5.5%), consumer staples (-2.9%), health care (-1.9%), and real estate (-1.4%) sectors. 

U.S. Treasuries finished sharply higher after two days of aggressive selling, driving yields lower across the curve. The 2-yr yield declined 14 basis points to 0.38%, and the 10-yr yield declined 15 basis points to 1.12%. The U.S. Dollar Index advanced 1.5% to 102.67, as demand remained strong for the world's reserve currency. 

Reviewing Thursday's economic data:

  • Initial claims for the week ending March 14 increased by 70,000 to 281,000 (consensus 220,000), bolstered by the impact of the coronavirus. The unadjusted number of initial claims increased by 50,517 to 250,892. Continuing claims for the week ending March 7 increased by 2,000 to 1.701 million.
    • The key takeaway from the report is that it is an early warning sign of much larger claims numbers to come considering the fact that many forced, or voluntary, business closures didn't start to ramp up until the middle of the month with initial expectations that they will be closed at least through the end of March.
  • The Philadelphia Fed Index for March dropped to -12.7 (consensus 10.0) from the 36.7 reading in February.
  • The current account deficit for the fourth quarter totaled $109.8 billion. The third quarter deficit was revised to $125.4 billion from $124.1 billion.

Looking ahead, investors will receive Existing Home Sales for February on Friday.

  • Nasdaq Composite: -20.3%
  • S&P 500: -15.4%
  • Dow Jones Industrial Average: -29.6%
  • Russell 2000: -36.6%