This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, everyone. There’s green on the screens this morning as we’re looking at a risk-on Tuesday.
Let’s see where investors are putting their dough.
We start in Asia. Led by Japan’s Nikkei, all major indexes are in positive territory. China is planning to lift its two-month coronavirus lockdown in Wuhan, where the contagion began, allowing residents to return to work and normal life in the coming weeks.
It’s a different story in Europe where COVID-19 infections are far from reaching a peak. But, there’s a ray of hope from Italy, the worst-hit country. The hospitals here are still overwhelmed, and factories and businesses are shut, but the death toll fell for a second straight day. That news, and the promise of EU-wide fiscal coordination, is sending the markets higher this morning. The benchmark Stoxx Europe 600 jumped more than 4% in the opening minutes of trade, with bourses in London, Frankfurt and Milan all climbing. That’s despite lockdown measures being tightened in towns, villages and capital cities across the continent.
The U.S., in contrast, looks like the biggest basket case. Partisan politics is delaying the passage of a fiscal relief package, and President Trump is now questioning the logic of strict lockdowns. The paralysis in Washington—will it be the $2.5 trillion plan favored by House Democrats or the Senate’s more modest $1.8 trillion bill?—sent the U.S. markets sharply lower on Monday. The Dow and S&P 500 have each lost more than one-third of their value since the February peak.
The U.S. futures though look set for a strong open, recovering all of yesterday’s losses, and then some. Market commentators say the Fed’s historic measures to scale up purchases of Treasurys and corporate debt appear to be brining liquidity back to the markets, which will hopefully remove some of the recent volatility from trading.
Elsewhere, the dollar is down, putting and end (for now) to an impressive 10-day rally. And Brent crude is up, pushing the oil benchmark above $30 a barrel.
Let’s turn to Corporate America. Goldman Sachs is out with a new forecast looking at the bottom-line impact on companies. Earnings growth will be a key metric to determine whether the economic recovery turns out to be the hoped-for “V-shaped” variety or it’s the more protracted “U,” or even dreaded “L.”
Here’s how they see it playing out:
The bottom line: it’s pretty bad
Goldman is writing off the first three quarters of 2020. If we’re lucky, most companies will see bottom-line growth again not before the final quarter of the year. A nice Christmas gift for weary shareholders.
I’m going to bring back yesterday’s chart for a moment to illustrate one more thing to watch. Earnings growth, we know, typically lags economic growth. The consumer has to get back on her feet again, and spend, re-invest, travel, dine out. When will that happen? Goldman economists figure we’ll see normal activity to return at some point in the second half. Here’s how they break it down.
But look at the last bar of both charts—the one on the far right. Goldman reckons the economy will contract by 3.8% this year and that EPS will fall by a much more precipitous 33%. This suggests the earnings recovery will take far longer than that of the overall economy. Bottom line: companies will see more of a protracted U-shaped turnaround.
If you noticed yesterday the breeze pick up around 6 p.m. CET (1 p.m. New York time), that was us here in Italy—an entire country exhaling with relief. At that hour, health officials deliver their daily press briefing, live on TV, detailing the latest coronavirus data: new infections, numbers hospitalized, recoveries and deaths. Yesterday’s was a good briefing.
For the second consecutive day, we saw an improvement in each metric. It’s too early to call this a “trend” or a “peak,” but it’s what health experts told us they hoped to see at this point as we enter the third week of limited public interaction. We’d know the measures were working if, after a full two weeks of lockdown, the toll of sick and dying ticked downwards progressively. That’s two straight ticks. We’ll take it.
Yesterday here I mentioned the many heroes on the front lines. Today, I want to tip my hat to a number of Italians who’ve become famous for homeland security efforts: i sindaci, or the mayors. Throughout the lockdown period, Italians have been sharing on Twitter and WhatsApp their favorite videos and recordings of Italy’s curmudgeonly mayors and regional presidents scolding the populace to respect the lockdown rules of social distancing. You can hear them bark into the camera that they’ll sequester citizens’ shoes if they catch them taking strolls on the lungomare by the seaside, or that they’ll bust up planned graduation parties with flame-throwers.
The most entertaining ones seem to hail from down south: from Bari (the Pugliese city on the heel), Messina (in Sicily) and the Campania region (home to Naples). Their short video appeals have now gone viral. A bunch of video whizzes compiled the best and mashed them up into a single viewing, even putting English subtitles on them. HT to Angela Giuffrida at The Guardian.
“Ping-pong is not allowed!” the mayor of Bari barks at residents on the beach in one scene. “Go home… to your Playstations!”
In another scene, an incandescent mayor rages at the underground practice of inviting hairdressers into the home to do whatever outlaw hairdressers do. “You’ll have coronavirus in your hair, instead of hair spray!” he hollers, punctuating his message with C-bombs (translation F-bombs).
Dear reader, stay home. With your Playstations. Forget the ping-pong.
Looking for more detail on coronavirus? Fortune has a new pop-up newsletter. The aptly named Outbreak will keep you up to date on the latest news surrounding the coronavirus outbreak and its impact on business and commerce globally. Sign up here.
And, you can write to [email protected] or reply to this email with suggestions and feedback.