In the U.S.:
- Treasury Secretary Mnuchin told Bloomberg he is considering the creation of a government lending program for oil companies. The administration also considering taking financial stakes in exchange for some loans, and some firms may be asked to reduce production. According to Mnuchin, some oil companies may already be able to access a loan program the Fed created for “main street” businesses.
- Initial unemployment claims jumped another 4.4M this week versus last week’s 5.2M. The Congressional Budget Office released updated economic estimates with the unemployment rate expected to rise to 14% in Q2 and peak at 16% in Q3 and the federal budget deficit expected to grow to $3.7T this year.
- In earnings, 123 companies in the S&P 500 Index have reported, 67.2% beat, 0.8% were in-line, and 31.9% missed estimates.
Equinix, Inc. (EQIX) announced the signing of a greater than $1.0B initial joint venture in the form of a limited liability partnership with Singapore’s sovereign wealth fund, to develop and operate xScaleTM data centers in Japan. The facilities, located in Osaka and Tokyo, will serve the deployment needs of hyperscale companies, including the world’s largest cloud service providers.
In REIT earnings, 10 companies in the Wilshire U.S. REIT Index have reported, 80 beat, and 2 missed estimates.
- Mainland medical doctors were reported to travel to North Korea to aid in the care of the nation’s leader Kim Jong-Un. It has been reported, but not verified, that Kim Jong-Un is in a vegetative state following a surgery, with some reports stating that he has already perished. If true, it is unclear who would be the likely successor, with many speculating his sister would take over.
- April flash Markit PMI manufacturing showed continued weakness at 43.7 versus March’s 44.8 reading. The flash services fell to a dismal 33.8 reading, both metrics indicate that Japan’s GDP may fall by over 10% in the second quarter as the country grapples with the coronavirus pandemic.
- The island of Hokkaido, which was initially proactive in battling the coronavirus and then lifted the state of emergency on March 19th after cases fell drastically, had to reinstate a state of emergency as a second, and far worse, wave of the virus has hit the island.
Wharf Real Estate Investment Co. Ltd. warned that it would likely report a loss for the six month period ending June 30th versus profits of over HK$7B one year ago. The company, which engages in the investment of strategic and substantial retail, office, and hotel operations in Hong Kong and mainland China has been severely impacted by the coronavirus pandemic.
- April flash Eurozone manufacturing PMI fell to 33.6 versus March’s 44.5 reading. Services PMI fell to a dismal 11.7 from 29.7. The U.K. posted similar readings of 32.9 manufacturing PMI and 12.3 services PMI.
A Bloomberg news story this week reported that Vonovia SE, Germany’s largest listed residential property company, is considering making a new attempt to acquire rival Deutsche Wohnen SE in a deal that would create a residential property company giant. Deutsche Wohnen has a market capitalization of about €12.7 bn, while Vonovia’s is about €24.3 bn. Vonovia started to pursue a deal for Deutsche Wohnen back in 2015 that was eventually dropped in in early 2016 after failing to get enough investor interest in its bid. At the time, Deutsche Wohnen viewed it as a hostile bid and not in the best interest of its shareholders. Vonovia issued a press release following the story and indicated that acquisitions are an integral part of its strategy and that they are constantly analyzing potential opportunities as a normal course of business. While not confirming or denying their interest, they also indicated that such a transaction would require the political support of the local government and that the government, much like Vonovia, is currently focused on efforts to successfully battle the COVID-19 pandemic.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.