North America Update: July 13
Keep an eye out for the next update on Monday, July 20. Thanks for your readership!
- This week is the start of the second quarter of corporate earnings. It will likely be the weakest corporate earnings season since the global financial crisis in 2008-2009, as the pandemic and measures taken to contain it hit business activity especially hard in the second quarter. Major U.S. banks, including JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs are set to report results this week. Other early reporters include Netflix, UnitedHealth Group and Delta Airlines in the coming week.
- The estimated earnings decline for the S&P 500 is forecasted at 43.8 percent for the second quarter, according to data from FactSet. Such a result would represent the largest year-over-year decline in earnings since the fourth quarter of 2008, and a steep downward revision from the estimate on March 31, which had a decline of 13.6 percent. All eleven sectors are projected to report a year-over-year decline in earnings, with the steepest declines in the energy, consumer discretionary, industrials and financials sectors. Banks are expected to see their results impacted by the current low-interest-rate environment with the benchmark interest rate near 0 percent. Financials are likely to have sustained further hits to their bottom-line results as credit costs increased.
- U.S. equity markets have rebounded in recent weeks despite the spread of the coronavirus in several states, but the market has proven itself susceptible to sudden downturns if investor sentiment shifts risks to the economy or profits, which could happen if corporate results come in far weaker than expected.
- Prime Minister Justin Trudeau today announced that the federal government is extending its program to subsidize wages for companies impacted by COVID-19 until December. The wage-subsidy program covers 75 percent of wages, up to a weekly maximum of $847, and to date has paid out over $18 billion to more than 252,000 companies.
- With a record of 230,000 new cases diagnosed today, WHO chief Tedros Adhanom Ghebreyesus warned during today’s press conference in Geneva, that there would be “no return to the old normal for the foreseeable future” and that “There are no short cuts out of this pandemic.”
- The UK has declined the EU’s invitation to join the union’s advanced vaccine purchase program.
- The government and unions of France today signed an agreement committing more than €8bn in pay rises for health workers. Prime Minister Jean Castex said, “This is first of all recognition of those who have been on the front line in the fight against this epidemic.” It was reported that the bulk of the package will be made up of €7.5bn for pay rises for nurses and careworkers, while another €450m will go to doctors who work solely on the public sector, the aim being to incentivize them to move from more lucrative private sector work.
- In light of the increased spread of the coronavirus in many countries around the world, the German Federal Minister of Health has warned against underestimating the risk for Germany saying, “The danger of a second wave is real. We should be vigilant and not be overconfident.”
- According to the Mexican Institute for Industrial Development, the investment chapter of the United States-Mexico-Canada Agreement (USMCA) will protect the energy investments of U.S. companies.
- In what is considered the first dispute of the USMCA, the United States government threatened to impose tariffs against imports of Mexican origin.
- The Mexican government reported that deaths from COVID-19 totaled 35,006 and the number of cases reached 299,750. The country has now exceeded Spain and Italy in the number of deaths.
- After testing positive for COVID-19, President Bolsonaro is currently isolated from family members. In recent days, the president met with about 48 people, including ministers, parliamentarians and business executives. Thirteen ministers who had contact with him tested negative.
- The Brazilian government gave BRL 3 billion to its cultural sector to ease the economic impact caused by the pandemic. A study by the Economic Division of the National Confederation of Trade in Goods, Services and Tourism revealed that tourism saw a decrease in revenue of BRL 122 billion.
- According to the president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro, the country’s trade balance will close 2020 with a double negative surplus. Agribusiness exports rose 24.5 percent in June, breaking a record during the pandemic and generating BRL 10.17 billion in revenue.
- Due to the pandemic, Petrobras accelerated layoffs and office closures.
- The Superior Electoral Court (TSE) announced an agreement for the Oswaldo Cruz Foundation (Fiocruz) and the Syrian-Lebanese and Albert Einstein hospitals to participate in the collaboration of a security protocol for the November municipal elections in light of the COVID-19 pandemic. Sirius, Brazil’s electron accelerator, unveiled details of the novel coronavirus. To help combat the COVID-19 pandemic with geo-referenced information, the COVID tool by ZIP code launched last week in Rio.
WEDNESDAY IS FEDERAL TAX DAY IN THE U.S.
- The COVID-19 pandemic led the U.S. Treasury Department to delay the federal tax filing deadline from its traditional mid-April date until July 15 to keep more cash in the hands of Americans to spend as the economy locked down. According to the Internal Revenue Service (IRS), around 142 million taxpayers have already filed returns, but the IRS has not processed them all. According to media reports, the IRS has a backlog of more than 4.7 million paper returns.
- The U.S. budget deficit surpassed $3 trillion through June as stimulus spending increased while tax revenue plunged, putting the federal government on a pace to register the largest annual deficit as a share of the economy since World War II. As a share of gross domestic product (GDP), the 12-month deficit was 14 percent last month, compared to 10.1 percent in February 2010, when the U.S. economy was recovering from the last recession.
- Widespread unemployment and business shutdowns have pushed down federal tax revenue while also boosting spending on safety net measures including unemployment insurance and nutrition assistance. For June, the U.S. Government spent $1.1 trillion, compared with $342 billion in the same period a year earlier, the Treasury said Monday.
Disney World Reopens Amid Backlash
- As Disney reopened their premier theme park, Walt Disney World, this weekend in Florida amid record-breaking coronavirus numbers, social media took the entertainment conglomerate to task by criticizing its decision to resume theme parks operations, calling it “premature” and “risky.” Florida has now seen more than 250,000 total cases of confirmed coronavirus cases and has tallied more than 300 deaths in the last three days, with 11,000 new cases reported on today’s park reopening day.
- Disney is taking safety precautions as necessary:
- Face masks are mandatory for Disney guests over the age of 2. There is a vending machine for masks for those who need one.
- Face coverings that have proven to be less effective against COVID—like neck gaiters and bandanas— are not allowed, WDW News Today reports.
- Rides are sanitized between each group of guests by Disney employees wearing both face masks and face shields.
Facebook Ad Boycott Continues
- Facebook last week took steadily intensifying heat from fleeing advertisers and boycott leaders and its own civil-rights auditors found that the tech giant repeatedly failed to address issues of hatred, bigotry and manipulation on its platform.
- Friday Axios reported Facebook was weighing a temporary blackout on political ads before the November election.
- Fast Company Innovation Festival: The in-person event, originally scheduled for October 5-9 in NYC, will now take place virtually on the scheduled dates.
- New Virtual Programming: Top conveners such as Aspen, Bloomberg, and Axios announced new virtual events on topics such as the future of telehealth, digital technology, and equitable access to the COVID-19 vaccine.
- Bundesliga: Officials began discussions on protocols to allow fans back into the stadiums at reduced capacity. The German soccer league was one of the first to return to play following the impact of the pandemic.
- College Football: The Big Ten and Pac-12 conferences announced they will only play inter-conference games this fall, while the Ivy League cancelled its football schedule, as conferences begin to assess plans for the upcoming college football season.
- PGA: The PGA announced today that the tour’s three playoff events will be held without spectators: Northern Trust, BMW Championship and Tour Championship.
- Chicago Marathon: Organizers for the Chicago Marathon today announced that the 43rd running of the race, scheduled for Oct. 11, will not proceed.
For more information about how we are helping clients solve in this uncertain time, please contact:
- Micho Spring, Chair, Global Corporate Practice, email@example.com
- Pam Jenkins, President, Global Public Affairs, firstname.lastname@example.org