COVID-19 Daily Update: April 6, 2020

As the global total of confirmed coronavirus cases reached 1.3 million, equity markets rallied on hopes that the hardest hit regions may have reached a plateau in number of infections.

European nations ravaged by COVID-19 over the past weeks reported fewer new cases than in previous days. Death tolls slowed in the U.K., where the pound fell after British Prime Minister Boris Johnson was moved to intensive care with more serious coronavirus symptoms. Last night, Queen Elizabeth II addressed the country and the world in a rare televised address, saying, “this is a time of disruption in the life… a disruption that has brought grief to some, financial difficulties to many, and enormous changes to the daily lives of us all.”

In the U.S., which remains the epicenter of the outbreak, the death toll surpassed 10,000. The total confirmed cases and deaths in the U.S. may be dramatically higher than reported, as incongruities in counting methodologies and a lack of testing effect tallies. S&P Global Ratings believes that with nearly 90% of the U.S. population under some form of lockdown, the economic standstill triggered by the COVID-19 shock will lead to job losses of unprecedented depth and pace. Following the record 6.6 million people who filed initial unemployment claims in the last week of March, S&P Global Ratings’ Chief U.S. Economist Beth Ann Bovino now expects May will bring the loss of more than 20 million jobs.

Government officials are taking additional actions to prepare and protect their countries’ populations from the coronavirus and its implications. Japan declared a state of emergency in Tokyo and other localities in the face of re-emerging coronavirus cases. Kenya ordered a 21-day restriction on movement in and out of Nairobi. Saudi Arabia implemented curfews in major cities, barring non-essential movement from 6 a.m. to 3 p.m.

The curve of the pandemic may be flattening in New York City, where the virus is still killing more people than all other causes combined. “If we are plateauing, we are plateauing at a very high level and, there is tremendous stress on the healthcare system,” New York Gov. Andrew Cuomo said. The chair of the New York City Council health committee, Mark Levine, warned that the city may have to convert Hart Island, a 131-acre island located in the western part of the Bronx, into a temporary grave site if the number of deaths continues to rise.

Oil futures fell last night following the delay of an emergency OPEC+ meeting because of disagreements between Saudi Arabian and Russian officials and a lack of commitment from the U.S. on possible output cuts. Now that the meeting has been delayed to Thursday, OPEC has three days to reconcile the relationship between Saudi Arabia and Russia, forge an agreement on output cuts, and gain the support of other key crude-producing countries in the midst of the oil market's coronavirus meltdown. After the U.S. administration’s shift to a more combative stance against OPEC over the weekend, the initial aspirations for a 10 million b/d collective production cut that could include the U.S. may not be plausible.

The United Arab Emirates’ energy minister, Suhail al-Mazrouei, said yesterday that "a joint and combined effort by all oil-producing countries is required, not only the group of OPEC+ countries, in order to address the weakness of demand in the global oil market.” Iraq's oil minister, Thamer al-Ghadhban, expressed similar sentiments last night, saying “producers within or outside OPEC+ are in the same boat and all of them should bear responsibility and bring the boat ashore to ensure stability through a new output cut agreement.” Thus far, Norway is the only nation to suggest it may join a new OPEC+ pact.

G20 energy ministers have agreed to hold an emergency meeting Friday to discuss global collaboration with OPEC+ oil production cuts.

Today is Monday, April 6, 2020, and here is essential insight on COVID-19 and the markets.

GLOBAL ECONOMY

PODCAST OF THE DAY

The Essential Podcast, Episode 2: The Triple Threat – Credit Markets in Flux

Host Nathan Hunt interviews Alexandra Dimitrijevic, Global Head of Research at S&P Global Ratings, to understand how coronavirus, an oil crisis, and record volatility are affecting corporate credit markets by sector and region. Listen and subscribe to this podcast on Spotify, Apple Podcasts, Google Play, Google Podcasts, Deezer, and our podcast page.

—Share The Essential Podcast from S&P Global

COVID-19: Coronavirus-Related Public Rating Actions On Corporations, Sovereigns, And Project Finance To Date

In response to investors' growing interest in the COVID-19 coronavirus and its credit effects on companies, S&P Global Ratings is publishing a regularly updated list of rating actions taken globally on corporations and sovereigns as well as summary table and support charts. For this report, S&P Global Ratings also included a summary of project finance rating actions. These are public ratings where the COVID-19 coronavirus as one factor or in combination with others is mentioned.

—Read the full report from S&P Global Ratings

Default, Transition, and Recovery: Five U.S. Defaults This Week Brings The 2020 Default Tally To 33

The 2020 global corporate default tally reached 33 this week after one Shanghai-based (Cayman Island-incorporated) and four U.S.-based issuers defaulted. The defaulted companies were: Chinese-based business parks developer and operator Yida China Holdings Ltd., U.S.-based cyber security service provider Optiv Inc., credit report repair service provider PGX Holdings Inc., hamburger restaurant chain Steak n Shake Inc. (SnS), and crude oil and natural gas exploration and production company Whiting Petroleum Corp.

There have been 10 defaults from the consumer/services sector (which includes both consumer and retail and restaurants sectors) so far in 2020—nine of which are U.S.-based. Credit risks to the global retail sector have increased dramatically as the effort to contain COVID-19 continues, in many cases through social distancing and mandatory closures of nonessential business operations. This is resulting in store closures, changes to shopping habits, and heightened expectations for broad-based macroeconomic decline (and subsequently lower spending prospects). The degree of any impact on S&P Global Ratings' ratings will depend on the duration of shutdowns and trajectory of a future rebound.

—Read the full report from S&P Global Ratings

For Asia-Pacific Banks, COVID-19 Crisis Could Add US$300 Billion To Credit Costs

The economic storm created by COVID-19 will test the ratings resilience of the region's 20 banking sectors. S&P Global Ratings recently cut our GDP assumptions for the region. We estimate an additional US$300 billion spike in lenders' credit costs and a US$600 billion increase in nonperforming assets (NPAs) in 2020. We therefore believe negative rating momentum is likely for some Asia-Pacific banks during 2020.

Asia-Pacific banking's nonperforming assets and consequent credit losses could rise by US$600 billion and US$300 billion, respectively, in 2020 because of COVID-19, the oil price shock, and market volatility. Events will hit the banking systems of China, India, and Indonesia the hardest. While many Asia-Pacific banks will exhibit resilience, negative rating momentum is inevitable.

—Read the full report from S&P Global Ratings

Coronavirus brings counterparty risk into sharp focus for renewables projects

Companies across a range of sectors — from car makers and airlines to travel companies — have been put on credit watch, or even had their credit ratings lowered, as a result of the coronavirus crisis, drawing increased attention to the issue of counterparty risk for renewable energy developers that sell electricity to such businesses. Power purchase agreements, or PPAs, have become a central part of a renewables industry increasingly able to stand up without government subsidies, and corporations with long-term sustainability targets have emerged as key off-takers for projects.

In lieu of subsidies, PPAs — often spanning time-frames of 10 years or more — in many cases now represent a developer's entire revenue stream for a given project. They also help underpin the bank loans that finance the new capacity. As a result, the creditworthiness of the businesses buying the green power is crucial for developers' financial stability.

—Read the full article from S&P Global Market Intelligence

Entertainment Promos Take Center Stage Amid Coronavirus Lockdowns

Of the 170 mobile operators in the 48 markets covered by S&P Global Market Intelligence, 80 offered additional data or speed boosts to its users in response to the coronavirus pandemic. Seventy-seven operators also offered additional value-added services, mostly through free or discounted access to video streaming apps. Most operators worldwide announced coronavirus-related promos in March after the World Health Organization announced the COVID-19 outbreak was officially a pandemic. The week of March 16 was the busiest as operators responded to announcements of varying degrees of lockdowns by several governments worldwide. The exceptions were operators that announced measures as early as January and February in the earliest-hit markets: mainland China, South Korea, Taiwan, Vietnam, Thailand and Italy.

—Read the full article from S&P Global Market Intelligence

Crude prices fall as stock markets soar

NYMEX crude oil plunged by 8% on Monday, despite a bullish day on Wall Street as the Dow Jones Industrial Average jumped by nearly the same percentage and rose more than 1,600 points. NYMEX May WTI was down $2.26 and settled at $26.46/b, while ICE June Brent took a smaller dip and was down $1.06 at $33.05/b. As for refined products, NYMEX May RBOB was up 0.1 cents to 70.16 cents/gal, while May ULSD was $1.0457/gal, down 2.49 cents. Oil prices fell following last week's optimism about a burgeoning OPEC+ deal on cutting production evaporated after meetings were delayed and President Donald Trump wouldn't commit the US to joining any worldwide deal to reduce output.

—Read the full article from S&P Global Platts

OPEC+ regroups on oil production cut negotiations after Trump's heel turn

Having pushed back their critical emergency meeting to Thursday, OPEC and its allies have three days to heal a rift between heavyweights Saudi Arabia and Russia, forge an elusive agreement on output cuts, and convince other key crude producing countries to join their crusade against the oil market's coronavirus meltdown. Delegates say they have been working their phones day and night since the meeting – originally scheduled for Monday – was called by Saudi energy minister Prince Abdulaziz bin Salman.

Initial aspirations for a 10 million b/d collective production cut that could include the US appear to have faded to more realistic goals, given US President Donald Trump's shift over the weekend to a more combative stance against OPEC. Trump on Friday emerged from a meeting with the CEOs of several US oil companies saying he was not inclined to force them into reining back output, before escalating his rhetoric on Saturday, threatening tariffs on US oil imports and claiming that OPEC and Russia would be "destroyed" if they did not reach a new supply accord. "I had been against OPEC all my life; because what is it? It's illegal, you can call it a cartel, a monopoly. I couldn't care less about OPEC," he said.

—Read the full article from S&P Global Platts

G20 has little to gain from OPEC+ oil cuts deal

G20 energy ministers have agreed to hold an emergency meeting on Friday to discuss global collaboration with OPEC+ oil production cuts. Boosting the price of crude is an economic imperative for members such as Saudi Arabia and Russia, but the majority of the group of major economies arguably have more to lose supporting any action by the cartel. At least 12 of its members led by China and India — both accounting for the largest share of demand growth prior to the spread of the coronavirus pandemic — are net oil and gas importers. Japan is entirely dependent on foreign imports, predominantly from the Middle East's petrodollar states. The same goes for South Korea.

The EU has little to gain from supporting Russia's economy, or the aims of President Vladimir Putin. Norway — Europe's largest producer — has indicated it would be willing to cut production but it isn't part of the 27-member bloc, or the G20. Even the UK — which still produces about 1 million b/d of petroleum products from its North Sea territory and counts BP and Shell among its biggest listed companies — would find it politically difficult to support output cuts that would potentially pump up fuel prices at a time of profound economic anxiety and distress. Britain became a net importer of crude in 2005.

Meanwhile, poorer G20 states such as South Africa and Argentina need lower oil prices to support their economies. Turkey -- which imports over half the oil it consumes -- has nothing to gain from supporting Saudi Arabia and Russia, two of Recep Erdogan's main foreign policy adversaries in the Middle East.

—Read the full article from S&P Global Platts

REFINERY MARGIN TRACKER: Global refinery runs seen down 14 million b/d this week on coronavirus pandemic

Global refiners entered the second quarter with expectations of lower runs to balance product supply with demand as many margins slip into negative territory as the coronavirus pandemic continues to spread throughout the world, an analysis from S&P Global Platts showed Monday. "The coronavirus (COVID-19) is wreaking havoc with the refining industry," according a recent report by S&P Global Platts Analytics.

"With demand collapsing, we anticipate that overall downtime will approach 14 million b/d of turnarounds this week, due to idling of units and run cuts," the report said, referring to the week ended April 10. Overall, Platts Analytics expects second quarter runs to be 10 million b/d lower in 2020 than in 2019.

—Read the full article from S&P Global Platts

CHART OF THE DAY

Infographic: OPEC and world oil producers seek a coronavirus exit strategy

This infographic shows the key crude grades from producers likely to be impacted in some way by global cuts. The world's biggest oil producers are running out of time to balance the market after the spread of the coronavirus pandemic crushed demand. The Platts Dated Brent benchmark has plunged 70% in the last month as consumption plummeted and major producers such as Saudi Arabia boosted supply. With storage expected to be filled by May a global deal on supply looks increasingly inevitable.

—Read the full article from S&P Global Platts

UNITED STATES

Economic Research: U.S. Biweekly Economic Roundup: The Beginnings Of A Sudden-Stop Recession

With nearly 90% of the U.S. population under some form of lockdown now, the "sudden stop" triggered by the COVID-19 shock will lead to job loss of unprecedented depth and pace. A record 6,648,000 people filed initial unemployment claims in the last week of March, and S&P Global Ratings now expects over 20 million jobs lost by May. Together with other real-time economic data trackers, the Bureau of Labor Statistic's March employment report is already showing an impact from the shutdowns. In March, 701,000 jobs were lost, and the unemployment rate jumped up to 4.4% from 3.5%. Recent relief measures (the CARES Act) from Congress, with their emphasis on checks to households and expanded unemployment insurance, help plug some of the sizeable hole in lost income.

—Read the full report from S&P Global Ratings

Surging unemployment threatens US banks concentrated in consumer loans

A staggering 10 million initial jobless claims over just two weeks put the U.S. unemployment rate on a trajectory to reach levels last seen during the Great Depression. A wave of missed payments appears inevitable, endangering bank portfolios of home mortgages, and credit card, auto and other consumer loans.

The official unemployment rate has already jumped 0.9 percentage point to 4.4%, according to the most recent report, which showed heavy job losses in sectors that include restaurants, bars, hotels, retail stores, and even medical professions hit by postponements of non-emergency procedures. That figure is based on a survey during the first half of March, before business closures driven by the fight against the novel coronavirus registered in the nearly 10 million claims, an amount economists expect to grow rapidly as the damage spreads and states work through backlogs of benefit claims.

—Read the full article from S&P Global Market Intelligence

Utility workers push to be classified as first responders

When disaster strikes, ordinary citizens clear the way for first responders such as firefighters, paramedics and police officers to get where they are needed most and to do so quickly. But utility workers, who sometimes are called upon to rapidly address life-threatening situations such as gas leaks or downed power lines, nevertheless can face literal roadblocks while trying to do their jobs.

Recent moves by at least one regional power grid operator to sequester critical workers on-site in response to the ongoing COVID-19 pandemic have helped highlight how essential utility employees are to maintaining routine daily life in America. And disruptive operational issues such as the ones that occurred in the wake of Hurricane Sandy are among the reasons the union wants its members to be classified as first responders so they can have the advantages such a designation confers during emergencies or crises. Recently, the U.S. Department of Homeland Security's Cybersecurity and Infrastructure Security Agency issued guidelines stating that utility workers, among other professionals, are part of the country's essential critical infrastructure workforce.

Recently, the U.S. Department of Homeland Security's Cybersecurity and Infrastructure Security Agency issued guidelines stating that utility workers, among other professionals, are part of the country's essential critical infrastructure workforce. But being considered essential is not enough for the union's members, Slevin said.

—Read the full article from S&P Global Market Intelligence

Pizza chains aim for larger slice of contactless deliveries during coronavirus

Large pizza chains stand to gain greater slices of the U.S. market as they push contactless delivery methods for consumers staying home during the coronavirus pandemic, analysts said. Domino's Pizza Inc., Papa John's International Inc. and Yum! Brands Inc.-owned Pizza Hut have all ramped up the zero-contact service in recent weeks as states across the country restrict in-person dining at restaurants. Eateries across cuisine styles and third-party delivery services like Uber Technologies Inc.'s Uber Eats service and Grubhub Inc. have also embraced the service to protect customer and worker safety while they continue to seek sales opportunities.

—Read the full article from S&P Global Market Intelligence

Interview: Continental's Hamm sees US drillers slashing oil output by 30%-35%

Plunging oil demand and dwindling storage options -- not any supply-cut coordination with Saudi Arabia and Russia -- will force US producers to voluntarily cut output by about 30%-35%, Harold Hamm, Continental Resources executive chairman, said in an interview Monday. President Donald Trump raised the possibility last week that US producers would agree to curtailments to help break the oil market stalemate between Saudi Arabia and Russia. The top OPEC+ producers have been locked in a price war since early March, when their supply cut agreement fell apart.

"The US producers don't need to coordinate between themselves," Hamm said. "That's unnecessary. Each one of them will have his own situation to deal with... Overall, we've got 30 million barrels that's been taken off the market in demand with this virus that swept the globe. So everybody's going to be cutting back."

—Read the full article from S&P Global Platts

Infographic: A crushing collapse: Ethanol plummets as demand evaporates

Ethanol prices have fallen to record lows; US ethanol producers have idled or shut down as much as 4 billion gallons of annualized capacity. Shelter-in-place guidelines have reduced driving significantly, severely cutting ethanol demand. The demand destruction comes with the US ethanol industry already hurting from poor margins. A USDA report forecast the 2020 US corn crop would reach 97 million acres, the fourth-largest corn crop recorded. With ethanol a large portion of corn demand, oversupply is not just for energy markets.

—Read the full article from S&P Global Platts

Analysis: US aluminum premium futures lower on spot cancellations

CME Group's AUP Midwest aluminum premium forward curve was lower through 2020, amid the auto and aerospace sectors shutting down and concerns on corporate earnings over the coronavirus pandemic. This has affected rolling mills as some have recently canceled tonnage for April and May, while others are running limited capacity and taken aluminum contract minimums. The futures contracts trade on CME Globex and CME Clearport and settle on a monthly basis, based on the Platts US Aluminum Transaction premium.

—Read the full article from S&P Global Platts

Multiple US aluminum mills idle as pandemic skews markets

Several US aluminum rolling mills and extrusion facilities announced temporary suspensions to their operations this week as the coronavirus pandemic has continued to skew markets and dent demand. Aleris halted production at its Lewisport, Kentucky, aluminum rolling mill, effective March 30 until April 13, a company representative told S&P Global Platts Friday. Arconic also confirmed upcoming suspensions of operations at two of its US facilities. Norsk Hydro, which operates several extrusion facilities in the US, said its extrusion output had been heavily curtailed as a result of reduced demand in the current environment.

—Read the full article from S&P Global Platts

No place to go: Oil storage filling up amid collapsing demand, excess production

Concerns are mounting that the U.S. soon may not have enough oil storage to absorb a collapse in demand caused by the coronavirus that has started to ripple through the supply chain, with consequences for producers, pipelines, refiners and consumers. Oil market experts do not expect international prices to move into negative territory, but they said an overflowing storage situation could shut down pipelines, shut in wells and destroy billions of dollars in value that would take years to recover. At the heart of the problem is evaporating transportation fuel demand. People across the world are sheltering in place at the same time that Russia and Saudi Arabia have launched an oil price war and are increasing supply into an oversaturated market.

—Read the full article from S&P Global Platts

EUROPE AND THE MIDDLE EAST

COVID-19: Coronavirus-Related Public Rating Actions On Nonfinancial Corporations And Affected European CLOs

In response to investors' growing interest in the COVID-19 coronavirus and its credit effects on companies and European collateralized loan obligations (CLOs), S&P Global Ratings is publishing a regularly updated list of rating actions we have taken globally on nonfinancial corporations, which have had an effect on European CLOs, and a summary table. These are public ratings where S&P Global Ratings mentions the COVID-19 coronavirus as one factor or in combination with others.

—Read the full report from S&P Global Ratings

Industry Report Card: GCC Banks Face An Earnings Shock From The Oil Price Drop And COVID-19 Pandemic

S&P Global Ratings believes conventional and Islamic banks in the Gulf Cooperation Council (GCC) countries will see significantly reduced revenue and credit growth in 2020. The sharp drop in oil prices and measures implemented by regional governments to contain transmission of the coronavirus (COVID-19) will take a toll on important sectors such as real estate, hospitality, and consumer-related. Under our base-case scenario, we assume that these measures will be relatively short lived and forecast a gradual recovery in nonoil activity from third-quarter 2020. However, the severe shock could cause irreparable damage to some parts of the nonoil economy. Furthermore, if the recovery takes longer than we expect, GCC banks could feel greater pressure.

—Read the full report from S&P Global Ratings

European middle market vies for support amid coronavirus/economic challenges

There is still little certainty over the length or full impact of the coronavirus pandemic on European businesses. But as national governments battle the immediate economic challenges, massive support programmes designed to preserve as much corporate liquidity as possible are being worked through.

Lenders and sponsors in the European mid-market were quick to welcome these efforts. "There has been an immediate reaction from the government in order to alleviate financial stress caused by the total lockdown of businesses, and it's hugely appreciated," one U.K.-based lender said. State-introduced measures have so far tended to follow a similar pattern. These bring forbearance on one side and protection on the other, with additional support such as payment deferrals, loans and employment benefits.

—Read the full article from S&P Global Market Intelligence

Lloyd's of London improvement continues steadily under shadow of coronavirus

At first glance, Lloyd's of London's 2019 results are not a good advertisement for the marketplace's campaign to boost underwriting results. Although the market made a £2.53 billion profit, compared with a £1.00 billion loss in 2018, the result was entirely down to its £3.54 billion investment return, offsetting an underwriting loss of £538 million. Underwriting results have had the largest influence on overall performance for seven of the past 10 years, S&P Global Market Intelligence analysis shows. Nevertheless, underwriting performance showed several gradual signs of improvement in 2019, the first full year of the profitability improvement drive aimed at fixing a deterioration in Lloyd's attritional loss ratio and accident year combined ratio excluding catastrophe losses in 2017.

—Read the full article from S&P Global Market Intelligence

Infographic: European steel, aluminum demand stalls on automakers’ shutdown

The continent-wide outbreak of coronavirus has hammered automotive production. As of March 26 all major European car manufacturers had halted output, withdrawing an estimated 61,000 vehicles a day from production. The first shutdown occurred on March 13 and since, production lines across Europe have been going cold as automakers responded to logistical problems hampering supply lines and also attempted to maintain worker welfare. With the automotive sector a major consumer, European aluminum and steel industries have experienced a marked drop in demand.

—Read the full article from S&P Global Platts

VIDEO OF THE DAY

Watch: Market Movers Europe, Apr 6-10: Oil and power markets brace for production cuts and demand drops amid COVID-19

OPEC+ oil producers will hold a virtual meeting; European gas prices start summer on a downward trend; Restaurant closures put biodiesel producers in a feedstock quandary; and European power markets brace for a further drop in demand.

—Share the video from S&P Global Platts

COVID-19's Impact On Europe's TV Networks And Production Landscape

TV networks are feeling the effects of an advertising slump as advertisers shift resources to more critical business functions during the COVID-19 crisis. Meanwhile, production has ground to a halt, disrupting the whole ecosystem. The only notable upside will be a surge in TV viewing, borne out in the data for the United Kingdom, France and Italy, in particular, where certain channels grew viewing by more than 100%.

Key advertising industries such as travel, tourism and retail are fighting against total collapse. The test for TV networks will be how effectively they can facilitate deals on current inventory, while also providing more beneficial terms on future inventory. Broadcasters can cut associated costs for advertisers — much as Channel 4 (UK) is cutting late booking fees, as reported by CampaignLive.co.uk — or offer incentives such as first preference on important slots such as Christmas time in exchange for taking spots in April/May.

—Read the full article from S&P Global Market Intelligence

Entertainment Promos Take Center Stage Amid Coronavirus Lockdowns

TV networks are feeling the effects of an advertising slump as advertisers shift resources to more critical business functions during the COVID-19 crisis. Meanwhile, production has ground to a halt, disrupting the whole ecosystem. The only notable upside will be a surge in TV viewing, borne out in the data for the United Kingdom, France and Italy, in particular, where certain channels grew viewing by more than 100%.

Key advertising industries such as travel, tourism and retail are fighting against total collapse. The test for TV networks will be how effectively they can facilitate deals on current inventory, while also providing more beneficial terms on future inventory. Broadcasters can cut associated costs for advertisers — much as Channel 4 (UK) is cutting late booking fees, as reported by CampaignLive.co.uk — or offer incentives such as first preference on important slots such as Christmas time in exchange for taking spots in April/May.

—Read the full article from S&P Global Market Intelligence

EMERGING MARKETS

COVID-19: Emerging Market Local Governments And Non-Profit Public-Sector Entities Face Rising Financial Strains

S&P Global Ratings’ current base-case scenario assumes that the COVID-19 pandemic will pose mostly a medium risk to financial performance of public-sector entities outside the U.S. But among these entities, we view local and regional governments (LRG) in emerging markets, public universities, and transport infrastructure operators and providers as the most vulnerable to current economic disruptions. Although we acknowledge that some national governments have approved fiscal stimulus packages, it remains to be seen how those resources will trickle down to effectively reach public-sector entities to prevent deterioration in their credit quality. Currently, out of 16 countries in which we rate LRGs, those in 12 face increasing risks on their budgetary performance in 2020. A weak demand, combined with a price war between OPEC and Russia, collapsed oil prices, denting tax and royalty LRGs revenues in oil-dependent economies. This report assumes that the COVID-19 pandemic pushes the global economy into recession with a gradual recovery expected starting in the third quarter of 2020.

—Read the full report from S&P Global Ratings

Developing Markets: Credit Memo | March 2020

According to S&P Global Ratings research, the sudden stop to the global economy caused by COVID-19—and the drastic efforts to contain it—will lead to a global recession. In S&P Global Ratings' view, this will likely mean a surge in defaults, potentially reaching a double-digit speculative-grade default rate for nonfinancial corporates in the U.S. and a material increase to high single digits in Europe over the next 6 to 12 months. Such surge in observed default date, should it materialize, equates with the previous spikes of default rates of S&P Global Ratings rated entities that we saw in 2009 (following the Global Financial Crisis), in 2002 (Tech Bubble), and in 1990 (a US economic recession). The impact to emerging markets will vary. Countries with greater exposure to tourism, commodities, U.S. dollar financing or that have larger external financial requirements will most likely see downward rating pressure, while others might be less exposed and better able to withstand the crisis.

S&P Global Market Intelligence uses Credit Analytics’ CreditModel™ (CM), a statistical model, to assess the creditworthiness of 6125 financial and non-financial corporates based in Central Asia, European Emerging Markets, Middle East and North Africa (MENA), Sub-Saharan Africa, and the Indian sub-continent. CM can generate credit scores for companies of all types including rated and unrated, public and private companies, globally. This becomes especially useful for our study that addresses a largely unrated market. S&P Global Market Intelligence also uses Credit Analytics Probability of Default Market Signal (PDMS) model, which uses stock price and asset volatility as inputs to calculate a one year Probability of Default (PD). This helps us understand which corporates have experienced significant changes in default risk, based on market-derived signals. S&P Global Market Intelligence conducted our analysis by generating medians from PDMS based on both sector and regional clustering. Combining CM and PDMS for our study helps in ranking entities in absolute terms according to their long-term view of credit risk and in mapping these scores to one year PD based on derived market signals.

—Read the full article from S&P Global Market Intelligence

Research Update: Brazil Outlook Revised To Stable From Positive On Uncertainty Related To COVID-19; 'BB-/B' Ratings Affirmed

On April 6, 2020, S&P Global Ratings revised its outlook on its long-term ratings on Brazil to stable from positive. At the same time, we affirmed our 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings. We also affirmed our 'brAAA' national scale rating and our transfer and convertibility assessment of 'BB+'. The outlook on the national scale rating remains stable.

The outlook revision to stable from positive reflects diminishing prospects for an upgrade over the coming year due to the negative impact of the COVID-19 pandemic. We expect Brazil's GDP growth and fiscal performance to suffer in 2020 due to the pandemic and extraordinary government spending, before gradual economic recovery and fiscal consolidation resumes. We also assume slower-than-expected progress on the reform agenda to address structural fiscal vulnerabilities and to improve low medium-term GDP growth prospects.

—Read the full report from S&P Global Ratings

How the Chinese Equity Market Responded to the Domestic and Global Coronavirus Outbreak

As the coronavirus has spread across continents, countries around the world are experiencing a slowdown in economic activity and volatility in the financial markets. The S&P Pan Asia BMI and S&P 500® lost 20.5% and 20.0%, respectively, in the first quarter of 2020. During the same period, the S&P China A Domestic BMI and S&P China 500 (which seeks to track the top 500 domestic and offshore listed Chinese companies) dropped 9.5% and 10.3%, respectively, which was only half of the loss suffered by the U.S. and Pan Asian markets.

In response to the domestic coronavirus outbreak, the China A-shares market experienced a significant drawdown of 14.2% between Jan. 20 and Feb. 3, 2020, when the number of new cases of coronavirus infections in China was on the rise. However, the market has recovered most of its losses since Feb. 3, 2020, as a result of government stimulus packages and improved investor sentiment due to a slowing domestic infection rate. Business activities began to pick up in China subsequently, and the National Bureau of Statistics announced the China Manufacturing Purchasing Managers’ Index rebounded to 52.0 in March from 35.7 in February. Nevertheless, global equity market sentiment turned to panic as investors expected a global recession due to the worsening coronavirus outbreak in the rest of the world. The S&P 500 and S&P Pan Asia BMI declined by 33.7% and 27.8%, respectively, between Feb. 20 and March 23, 2020, while the S&P China A Domestic BMI and S&P China 500 suffered smaller losses of 14.1% and 17.5%, respectively.

—Read the full article from S&P Dow Jones Indices

In China, more easing might not mean better funding access for small businesses

Some Chinese banks may remain reluctant to lend to small businesses hit by the global slowdown due to the coronavirus pandemic, even as the nation ramps up monetary easing with its first cut to the interest rate on excess reserves in more than 11 years, economists said.

On April 3, the People's Bank of China cut the interest rate it pays banks to park funds with the central bank to 0.35% from 0.72%. The PBOC had last cut the rate in November 2008. Beijing also lowered the reserve requirement ratio by 100 basis points for rural and small city commercial banks, which have high exposure to rural and small businesses. It was the nation's 10th reserve requirement ratio cut since the beginning of 2018.

"This should in theory boost lending," said Iris Pang, chief Greater China economist at ING Bank NV. But, "banks may not lend to small businesses. Instead, they may lend to companies or individuals with strong credit profiles," she said.

—Read the full article from S&P Global Market Intelligence

COVID-19’s Role in the Changing Landscape of Indian Capital Markets

In the past five years, capital markets in India have witnessed bull and bear phases. The bulls accounted for most of the five-year period; however, Q1 2020 completely changed this landscape. Due to the COVID-19 outbreak, capital markets have taken a beating both globally and locally in India. The returns were promising for large-, mid-, and small-cap segments through December 2019; however, the scenario completely changed in Q1 2020. The returns of the large-cap segment were better than the small- and mid-cap segments across the five-year period. The S&P BSE SENSEX, which comprises the 30 largest and most liquid BSE-listed companies in India, outperformed all size indices.

We can say that the bulls had their way during most of the five-year period across all sizes and most sectors through December 2019; however, due to the COVID-19 outbreak, things went south at Dalal street as markets tumbled across all sizes and all sectors during Q1 2020, especially during March.

—Read the full article from S&P Dow Jones Indices

Written and compiled by Molly Mintz.