COVID-19 Daily Update: June 4, 2020

As the world watches protests against police brutality and structural racism continue across the U.S. for the ninth consecutive day, some six months into the global health crisis that has devastated communities of color, a stronger spotlight is shining on racial and economic inequalities—especially those of black women in America.

“I am part of the 1%, and I still worry when I’m approached by a police person,” VEON executive chairperson Ursula Burns, who became the first black female CEO of a Fortune 500 company when she took the helm of Xerox in 2009, told CNBC in a June 3 interview. “Companies must be interested, concerned, active, [and] vocal about how their communities, how their structures in their communities, are run.”

Data on the coronavirus’ combined racial and gendered impacts are scarce. Black Americans overall are dying due to coronavirus at 2.4 times the rate as white Americans, according to research by APM Research Lab, and more men worldwide have died due to the virus than women—signaling that more black men in the U.S. have died due to the virus than other group. While black men in the U.S. are suffering greater fatalities, black women are burdened with the worst of the crisis’ economic implications.

“As of April, less than half of the adult black population was employed. While the economic devastation is widespread… black workers are less able to weather such a storm because they have fewer earners in their families, lower incomes, and lower liquid wealth than white workers,” according to recent Economic Policy Institute research analyzing the Current Population Survey for April 2020. The report found that “white women experienced the largest increase in unemployment, while black women now have the highest unemployment rate,” resulting in black women suffering the largest job losses of any group.

“Black women experienced a drop in their [employment-to-population ratio] of 11 percentage points. Put another way, 18.8% of black women workers lost their jobs between February and April,” the EPI found.

Studies show that black women have historically dominated the labor force with high levels of participation, as compared to other women in the U.S., no matter their age, marital status, or if they have children. In 2018, according to the Bureau of Labor Statistics, the labor force participation rate of black women aged 20 years and older was 62.4%, compared to white women’s 57.6%. Additionally, black women accounted for 53% of the country’s black labor force that year.

As their unemployment rises, risks to black women’s household liquidity and stability skyrocket. “Black women are nearly twice as likely as white men to say that they’d either been laid off, furloughed, or had their hours and/or pay reduced because of the COVID-19 pandemic,” according to research conducted by Lean In, the non-profit founded by Facebook COO Sheryl Sandberg, and SurveyMonkey on the coronavirus’ impact on women. “Black women are the most likely to be concerned about being able to pay for basic necessities.”

Prior to the pandemic, 67.5% of black mothers were the primary or singular breadwinners for their families, as shown by a Center for American Progress analysis of 2018 data from the Current Population Survey. Because black women are more likely to be single heads of households in the U.S., any loss of earnings is detrimental to the wellbeing of their families during crises.

“Black women are more likely to work in lower-paying service occupations (like food service, domestic work, and health care assistance) than any other industry and less likely to work in the higher-paying engineering and tech fields or managerial positions,” according to the American Association of University Women, a non-profit organization. “The percentage of black women who are full-time minimum-wage workers is higher than that of any other racial group.”

Fifty-one percent of black women are working as essential workers outside of their homes, compared to 38% of white women, the Lean In survey found.

“When I entered Xerox Corporation, I entered into a company that already had a sensitivity, an awareness around the difference and the positive differences that African Americans, women, and alike could contribute. Part of the reason for that is that we had African Americans on the board,” Ms. Burns said. “It’s one of the things that’s very important that we have to continue to push in American business.”

Of the 37 female CEOs that currently lead Fortune 500 companies, none are black. Ms. Burns and Mary Winston, who was the interim CEO of Bed Bath and Beyond for six months last year, are the only two black women to have ever led an S&P 500 company.

“Before you even look at the companies, look at the boards. Most of the boards still have zero or one African American on board… I think that pressure in that area, can help to speed up progress and transitions for companies,” Ms. Burns said. “I think we really have to start looking more seriously at board composition and ensuring that we have the presence of difference on the board, a direct voice on the board.”

Today is Thursday, June 4, 2020, and here is today’s essential intelligence.

Uncertainty in the Global Economy

Tech, media and telecom PE funds look to recover from early COVID blow

The coronavirus pandemic is hitting private equity firms particularly hard. But with certain sectors in telecommunications, media and technology poised to grow due to pandemic dynamics, the industry is attracting attention. Private equity often relies on leverage, both new issuance and refinancing, as part of its investment model, but banks have largely restricted access to credit markets due to uncertainty surrounding the coronavirus. With markets tight and investors hungrily looking for a return, they see possibilities within the TMT industry as Americans work, shop and learn from home.

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

A Slow Recovery And U.S.-China Trade Tensions Could Test U.S. Investment-Grade Tech Companies

S&P Global Ratings revised three rating outlooks on U.S. investment-grade tech companies since the COVID-19 outbreak, a stark contrast to 43 rating actions on speculative-grade peers. The resilience in investment-grade ratings is due to these companies' strong balance sheet and liquidity, reduced business volatility over time, and the growing demand for their services in the global economy-which has allowed the tech industry to outgrow global GDP. Credit quality could suffer, however, if the recovery in IT spending is slower than S&P Global Ratings forecasts amid lower global GDP growth arising from the lingering effects of COVID-19. U.S.-China trade tensions could alter the semiconductor and hardware landscape for decades to come, with mostly negative consequences for U.S. investment-grade technology companies as China invests in its native semiconductor industry.

— Read the full report from S&P Global Ratings

US loan default rate tops historical average — finally — led by retail, telecom

The $1.2 trillion U.S. leveraged loan market saw another $10.54 billion of defaults in May, the busiest month, by volume, for this activity since 2014. Following a record number of defaults in April, May crossed additional milestones: The 2.85% historical default average was breached for the first time in more than five years, and the Retail sector once again climbed to record highs.

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

Increased Supply of U.S. Treasuries and Interest Rate Risk

Since March 2020, the federal government has enacted four pieces of legislation to assist businesses and individuals weather the economic downtown triggered by the COVID-19 outbreak. According to the Congressional Budget Office (CBO), these four pandemic-related laws are projected to increase the federal deficit by USD 2.2 trillion in fiscal year 2020 and by USD 0.6 trillion in fiscal year 2021. Those amounts would represent 11% of nominal GDP in fiscal year 2020 and 3% in fiscal year 2021. In late April 2020, the CBO adjusted the projected deficit to be 17.9% of GDP in 2020 and 9.8% in 2021, figures that were 13.3% and 5.5% higher, respectively, than projected in the initial January 2020 report.

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

No significant insurance losses expected from George Floyd demonstrations

Insured losses from the ongoing demonstrations over the death of an African American man in police custody are not expected to be significant, two industry analysts have said. The civil disturbances that started in Minneapolis on May 26 have led to destruction and looting in most major U.S. cities. The protests were sparked by the May 25 death of George Floyd. He died after a Minneapolis police officer pinned him to the ground with a knee on his neck for nearly nine minutes during an arrest.

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

Banking Sector Under Pressure

Investors favored large-cap banking stocks in May

Larger U.S. banks outperformed peers with smaller market capitalizations in May. The median monthly total return for the 20 largest banks by May 29 market capitalization in the S&P Global Market Intelligence analysis was 2.7%. Thirteen of those companies had a positive return, led by Santa Clara, Calif.-based SVB Financial Group at 11.2% and Houston-based Prosperity Bancshares Inc. at 9.1%. In contrast, the remaining 300 companies with a market capitalization below $5 billion had a median return of negative 2.7%. The market performance was worse for companies with a sub-$100 million market capitalization: a monthly return of negative 5.6%.

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

Tech Disruption In Retail Banking: Hong Kong's Large Banks Are Pioneering The City's Fintech Development

Hong Kong's fintech development was set in motion by HKMA's seven-part initiative. It has adopted a more forceful approach on implementation relative to its Singaporean counterpart, MAS. The COVID-19 outbreak is catalyzing customers' digital banking adoption and banks' pace of digitalization. The biggest banks in Hong Kong are best equipped to spearhead financial innovation with their deep pockets, vast operating network, and strong customer trust. New competitors are likely to focus on niche markets and will need to earn the trust of Hong Kong users who are sensitive about personal data and privacy. Their compliance and legal costs could also be high, given Hong Kong's stringent regulations.

—Read the full report from S&P Global Ratings

Tech Disruption In Retail Banking: Singapore Banks Are Front-Runners In Digital Race

In S&P Global Ratings’ view, fintech is vital for Singapore banks' competitiveness. Ongoing heavy investments in technology by large domestic banks and collaboration with technology companies are protecting their business models, and giving them an edge over new entrants. Fintech is likely to be more collaborative than disruptive, with banks preferring to partner with tech start-ups rather than taking them head on. COVID-19 has accelerated the adoption of digital banking in Singapore. Regulator strives to achieve a fine balance between preserving financial stability and promoting innovation.

—Read the full report from S&P Global Ratings

Tech Disruption In Retail Banking: Australia's Big Banks Hold Their Ground As Tech Takes Center Stage

Australia's major banks can defend their market positions against new tech-enabled competitors. Australia is catching up to peers such as the U.K., China, and Sweden, as strong consumer appetite for technology and a favorable regulatory environment drive Australia's fintech adoption. S&P Global Ratings believes the COVID-19 pandemic—and associated containment measures—will increase consumer adoption of financial technologies, accelerating Australia's transition to a technology-driven financial system with a reduced physical footprint.

—Read the full report from S&P Global Ratings

ESG in the Time of COVID-19

Listen: Boost to EVs from China’s new policy at risk due to COVID-19

The battery metals industry has welcomed China's two-year extension of subsidies for new energy vehicles, but the COVID-19 pandemic has prevented EV sales from picking up as expected. The battery metals industry has welcomed China's two-year extension of subsidies for new energy vehicles, but the COVID-19 pandemic has prevented EV sales from picking up as expected. In this edition of S&P Global Platts' monthly Battery Metals podcast, Jacqueline Holman and Henrique Ribeiro discuss how the new Chinese policy works and what can be expected for EV sales and battery metals going forward.

—Listen and subscribe to Battery Metals, a podcast from S&P Global Platts

In Europe, COVID-19 brings government renewable energy auctions into sharp focus

While there remains appetite from investors to build unsubsidized renewable energy projects in Europe, the current economic downturn and power price slump could drive more developers towards revenue stabilization mechanisms via government auction programs, industry participants said. "In times of volatility anything that gives security of pricing will have added attractiveness," Peter Dickson, partner and technical director at fund manager Glennmont Partners, said in an email. At the same time, "There remains a large amount of capital already committed to funds for renewable energy investment that is seeking [investable] projects," he said.

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

Electrification advocates open new front in fight over gas use: public health

Building electrification advocates are trying a new tack in the campaign to phase out natural gas use in homes and businesses, compiling decades of research and conducting new analysis to highlight health risks linked to gas appliances.

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

Norwegian green steel project, hydrogen strategy launched

Norwegian power utility Statkraft, steel manufacturer CELSA and Mo industrial park in Northern Norway have signed an agreement to develop green hydrogen for industrial use in high-temperature metal processes, Statkraft said June 3, as the government unveiled its hydrogen strategy. Hydrogen hub Mo aims to build an electrolysis facility using renewable power to produce green hydrogen. That could then replace the fossil fuels currently used in CELSA's production process. "The end product will be green steel, in the form of one of the world's most low carbon reinforcement steel for use in construction works," Statkraft said. The initial plan is to study a production unit capable of producing 2-4 mt of hydrogen per day.

—Read the full article from S&P Global Platts

The Outlook for Energy & Commodities

Infographic: OPEC+ faces tough choices in oil market recovery

The OPEC+ group of major producers led by Saudi Arabia and Russia has succeeded in stabilizing the oil prices after enacting historic cuts to supply. But with COVID-19 lockdowns in major consuming nations beginning to ease, its challenge is picking the right time to release the extra barrels recovering economies will require.

—Read the full article from S&P Global Platts

OPEC+ tightens the screws on quota busters, delaying deal on oil cut extension

Talks between OPEC and its allies have bogged down over quota compliance, holding up an apparent deal to extend the coalition's landmark 9.7 million b/d production cut agreement beyond June for a month to juice the oil market's recovery from the coronavirus pandemic. OPEC kingpin Saudi Arabia is insisting on firm commitments from other members to stick to their production quotas, and those who have violated their caps are being pressured to overcomply in the coming months to make up for their excess barrels, multiple sources involved in the discussions told S&P Global Platts.

—Read the full article from S&P Global Platts

Tropical Storm Cristobal closes ports in Mexico´s Bay of Campeche

Tropical Storm Cristobal forced ports to close in three states in Mexico's Bay of Campeche area June 3, although there has been no major impact on oil, gas or power generation infrastructure. Ports in the states of Veracruz, Tabasco and Campeche have been closed to all ships, said the head of Mexico's civil protection agency, David Leon, in a press conference. Northern ports in the state of Veracruz remained open, including the ports of Veracruz and Tuxpan, according to a Mexico-based oil broker. All relevant oil and gas infrastructure is working without disruption due to emergency protocols put in place by Pemex, the state oil company, said Leon. Power generation plants of state utility CFE in the area were also operating normally, he said.

—Read the full article from S&P Global Platts

Changing EU rules for LNG terminals would lower gas prices: study

Introducing primary capacity auctions with low reserve prices at all European LNG import terminals would help improve competition and lower weighted average gas prices, according to an independent study commissioned by the European Commission. This is one of several recommendations the study makes on how to improve the rules for using LNG terminals, as part of the EC's work to update the EU's gas market rules next year.

—Read the full article from S&P Global Platts

Don’t write an obituary for shipping’s dirtiest fuel

High sulfur fuel oil, once the cheap staple diet of the shipping industry, has been usurped by an abundance of low-cost, premium quality bunker fuel. That’s led to seafarers freezing orders for equipment to remove the sulfur from HSFO and maximizing compliant fuels. But don’t write off shipping’s dirtiest fuel as shippers play a waiting game over the oil price recovery. The COVID-19 driven collapse in oil demand has led to the spread between HSFO and very low sulfur fuel narrowing to less than $40/mt in mid-April based on the Northwest Europe differential for delivered bunker fuels at the Rotterdam hub. That compares to close to $300/mt when the International Maritime Organization rules came into effect on January 1, requiring ships to sail with 0.5% sulfur fuel oil or have the sulfur removed using an exhaust gas cleaning system, or “scrubber”.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.