fortune--2020-06-26--Trump’s China hawks are taking wing

Trump’s China hawks are taking wing

As the U.S. pulls away from the rest of the world in coronavirus cases , investors begin to look elsewhere

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On Monday, U.S. President Donald Trump clipped the wings of one of his fiercest China hawks after the aide’s assertion that the U.S.-China trade deal is “over” sent markets into a tailspin.
The aide, White House trade adviser Peter Navarro, offered the bleak assessment in an interview with Fox News. Within hours he was scrambling to walk it back. Trump himself took to Twitter to reassure investors that the China deal is “fully intact.”
The exchange highlights the administration’s increasing difficulty in convincing voters Trump is serious about “getting tough” with China—without roiling markets or torpedoing the “phase one” trade pact the two countries signed in January.
Trump, trailing badly in the polls, has come under new pressure to “stand up” to China since the publication last week of the tell-all memoir by his former national security advisor, John Bolton.
Bolton alleges that, in his meetings with Chinese President Xi Jinping, Trump fawned over his counterpart as the “greatest leader in Chinese history” and “pleaded” for Xi to ramp up soybean imports from states Trump must carry to win re-election.
Trump disputes Bolton’s account and has blasted his former aide as a “liar.” But in the past week, the administration has gone to extraordinary lengths to burnish Trump’s anti-China bona fides.
At rallies in Oklahoma and Arizona, Trump lambasted China for America’s economic woes and referred to the coronavirus several times using an ugly racist slur.
Trump’s China hawks are taking wing. On Wednesday, Trump’s current national security advisor, Robert O’Brien, assailed China’s leadership in stark rhetoric reminiscent of the Cold War. “America, under President Trump’s leadership, has finally awoken to the threat the Chinese Communist Party’s actions pose to our way of life,” he said.
Washington Post columnist Josh Rogin reports that Secretary of State Mike Pompeo, Attorney General William Barr and FBI Director Christopher Wray also plan tough China speeches in the coming weeks, and each of their agencies is pushing new initiatives to confront Beijing. Trump has floated the idea of inviting India, Australia, South Korea, and Brazil to join the Group of Seven countries in a kind of “counter-China coalition” meeting parallel to the upcoming summit. On Thursday, Pompeo surprised officials in Brussels by announcing that the U.S. had accepted a proposal to create a new U.S.-European Union dialogue on China.
Those efforts come as U.S. lawmakers from both parties clamor for greater restrictions on America’s economic relationship with China. The Senate last month approved a bill that could force mainland companies to delist from U.S. stock exchanges if they fail to comply with U.S. regulations. On Thursday, the Senate passed legislation that would impose sanctions on people or companies supporting efforts by China’s national government to undermine the autonomy of Hong Kong.
Sponsors of yesterday’s bill said it was a response to Beijing’s decision to impose a new security law on Hong Kong via China’s national parliament, bypassing Hong Kong’s legislature. Passed by unanimous consent, it includes sanctions on banks that do business with anyone supporting efforts to restrict Hong Kong’s autonomy, potentially barring violators from dealing with American counterparts and limiting their access to U.S. dollar transactions. To become law, it must also pass the House of Representatives and be signed by Trump.
In the escalating conflict between the world’s two largest economies, Hong Kong increasingly finds itself caught in the middle. Earlier this month, Trump vowed to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China. Sor far, the White House has offered no details on the change.
But Hong Kong may prove to be a windfall beneficiary of efforts to deprive Chinese companies of access to U.S. capital markets. Hong Kong Stock Exchange CEO Charles Li says the exchange is seeing “tremendous interest” from Chinese companies exploring secondary listings in Hong Kong. As Fortune‘s Eamon Barrett and Naomi Xu Elegant explain, the financial impact of that “emigration” of mainland companies to Hong Kong could be enormous—and will likely enhance’s Hong Kong stature as a global financial capital, possibly at the expense of American investors.
This week’s Eastworld Spotlight conversation with Jennifer Zhu Scott, founding partner of Radian Capital and past co-chair of the Fortune Global Tech Forum, explores how China’s push for a central bank digital currency is fueled at least in part by fears that America’s China hawks eventually will seek to impose financial sanctions as well as trade sanctions against China—or even cut it off from the global payments system.
More Eastworld news below.
Clay Chandler
clay.chandler@fortune.com
This edition of Eastworld was curated and produced by Grady McGregor. Reach him at grady.mcgregor@fortune.com.
Eastworld news
Pressure on China ramps up
Europe appears to be re-examining its relationship with China. On Monday, the president of the European Commission Ursula von der Leyen met with Chinese President Xi Jinping and premier Li Keqiang. In a press conference afterwards, von der Leyen said she called on China to drop its national security law in Hong Kong, hold up its global trade and climate commitments, address human rights issues in Xinjiang and Tibet, and discontinue cyberattacks in the EU. This harsh rhetoric marks an escalation for the EU, but it did not announce specific policy measures to ensure that China would meet its demands. Foreign Policy
Backs to Huawei
On Thursday, U.S. Secretary of State Mike Pompeo said the tide is turning against Huawei, the Chinese telecommunications giant. The U.S. has blacklisted Huawei since May 2019, and more recently Huawei’s contracts have become the subject of controversy in the U.K. and across Europe. Now, however, there are indications that countries in Asia may be turning their backs on the global telecommunications firm too. On Wednesday, Singapore announced that it would opt for Sweden's Ericsson and Finland's Nokia to build the city-state's 5G infrastructure. On Thursday, leading Japanese telecoms firm the Nippon Telegraph and Telephone Corp. announced that it was taking 5% stake in NEC Corp., a Japanese 5G equipment manufacturer. Nikkei Asian Review
Reckoning with racism
Since the late 1980s, Colgate-Palmolive, the U.S. oral healthcare giant, has owned a 50% stake in Hawley & Hazel, a consumer products company with a flagship toothpaste brand called Darlie. Darlie, once called Darkie, was crafted in the 1930s in the image of American, black-faced minstrel performers. In Chinese, the popular toothpaste is still called “black people toothpaste” and has a racist cartoon on its packaging. Colgate says it is now working with Darlie to “review” and “evolve” all aspects of the brand. Johnson and Johnson also said this week that it will stop selling its skin-lightening products in Asia. Bloomberg
The end of poverty?
In 2013, President Xi Jinping declared that China would eradicate extreme poverty by the end of 2020, a date that is now fast approaching amid a global pandemic and economic downturn. This week, The Financial Times visited Atule’er, a village at the forefront of China’s poverty alleviation goals and detailed a range of measures aimed at lifting villagers out of poverty that range from empowering to bizarre. In one instance, local officials graded ‘poverty-stricken households’ in the village with placards posted on their doors that rated how well members of the household were performing in lifting themselves out of poverty. Financial Times
China’s Anthony Fauci
On Jan. 20, Professor Zhong Nanshan, a top public health official in China who is often referred to as China’s Anthony Fauci, announced on Chinese television that COVID-19 could spread between humans. While doctors like Li Wenliang had previously tried to alert the wider public to the potential dangers of the disease, Zhong’s announcement was the first time a top official publicly contradicted the government line that the disease could not spread between humans. This week, Sup China outlines how Zhong established credibility in helping China fight SARS in 2003. That outbreak earned him popular support and trust with the government that allowed him to take a leading role in China’s fight against the current pandemic. Sup China
Coronavirus by country
The Philippines
In the last month, the number of coronavirus cases in the Philippines has more than doubled, from just over 14,000 on May 26 to more than 33,000 today. The spike is causing strife at the top levels of the Filipino government. On Thursday, Vice President Leni Robredo called out her own government for its early complacency in combatting the pandemic, for leaving the country open for too long to international travelers, and for not ramping up testing capacity fast enough. Meanwhile, President Rodrigo Duterte has accumulated extraordinary powers in the midst of the pandemic. After dismissing the threat of the pandemic in February, the Filipino legislature granted Duterte emergency powers in March that gave him more control over public funds and led to the government setting up military checkpoints across the country to enforce lockdowns. Some portions of the country remain under lockdown, and Duterte is seeking to extend emergency powers that are set to expire this week. CNN
Markets and movers
Lazada – The southeast Asia arm of Chinese e-commerce giant Alibaba is getting new leadership. On Friday, Lazada announced that former Alibaba executive Chun Li will replace Lazada co-founder Pierre Poignant as CEO of the firm. Lazada serves over 300 million customers across six markets in southeast Asia. Reuters
Tencent – The Chinese tech giant is buying iFlix, the Malaysian video streaming platform with 25 million active users across southeast Asia. The terms of the deal remain private, but analysts expect that Tencent got a significant discount due to iFlix’s recent financial troubles. Deal Street Asia
Jio Platforms – On Wednesday, India’s top antitrust watchdog approved Facebook’s $5.7 billion investment in Jio Platforms, clearing the Indian telecoms giant and U.S. social media firm of engaging in anti-competitive behaviors. The approval cements a deal that set off a fundraising flurry that has netted Jio over $15 billion in investments in the last 11 weeks. Bloomberg
Final figure
$5.3 billion
The U.S. government is among the largest landowners in Hong Kong, with land holdings of more than $5.3 billion, according to the South China Morning Post. The U.S. negotiated with Hong Kong for the land just two years after the city's handover in 1997, signing a rare 999-year lease for properties that include the U.S's consulate and staff residences. The landholdings in Hong Kong suggest the U.S. may have money on the line its on-going battle with Beijing over Hong Kong's new national security law. “The value of the U.S. government’s holdings in Hong Kong underscores what’s also at stake for America,” the South China Morning Post reports.


fortune--2020-06-26--2 reasons China may be ramping up its digital currency project

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China’s digital currency project reached a new milestone in April when the People’s Bank of China (PBOC) launched the first trials of the digital RMB in four Chinese cities—Shenzhen, Suzhou, Chengdu, and the Xiong’an New Area near Beijing. Chinese media reported that digital RMB would be used for transportation subsidies in Suzhou and primarily focus on food and retail services in Xiong’an.
The timing of the rollout was curious, coming as China recovered from the coronavirus that largely crippled its economy. Why would Beijing make the push then?
Jennifer Zhu Scott, founder of investment firm Radian Partners, cited two reasons in an interview with Fortune this week.
First, the Chinese government sees poverty alleviation as a top priority for 2020. Currently, there are 5.5 million Chinese people living in extreme rural poverty. A digital currency would streamline the distribution of aid to rural regions, eliminating some of the bureaucracy and inefficiencies that currently make the process cumbersome.
“In theory, all the central government needs to do is to give every single family a phone [with] a built-in digital wallet in it,” said Zhu Scott.
The second reason for the apparent digital currency push is China’s urgent need to depend less on the U.S. dollar.
“China has been expanding its global role, especially in developing countries,” said Zhu Scott. But its bilateral trade still relies on U.S. dollars, she said. That’s a risk for Beijing, considering recent U.S. threats to impose sanctions on China; such moves effectively weaponize the U.S. dollar.
Just this week, the U.S. Senate unanimously passed a bill that would sanction Chinese officials—as well as banks and firms that do business with them—who “undermine Hong Kong’s autonomy or erode the basic freedoms promised to Hong Kongers,” Sen. Pat Toomey (R-Pa.), a bill sponsor, said in a statement. Lawmakers drafted the bill in response to Beijing’s move to impose a controversial national security law on Hong Kong. The U.S. argues that by enacting the law, Beijing is stripping Hong Kong of its promised autonomy from the mainland.
Given such threats, “a sensible question to ask is, ‘How much am I exposing my trade [to] this political risk, when this bilateral trade doesn’t involve the U.S.?’” Zhu Scott said.
The PBOC, China’s central bank, started its digital currency project in 2014. The PBOC reportedly accelerated its development in 2019 after Facebook unveiled its own cryptocurrency, called Libra.
Beijing has kept the initiative largely under wraps. There is currently no official date for when China will launch its digital currency. However, Yi Gang, governor of the People’s Bank of China, told the media in May that the PBOC will be planning another trial during the 2022 Winter Olympics in Beijing.
This story is part of Eastworld Spotlight, a series of conversations on matters of business, tech, and finance with executives, experts, entrepreneurs, and investors in Asia. Subscribe to Fortune’s Eastworld newsletter to get them in your inbox.


fortune--2020-06-26--The U.S. clampdown on Chinese companies is an unexpected windfall for Hong Kong

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In recent weeks, a pair of U.S.-listed Chinese companies have opted for secondary listings in Hong Kong, each raking in billions of dollars in capital. Gaming company NetEase and e-commerce giant JD.com, both Nasdaq-listed, debuted in Hong Kong this month, with NetEase raising $2.7 billion on June 11 and JD raising $3.9 billion last Thursday in the second-largest IPO of the year so far.
The trend seems set to continue with search engine Baidu and travel agency Trip.com reportedly considering secondary listings in Hong Kong. New York–listed fast-food group Yum China also is eyeing a secondary listing there, in what would be the first non-tech Chinese firm to join the movement.
The run comes months after Alibaba broke ground with a $12.9 billion secondary listing in Hong Kong in November—five years after its record-breaking initial public offering in New York.
The new “homecoming” secondary offerings look to replicate Alibaba’s success, but they also reflect the renewed rift between the U.S. and China over the coronavirus, trade, and human rights. Proposed regulation and legislation in the U.S. are squeezing Chinese companies, jeopardizing their access to U.S. markets.
The U.S. sees its clampdown as a new broadside in its battle with Beijing, but so far it’s proving to be an unexpected boon for at least one player: Hong Kong. U.S.-listed Chinese firms are looking to Hong Kong to hedge their bets, with the potential to pour hundreds of billions of dollars into the city just as Beijing pulls Hong Kong closer and casts doubt on the city’s future as Asia’s financial capital.
U.S. pressure
Washington has been hunting for ways to bump Chinese companies off the U.S. stock market since June of last year, when a bipartisan group of lawmakers introduced a bill that would exert greater regulatory oversight on Chinese firms. “It’s time for China’s government to play by the same rules as American companies in our financial markets,” said Sen. Bob Menendez (D–N.J.), a sponsor of the bill that, in the end, didn’t get far.
Then in April this year, financial fraud allegations rocked three U.S.-listed Chinese companies. Nasdaq-listed Luckin Coffee was found to have exaggerated sales by $310 million. Days later, NYSE-listed TAL Education Group admitted fraudulent sales. Then short-sellers Muddy Waters and Wolfpack accused Nasdaq-listed video-streaming site iQiyi of fraud, a claim it denies.
Charles Zhengyao Lu, chairman and founder of Luckin Coffee Inc., center left, and Jenny Qian Zhiya, chief executive officer of Luckin Coffee Inc., center right, react as stocks start trading during the company’s initial public offering at the Nasdaq MarketSite in New York on Friday, May 17, 2019. Victor J. Blue—Bloomberg/Getty Images
The fraud allegations prompted Nasdaq to propose new rules that would make it harder for foreign firms—particularly Chinese ones—to launch on the market. Shortly after, on May 20, the U.S. Senate passed a new bill, similar to Menendez’s, that would give the Securities and Exchange Commission (SEC) greater leverage to remove Chinese firms from U.S. stock exchanges.
If made law, the Senate bill would permit the SEC to delist companies that don’t comply with the regulator’s auditing practices—including providing the SEC with copies of company audit reports. Chinese companies typically don’t hand over these documents because Beijing deems the material state secrets.
The bill’s sponsor, Sen. John Kennedy (R-La.), said the bill would “stop [the Chinese Communist Party] from cheating on U.S. stock exchanges.”
The SEC has pushed for access to Chinese auditors and audits since 2011, when the regulator delisted 50 Chinese companies for fraudulent reporting. But the fresh momentum behind the latest Senate bill shows how politicized the issue has become, says Bob Bartell, global head of corporate finance at financial consultancy Duff & Phelps.
Since the Senate bill passed, Beijing has hinted at making concessions. China Securities Regulatory Commission (CSRC) chairman Yi Huiman said that the U.S. and China could conduct joint investigations of U.S.-listed Chinese companies accused of financial fraud. “As long as the U.S. is willing to sit down and talk, differences will surely be resolved,” Yi told Chinese business magazine Caixin in an interview this week.
Benefit for Hong Kong
Until that happens, the trend of secondary listings in Hong Kong looks set to continue. And it comes at a fortuitous time for the city.
Hong Kong fell into a recession in 2019, bruised by months of anti-government protests and the economic fallout of the U.S.-China trade war. Its economy has continued to contract as the coronavirus struck at the start of this year.
Demonstrators march with umbrellas during a protest in the Wan Chai district in Hong Kong against the planned national security law in May 2020. The law puts in doubt Hong Kong’s autonomy from the mainland and its reputation as an international finance hub. May James—Bloomberg/Getty Images
Companies and analysts are questioning its status as an international financial hub ever since the Chinese central government revealed plans for a national security law in the city and the U.S. responded by declaring that it no longer views Hong Kong as autonomous from mainland China, a designation that threatens the region’s special economic status.
The secondary listings could be a financial windfall for the city. A June 11 report from Chinese investment bank China Renaissance estimated that “new economy” stocks—the ones Hong Kong’s exchange hoped to attract to the city with 2018 listing reforms—could account for 30%–35% of Hong Kong’s market cap in the next five to 10 years.
U.S. investment bank Jefferies Group estimated in a recent report that U.S.-listed Chinese companies could bring $557 billion to Hong Kong through secondary listings. The influx of capital will trickle down to Hong Kong’s financial services sector too, providing huge incentives for foreign banks to maintain a presence in Hong Kong—despite ongoing political turmoil.
U.S. banks, like Morgan Stanley and J.P. Morgan, aren’t as important to Hong Kong’s IPO scene as they once were, however. Foreign banks remain major players in Asian equity trading, occupying most of the top 10 spots, according to Dealogic. Chinese banks, meanwhile, underwrote the majority of IPOs in Asia last year and have done so since at least 2017.
Since Alibaba’s secondary offering in Hong Kong last November—which was underwritten by both U.S. and Chinese banks—the e-commerce leader has become the exchange’s most valuable company by market cap, as well as one of its most liquid stocks. Alibaba’s chief financial officer said at the time of the firm’s Hong Kong debut that “we hope our listing encourages other companies to consider listing here.”
“More of these large companies like Alibaba, JD, NetEase listing in Hong Kong does increase the attractiveness of the listings in Hong Kong,” said Michael Wu, a senior equity analyst at Morningstar Investment Management. Wu says the uptick in secondary listings “reaffirms” the status of Hong Kong’s capital markets.
At the same time, though, the influx of Chinese stocks could diminish the market’s independence.
Employees cheer at Alibaba headquarters in Hangzhou, China, as Alibaba Group Holding Ltd. debuts on the New York Stock Exchange in 2014. Its U.S. IPO remains the biggest of all time and is seen as a missed opportunity for Hong Kong Stock Exchange. Visual China Group/Getty Images
At the end of 2019, mainland Chinese companies accounted for a little over half of all businesses listed on the Hong Kong exchange. As more mainland companies pile into the Hong Kong exchange, it’s feasible Beijing will take a more active interest in protecting the market’s stability.
Mainland China has a “national team” of investment funds the government instructs to prop up domestic markets in times of uncertainty. Some observers speculate this dynamic is playing out in Hong Kong too. When the Hang Seng Index slumped 5.6% after Beijing announced the forthcoming national security law, mainland investors promptly pumped $570 million into the market through stock connect schemes.
Second home
The U.S. Senate bill is “probably the key reason for the recent spate of Chinese companies looking to do a secondary listing in Hong Kong,” said Wu. JD.com named the congressional bill as a risk factor in its IPO prospectus, saying it could hurt U.S. share prices and investor confidence and lead to delisting.
U.S.-listed Chinese companies have considered secondary listings before, Wu said. In early 2018, NetEase founder William Ding expressed interest in a secondary listing in Hong Kong. The offerings are a good way to raise additional capital, and they make shares of Chinese companies more accessible to home market investors. But the recent political uncertainty has turbocharged such nascent plans.
Two friends face Victoria Harbor and the skyline of Kowloon in Hong Kong on May 2020. The city is the beneficiary of the recent tussle between Chinese companies and the U.S. stock exchanges on which they trade. ANTHONY WALLACE—AFP/Getty Images
According to Bloomberg, four U.S.-listed Chinese firms have gone private this year, up from zero in 2019. Taking a company private is another way to protect against the whims of U.S. securities regulators. But for supersize companies like Alibaba, with a market cap of $603 billion in the U.S., privatization would be a more cumbersome strategy since the firm would likely have to announce a buyback scheme. Seeking a secondary listing elsewhere is less complex.
What is a secondary listing?
Secondary listings are common, especially for companies outside the U.S. that want to tap investors at home as well as financiers in America. HSBC, consumer goods giant Unilever, and miners Rio Tinto and BHP are all listed on more than one continent. Trading shares across multiple markets gives companies greater access to liquidity and often gives shareholders a boost too, says Clement Chan, managing director of assurance at financial services provider BDO.
“A secondary listing adds more reference points to a company’s shares, providing more information on market sentiment to traders,” Chan said. That additional insight can increase investor confidence and, in turn, drive up the price of shares.
The process for achieving a secondary listing is normally smoother than for launching an initial IPO, because the company has already been vetted by a foreign regulator. However, there are still restrictions.
For a secondary listing in Hong Kong, for example, a company must have either a market cap over $5 billion or a market cap over $1.3 billion plus more than $129 million in revenue for the past year. The company also needs to have traded in its primary location for at least two years.
According to investment bank UBS, there are 42 U.S.-listed Chinese companies eligible for a secondary listing in Hong Kong. For those facing the threat of being delisted in the U.S., a secondary listing would provide a security net against the company’s market cap crashing; the affected company could offer U.S. shareholders the option to swap their stock for an equivalent stake issued in Hong Kong.
“Because of the rhetoric of U.S. politicians, they need to be prepared for delisting in the worst case,” said Xiaoyan Jiang, founder of Prime Number Capital, a boutique investment firm that specializes in advising Chinese companies on listing in the U.S.
Primary and secondary shares are fungible and, theoretically, are valued at about the same price. UBS notes that the cost of trading, however, is higher in Hong Kong, so potentially not all investors would take up an offer to swap U.S. shares for Hong Kong ones.
Why Hong Kong?
For U.S.-listed Chinese firms, Hong Kong is an especially attractive location to launch a secondary offering. For one, the Hong Kong dollar is pegged to the U.S. dollar. Even though a company’s U.S.-listed shares can’t be traded in Hong Kong, nor vice versa, the peg offers greater stability between the relative value of the two share pools. That stability leaves the company less susceptible to arbitrage, in which investors buy and sell shares across the two markets to make a profit on the price difference.
A secondary listing in Hong Kong was not an option for U.S.-listed Chinese firms until recently. In April 2018, the Hong Kong Stock Exchange introduced listing reforms to allow overseas-listed Chinese companies to debut in secondary offerings in Hong Kong. The rule change applies to companies listed on Nasdaq, the New York Stock Exchange, or the main board of the London Stock Exchange. The shift was one in a basket of reforms aimed at making Hong Kong’s bourse more globally competitive after the loss of Alibaba’s original IPO to New York in 2014.
Thanks to a regulation introduced by the HKEX in May, secondary listing companies can be included in the local benchmark Hang Seng Index too. Such inclusion is a prerequisite for trading on the Hong Kong–Shenzhen and Hong Kong–Shanghai stock connect schemes—agreements between the cities’ bourses that allow international and mainland investors to trade in each other’s markets, meaning Hong Kong–listed companies get access to cash flows from mainland China.
There are currently no secondary listings on the stock connect, says Wendy Liu, China analyst at UBS. The CSRC needs to approve a company’s inclusion on the connect, but Alibaba, which is a constituent of the Hang Seng Index, is a prime candidate to be the first permitted. “We’re watching Alibaba as to when it gets into the connect scheme,” Liu said.
Risk to the U.S.
Secondary listings in Hong Kong aren’t an immediate worry for U.S. markets. In fact, U.S. investors are “happy to see” the offerings, says Bruce Pang, head of macro and strategy research for China Renaissance Securities. There’s a cap on how many shares investors can purchase in the U.S., so if a company like Alibaba is listed in Hong Kong too, investors who are tapped out in the U.S. can buy more shares in Hong Kong.
It’s delistings that pose the real risk.
The U.S.-listed Chinese companies that could be covered by the Senate bill have a combined market cap of $1 trillion, which accounts for around 3% of the U.S.’s total equity market cap. On average, they collectively trade around $8 billion per day—6% of total U.S. turnover, according to the China Renaissance report.
Delisting all those companies would represent “a sizable loss” in U.S. market cap and trading revenue for U.S. capital markets, says Pang.
While institutional investors have access to both U.S. and Hong Kong markets, retail investors could potentially have fewer opportunities to invest in Chinese companies directly or potentially though ETFs, says Matthew Kennedy, senior strategist at Renaissance Capital.
“U.S. investors would certainly have less exposure to China if these companies were delisted from U.S. exchanges,” he said.
If the Senate bill becomes law, Pang said, it won’t result in a sudden rash of delistings. First, there will be a three-year grace period after the law is enacted. It would give regulators “time to adjust and negotiate” and reach a compromise about the inspections that would enable some auditing and prevent a mass delisting of Chinese companies, which investors and financial regulators don’t want.
Even with that threat and escalating Washington-Beijing tensions, the U.S. will remain “one of the top preferences” for Chinese companies looking to raise capital overseas, Pang said, citing the demand to raise U.S. dollars as a main driver.
“I’ve been asked by many investors, ‘Do you think that Chinese companies are still going to take the U.S. as one of the major IPO destinations?'” Pang said. “My answer would be yes.”


fortune--2020-06-26--As the U.S. pulls away from the rest of the world in coronavirus cases, investors begin to look else

As the U.S. pulls away from the rest of the world in coronavirus cases, investors begin to look elsewhere

The U.S. clampdown on Chinese companies is an unexpected windfall for Hong Kong

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.
Happy Friday, Bull Sheeters. You don’t see this every day: the U.S. futures are decoupling from the rest of the global equities markets. Asia and Europe are solidly trading higher, while the U.S. looks set to open in the red. Why? Guess which part of the world is doing a decent job of managing the coronavirus, and which part of the world has fallen down on the job?
Let’s see where investors are selectively putting their money.
Markets update
Asia
The major indexes are mostly in the green, with the Nikkei 1.1% higher.
1.1% higher. China and the U.S . are heading into a new “ cold war ,” the CEO of risk consultancy Cognoscenti Group warns. Reminder: when geopolitical tensions between the world’s two biggest economies go up => risk-off investing days are on the rise, too.
and the . are heading into a new “ ,” the CEO of risk consultancy Cognoscenti Group warns. Reminder: when geopolitical tensions between the world’s two biggest economies go up => risk-off investing days are on the rise, too. Speaking of which… the Senate unanimously passed a bill to sanction Chinese officials who threaten Hong Kong’s semi-autonomous status.
Europe
The European bourses jumped out of the gates. The benchmark Stoxx Europe 600 was up 0.7% 30 minutes into the trading session.
out of the gates. The benchmark was up 30 minutes into the trading session. Good news for Europe’s airlines: Lufthansa won a crucial shareholder vote to avoid insolvency, and the Dutch agreed to give Air France-KLM a $3.8 billion lifeline.
won a crucial shareholder vote to avoid insolvency, and the Dutch agreed to give a lifeline. The drama is not over for Germany’s Wirecard. The payments-processing firm filed for insolvency protection yesterday. Now Brussels plans to investigate how the German watchdog missed the shenanigans.
U.S.
The Dow , S&P 500 and Nasdaq bounced back nicely yesterday, each closing higher by more than 1% . U.S. futures, however, are weak, pointing to a negative open.
, and bounced back nicely yesterday, each closing higher by more than . U.S. futures, however, are weak, pointing to a negative open. Bank shares climbed yesterday after winning a major concession to the so-called Volcker rule , allowing them to, for example, invest in VC funds. Wells Fargo led the pack, closing up 4.8% .
climbed yesterday after winning a major concession to the so-called , allowing them to, for example, invest in VC funds. Wells Fargo led the pack, closing up . But the Fed also taketh… The big banks that underwent the latest round of stress tests will be barred from issuing dividends or buybacks for the time being.
or for the time being. Nike is down nearly 4% in pre-market trading. It reported an unexpected quarterly loss yesterday. Game, set and match to coronavirus.
Elsewhere
Gold is up.
is up. The dollar is flat.
is flat. Crude is up, in line with equities; Brent is trading nearly 1% higher.
By the Numbers
47.3 million. Lost in yesterday’s rally was yet another dismal round of jobless claim numbers. Yesterday’s report came in at the high end of expectations, with 1.48 million new claims—a mere 60,000 fewer than the previous week. Since March, 47.3 million workers in the United States have now filed for unemployment benefits. Claims have been above 1 million/week for 14 straight weeks. This is what the carnage in the labor markets looks like:
37,667. That was the number for new coronavirus cases in the U.S. yesterday, according to the CDC. At more than 41,000, The New York Times tally is even worse. It’s another record no matter how you count it. The U.S. is not having a good pandemic—that’s becoming clearer every day. In fact, the CDC reckons the number of Americans who’ve been infected is closer to 20 million, 10x greater than what the official data says. Unless the governors figure out a way to flatten the curves in their states, this public health crisis will continue to wreak havoc on Americans and the American economy for years to come. How close is America to getting the curve to dip and flatten? Here’s how it’s trending:
Charlie Bilello of Compound Capital Advisors has been breaking down the numbers on his Twitter feed. The numbers are ugly:
3%. “Locking down an entire country, doesn’t matter where, costs you about a 3% [hit on] GDP per month,” says Hartmut Issel of UBS Global Wealth Management… You see why it’s important to get these outbreaks under control? Mask up, people.
***
Postscript
I awoke with a jolt in the wee hours of August 24, 2016. The iron railing on our terrace was vibrating like a bell. Terremoto, my wife exclaimed. Earthquake. If you’ve ever been in one, you know how disorienting they are. It doesn’t help when they strike at 3:30 in the morning.
This is what this NJ transplant has learned about earthquakes since moving here: If, after the first wave of shocks, your house is still intact, and your electricity and water still function, it’s a good bet the epicenter is a somewhat safe distance from your front door. But where? Who was hit harder than us? The in-laws? Friends? What about them?
The epicenter of this 2016 quake hit Amatrice, a windy two hour drive east of Rome, up in the mountains along the via Salaria—the old salt road from ancient Roman times. Amandola, where I sit, is a short distance from Amatrice. As I type, looking southwest, I can see the mountains that loom over Amatrice. (If you’re a fan of pasta Amatriciana, you know Amatrice [pronounced ahm-ah-TREE-chay]. I happen to have a good recipe for pasta Amatriciana, btw. Step one: get on a plane; head straight for Amatrice. That’s it.)
Amandola, as well as many of the towns up and down this valley, was hit extremely hard by this same quake. Locally, more than half the houses were deemed uninhabitable or, worse, had to be razed to the ground. We were lucky. Our place, built of solid stone, on a solid hill, stood tall. Most of my neighbors though didn’t make out so well. Across the street, a few meters from my place, there’s an extraordinary 15th century convent. It had served as a kind of lodge for pilgrims making the journey on foot to Rome back in the day. It’s kaput. (I think the owners want to sell it, if anybody’s looking for a fixer-upper project.)
Further down the road are my delightful neighbors, Renzo, Simona, Graziella, Quinto, Peppa, etc. They were an extended family clustered in a big farm house on a bend in the road. Their place was destroyed, their farming livelihood in ruins.
Being in Rome, a safe distance away, I felt hopeless. The only way I could think to help was to offer them our place to stay. Proud marchigiani, they of course refused. At first. Then they came around. They took the keys and crammed into our house. But only for a few weeks, they insisted. And then, only for the autumn. Okay, only for the winter, they demurred. They rode it out in Casa Warner until well after Easter of 2017, enough time to get their lives in order.
As goodwill gestures go, I thought of this as no big deal. A no-brainer even. We were safely in Rome. They were here in Amandola, homeless. You’re my neighbor. This is what neighbors do. You’d do the same for me. Shut up, and take the keys. It was that kind of exchange. Except, being in Italian, everyone was yelling at each other for some reason.
They have since found another place to live as they await the state funds to bulldoze and rebuild their place. Since August, 2016, something’s changed between us. We call them a lot to check in, make small talk. We share photos of the kids on WhatsApp. They fill us in on the local gossip. I look forward to these calls, even when Simona rings me on deadline.
Now, every time we arrive in Amandola, they greet us with something in their hands. During truffle season, it’s freshly unearthed truffles. Or it might be a bottle of some homemade hooch. Simona is a wondrous cook. The other day, she dropped off containers giving off a lovely scent, describing them to me as una cosa piccola (something small.)
She handed us a hefty pot of cinghiale alla cacciatora (wild boar stew) and her homemade tiramisú.
A proud americano, I at first refused. She wouldn’t hear of it. She pointed to my scrawny kids. But there’s enough food here to feed a summer camp, I countered. It’s nothing, she argued… Why are we raising our voices again?
I conceded. Just this one last time, I told her.
This is what she gave us:
A few hours later, after dinner, I sent Simona a photo of the kids doing the scarpetta—wiping the dish clean of the remaining cinghiale sauce with a piece of bread.
Good, she responded. I’ll make more.
***
Have a nice weekend, everyone. I’ll see you here on Monday.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
If you were to assemble the people who could help you truly understand health care and how it’s affected businesses today, who would you pick? Here’s a few on Fortune’s list:
The CEOs and presidents of healthcare giants Johnson & Johnson, Moderna, Novartis, Aetna
Johnson & Johnson, Moderna, Novartis, Aetna co-discoverer of CRISPR-Cas9 Dr. Jennifer Doudna
Dr. Jennifer Doudna Dean of Stanford Medicine Dr. Lloyd Minor
Dr. Lloyd Minor chief medical officers from IBM, Verily, Google Health
from IBM, Verily, Google Health healthcare venture capitalists like Sue Siegel
like Sue Siegel Thrive Global CEO Arianna Huffington
Arianna Huffington CEO of REFORM Alliance Van Jones
Van Jones NBA Commissioner Adam Silver
Hear from them and more at FORTUNE Brainstorm Health, our virtual health-care conference on July 7-8. As a newsletter subscriber, you’re invited to use this code—BSH20HALF!—and get half off.
Today's reads
How to prevent the next Wirecard. Investors in the once high-flying German fintech have seen their shares collapse by more than 90% in the past week as a financial fraud investigation gathers steam. This is hardly the first such fraud, and won't be the last. Much of the debacle could have been avoided, Fortune's Jeremy Kahn argues. Here's how.
Forty under 40. No, you cannot nominate me for Fortune's annual Forty under 40 list. But if you have somebody worthy in mind, we want to hear from you. Submit a name here.
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Market candy
>30%
It's probably a good thing COVID-19 has grounded so many flights in Pakistan these days. The country's aviation minister admitted this week that more than 30% of civil aviation pilots have fake licenses, and they're not qualified to fly. Gulp.


fortune--2020-06-26--The ECB’s Christine Lagarde thinks the global economy is past the worst

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Good morning. David Meyer here in Berlin, filling in for Alan one more time before I sink into my summer holiday (and yes, it will largely be a staycation.)
European Central Bank chief Christine Lagarde doesn’t always get her assessments right—who could forget the abrupt u-turn she had to perform on the need for a monetary response to the pandemic?—but let’s hope she’s right this time, because the ECB president thinks the world’s economy might now be past its coronavirus trough.
“We probably have passed the lowest point and I say that with some trepidation because of course there could be a second wave,” Lagarde said at a summit this morning, before noting that the recovery “is going to be incomplete and might be transformational.”
Again, let’s hope she’s right about passing the lowest point. But a glance at the global statistics shows that daily case numbers continue to climb.
* * *
Separately, Brian Stafford–the CEO of Diligent, a software platform for corporate governance–yesterday told a Fortune virtual gathering that his company today is launching a major new initiative to promote racial diversity on corporate boards.
The gathering, which was held in conjunction with McKinsey & Company, included John Rogers of Ariel Investment, a longtime advocate of boardroom diversity who said progress has been far too slow. “Business can’t be a bystander in economic justice,” said McKinsey’s Lareina Yee. “It needs to be a leader.” Rogers told the story of Atlanta Mayor Maynard Jackson in the 1970s telling his city’s top companies that they had to put black business people on their boards if they wanted to keep operating in the city. “That’s the kind of opportunity we need to see in the C-Suite.”
Stafford said the Diligent platform includes 700,000 board members, and he will be calling on that network to “nominate diverse, board-ready leadership” and to “create more visibility into the pipeline” for board members. He said 10 of the large private equity firms that use his platform have committed to creating “five incremental new board roles each” for diverse director candidates.
“I think we actually have the potential to move the numbers,” Stafford said. More detail here.
News below.
David Meyer
@superglaze
david.meyer@fortune.com
Alan Murray contributed to this essay.
TOP NEWS
Reopening pause
Texas has paused its reopening and Florida is also holding off moving to the next reopening phase, as COVID-19 figures continue to climb. California, too, is warning that its reopening plans could be affected if a lot more people end up in hospital. The CDC now estimates that the real number of Americans who have been infected so far is perhaps ten times the official case count of 2.4 million. Wall Street Journal
Health care
As the crisis begins to swell again in the U.S., and as some estimate 27 million people may have lost their job-based health insurance due to the shutdown, the Trump administration is moving to eradicate the Affordable Care Act. It asked the Supreme Court to overturn the Obama-era legislation yesterday. The case will likely not be heard before the fall. Fortune
Wirecard fallout
Germany's banking regulator, BaFin, not only failed to spot the massive alleged Wirecard accounting fraud that auditors say took place—it imposed a short-selling ban on Wirecard shares for a couple months last year, and filed a criminal complaint against journalists who reported whistleblower allegations. Now the European Commission will tell Esma, the EU's top markets supervisor, to examine BaFin's handling of the fiasco and find out what went wrong. Financial Times
KLM bailout
The Dutch government is giving Air France-KLM's Dutch operations a $3.8 billion bailout, which comes on top of the $7.9 billion that the French government is giving Air France. As in the French case, the deal comes with environmental strings attached. KLM will also have to cut some jobs—and scrap dividend payments. Bloomberg
AROUND THE WATER COOLER
Digital transformation
Accenture CEO Julie Sweet writes for Fortune that the challenge for organizations now is how to accelerate digital change during a crisis. "Leaders have adopted automation and A.I. five times faster than laggards, and have put in place strategies that give them high confidence in the reliability of their data," she writes, arguing that those who risk falling behind need to follow a new set of rules. Fortune
Executive pay
Some of the firms that slashed their CEO compensation as the coronavirus lockdown took hold, have already started to reinstate it. The New York Times and Fortune have both found examples of companies—Darden Restaurants, Rollins Inc., Meritor, Ascena Retail Group—that are restoring CEO and/or C-suite pay to what it was barely a quarter ago. The economy, of course, is nowhere near where it was before the crisis hit. Fortune
Climate Pledge Arena
Amazon has bought the renaming rights to the New Arena at Seattle Center, which used to be known as KeyArena and will now become Climate Pledge Arena—in the words of Jeff Bezos, the name will provide "a regular reminder of the urgent need for climate action." Appropriately, Amazon plans to make it the first "net zero carbon certified arena in the world." The hockey ice will even use reclaimed rainwater. Business Insider
Swedish situation
The World Health Organization put Sweden on a list of countries where “accelerated transmission has led to very significant resurgence that, if left unchecked, will push health systems to the brink once again in Europe." The controversial Swedish COVID-19 czar Anders Tegnell claims the WHO made a "total mistake" and did not take into account the nuances in Sweden's testing approach. Tegnell is also reconsidering his opposition to people wearing face masks, as the WHO has recommended. Bloomberg
This edition of CEO Daily was edited by David Meyer.


fortune--2020-06-26--Families of 3 dead workers sue Tyson Foods over coronavirus outbreak

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The families of three workers who died after contracting the coronavirus in an Iowa meat plant outbreak sued Tyson Foods and its top executives Thursday, saying the company knowingly put employees at risk and lied to keep them on the job.
The lawsuit alleges that Tyson officials were aware the virus was spreading at the Waterloo pork processing plant by late March or early April but kept that information from employees and the public.
As the outbreak grew, the company failed to implement safety measures, allowed some sick and exposed employees to remain on the production line, and falsely assured workers and the public that the plant was safe, the suit alleges.
“Tyson intended by these false representations to deceive workers in the Waterloo facility … and to induce them to continue working despite the uncontrolled COVID-19 outbreak at the plant and the health risks associated with working,” according to the lawsuit, which was filed in Black Hawk County district court.
Tyson spokesman Gary Mickelson said the company was saddened by the deaths and that its “top priority is the health and safety of our workers.” He said Tyson has implemented safety measures that meet or exceed federal guidelines.
Meatpacking plants have been hot spots for coronavirus because of their crowded conditions, prompting several to temporarily close. Thousands of workers have become infected and several dozen have died.
The largest union representing meatpacking workers said Thursday that more than 14,000 employees at unionized plants have been infected with coronavirus and 65 have died.
Meat companies including Smithfield Foods and JBS USA and retailers such as Amazon and Walmart have been sued by the families of workers who died from coronavirus. But the lawsuit filed Thursday against Tyson may be the first involving multiple victims at one workplace during the pandemic, according to news reports.
Last week, Iowa Gov. Kim Reynolds signed a bill into law shielding businesses and health care providers from legal claims from people exposed to the virus, retroactive to Jan. 1. But the law has exceptions for injuries that result in hospitalization and death, and appears unlikely to block the case from moving forward.
The lawsuit seeks damages for the estates of employees Sedika Buljic, 58, who died on April 18; Reberiano Garcia, 60, who died on April 23; and Jose Ayala, Jr., 44, who died on May 25. Waterloo attorneys Tom Frerichs and John Rausch and the Spence Law Firm in Wyoming are representing the families.
At least two other Waterloo workers have died after contracting the virus, which infected more than 1,000 of the plant’s 2,800 workers and has devastated the broader community.
With illnesses mounting, Tyson refused calls from local leaders to close the plant for several days and lobbied the governor to keep it open, the suit alleges. The county sheriff. who visited the plant April 10, has said he was shaken by seeing workers in crowded conditions without face coverings and pressed Tyson to close.
The plant is Tyson’s largest pork facility and can process around 20,000 hogs per day.
Iowa’s Occupational Safety and Health Administration inspected the plant April 20 in response to complaints, and said earlier this month it found no violations. The plant closed two days after the inspection before reopening with new safety measures in early May.
In addition to damages for pain and suffering and loss of income, the lawsuit seeks punitive damages to punish Tyson for an “incorrigible, willful and wanton disregard for workplace safety” and to send a message to other companies.
The lawsuit names the company as well as Chairman John H. Tyson, CEO Noel White, spokeswoman Liz Croston, and several other executives and plant supervisors. Its claims include gross negligence and fraudulent misrepresentation.
John H. Tyson asserted in a newspaper ad in April that the “food supply chain is breaking” due to plant closures and warned that customers would see meat shortages at grocery stores.
The lawsuit claims those warnings were exaggerated and notes that Tyson’s pork exports to China, including some from the Waterloo plant, increased significantly that month.
The lawsuit makes an explosive claim that Tyson has denied previously: that the company allowed workers and subcontractors from another Iowa plant that had closed due to a coronavirus outbreak to begin working in Waterloo in April.
Plant supervisors told employees that their sick coworkers had the flu and warned them not to discuss coronavirus at work, the suit alleges. One man who vomited while on the production line was allowed to keep working, it claims.


fortune--2020-06-26--Sweden’s COVID-19 architect discouraged face masks. Now, he’s reconsidering

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The scientist behind Sweden’s controversial Covid-19 strategy said he’s willing to reconsider using face masks, after previously seeing little benefit in them.
Anders Tegnell, Sweden’s state epidemiologist and the architect of its hands-off response to the coronavirus pandemic, said there are situations in which it might be advisable for people to cover their mouths and noses.
Face masks are “possibly” to be recommended for people using public transport, Tegnell said in an interview with Dagens Industri on Thursday. “We need to think about that more.” But masks “definitely won’t become an optimal solution in any way,” he said.
Tegnell has so far argued against the World Health Organization’s recommendation to use face masks when social distancing is hard to do, with the justification that there’s “very little scientific evidence” that they work. Instead, Tegnell has warned that masks may give infected people a false sense of security and even encourage the kind of hand-to-face contact that can spread the disease.
The WHO updated its stance on masks earlier this month, encouraging people to wear them when social distancing isn’t an option.
The Swedish Way
The Swedish epidemiologist has repeatedly made international headlines since advising against a full lockdown. He’s subsequently admitted that more restrictions might have been necessary, but refused to abandon his strategy. Meanwhile, Sweden has one of the world’s highest Covid mortality rates.
On Wednesday, Tegnell once again spoke out against severe lockdowns as an appropriate response to the virus. In a podcast on Swedish radio, he said he felt the “world had gone mad” in imposing such severe restrictions, despite the societal costs.
Instead of shuttering schools, shops and restaurants, Sweden left pretty much everything open. Citizens were encouraged to observe social distancing guidelines, but the strategy assumed Swedes would voluntarily alter their behavior without the need for laws.
Tegnell’s underlying argument is that Covid-19 isn’t going away any time soon, meaning sudden, severe lockdowns will ultimately prove ineffective in addressing the longer-term threat. What’s more, traffic data now show Swedes travel a lot less than their Nordic peers. That means Swedes may be less exposed to the virus than people living in places where strict lockdowns have been eased, he said.
“When comparing how sustainable various measures are, this is a good example,” Tegnell said.
In his comments to Dagens Industri, Tegnell said Swedes should continue to observe social distancing guidelines, such as working from home if possible, and avoiding public transport.
“I think we will have to keep living a little differently for a good while,” he said.


fortune--2020-06-26--What should you do if you received a stimulus check made out to someone who is deceased?

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The dearly departed were not excluded from the federal government’s stimulus check spending spree—far from it.
The Internal Revenue Service sent out more than 1 million stimulus payments, totaling nearly $1.4 billion, to deceased Americans as part of its coronavirus aid package, according to a report released Thursday by the Government Accountability Office.
The watchdog agency’s report, which evaluates the federal government’s response to the COVID-19 pandemic, notes that the IRS and Treasury Department “faced difficulties” both in delivering payments to some Americans and denying them to others who were ineligible, such as the deceased.
As a result, the agencies made stimulus payments to deceased recipients during the “first three batches” of disbursements that went out this spring. Those disbursements accounted for 72% of the total payments handed out as of May 31.
The GAO cited administrative issues as the cause of the oversight. It pointed to the IRS’s “legal determination” of who was eligible for the payments, as well as the Treasury Department’s lack of access to Social Security Administration death records typically used by the IRS “to detect and prevent erroneous and fraudulent tax refund claims.”
As a solution, the GAO suggested that Congress amend the Social Security Act to “allow the SSA to share its full death data with Treasury” in future, in order to “help reduce similar types of improper payments in other circumstances.”
The IRS indicated in May that stimulus payments made to deceased individuals should be returned to the government. The IRS has provided information on how to return an “Economic Impact Payment,” as it’s known, on its website.
However, the agency “does not currently plan to take additional steps” to retrieve those payments, according to the GAO report. The $1.4 billion distributed to deceased Americans represents a small portion of the $269 billion disbursed overall by the government across more than 160 million stimulus payments.
Meanwhile, the IRS has reportedly recruited state officials to help it retrieve stimulus payments made to incarcerated individuals, according to the Associated Press, despite no clear legal basis that it has a right to do so.
Questions over the government’s management of the Economic Impact Payments come as lawmakers consider additional stimulus measures that could see more direct payments made to Americans. President Trump is reportedly in favor of additional stimulus payments, believing they would bolster a U.S. economy still badly damaged by the coronavirus pandemic in advance of this fall’s presidential election.


fortune--2020-06-26--Accenture’s CEO: 5 rules for rethinking digital transformation during COVID-19

Almost overnight, the COVID-19 crisis widened a performance gap—between those organizations that invested in technology innovation at scale before the pandemic and those that did not—into a chasm. The challenge now is how to accelerate this kind of digital change during a crisis, even as many are slipping behind. To persevere and prevail, companies of all sizes across industries will need to employ a new strategy and mindset.
Accenture research conducted at the end of 2019 measured differences in digital technology adoption, depth, and culture penetration and found that the top 10% of companies (“leaders”) grow revenue at two times the rate of the bottom 25% (“laggards”). The two groups’ approaches and methods are dramatically different. For example, leaders have adopted automation and A.I. five times as fast as laggards, and have put in place strategies that give them high confidence in the reliability of their data. The same pattern holds true across other technologies.
Strong digital foundations are already helping leading companies adapt to the crisis quickly. One global retailer that invested for years in true omni-channel sales and delivery had already offered curbside pickup at 100 of its stores. When forced to close its physical stores owing to COVID-19, in just 48 hours it was able to expand its curbside service to 1,400 stores while maintaining a majority of its revenue. Meanwhile, many of its competitors struggled to shore up their online channels.
In another noteworthy example, a global food manufacturer that had invested in “digital twin” modeling capabilities and A.I.-driven tools to optimize its supply chain before the pandemic could quickly access and analyze critical information, enabling it to move supplies as close to production sites as possible and avoid idling a single factory for lack of materials.
Not only are the digital leaders performing better through the crisis, we also see them doubling down on their investments to widen the gap. Laggards can still catch up, but they must jump-start their digital journey with new urgency.
In our work with clients on their transformations, most CEOs tell us they understand the destination, but many also tell us they are uncertain how to move forward with enough speed and confidence in the ultimate value creation.
Facing ‘brutal facts’
This crisis is different. Billions of people around the world almost instantaneously changed their behavior, with profound and lasting implications for business. Companies can’t simply reduce costs and “freeze,” but must accelerate to new levels of digital performance to serve new customer expectations, adapt to the health challenges of COVID-19, and pivot to new growth opportunities.
The first step for CEOs is taking stock of their organization’s level of digital maturity. This is the time to heed sage advice from Vice Adm. James Stockdale: You must retain faith that you will prevail in the end, regardless of the difficulties, and at the same time confront the most brutal facts of your current reality, whatever they might be.
For most companies, the “brutal facts” will reveal that they are even further behind on their digital journey than they realized and that the bar has been raised. To leapfrog the competition, CEOs need to rethink transformation and follow a new set of rules.
Fast-forward to the cloud. Leaders build a digital core and scale it across their business quickly. And this is only possible with a strong foundation in the cloud, which provides the innovation, efficiency, and talent advantages to do things differently and fast. Ninety-five percent of digital leaders have significant cloud capabilities, compared with only 30% of laggards. Make this a leadership expectation; set a target of at least 50% of your business in the cloud in the next 12 to 24 months if you are early in your move to it, and at least 75% if you are farther along.
Build your digital “A-Team.” All companies must now be as good as digital natives to deliver the first-class experiences customers and employees have come to expect. But creating your digital foundation quickly cannot be done alone, and it requires new kinds of relationships with digital, technology, and cloud companies. Recruit the handful who can help you build and become part of your digital core, who are invested in your success and who will give your business the attention and resources it demands.
Be a learner. Organizations must think beyond traditional ways of doing business to solve complex problems. Learn from your customers, your employees, and the leaders in your own and other industries. In response to COVID-19, first responders in health and public sector organizations quickly adapted successful interactive virtual agent models from telecommunications and financial services organizations with great success.
Move at “lean” speed. Almost overnight, organizations moved fast to become more digital and work remotely, and CEOs are saying they “don’t want to go back.” To retain this level of agility, consider what internal barriers fell during the crisis. Then create lean decision-making and governance processes, streamline procurement, and evolve your culture to support a new way of working.
Act with purpose. Speed means you need your people with you. Clearly articulating purpose upfront is essential to cutting-edge change management techniques that harness the power of employees to drive change and act with agility.
Companies that understand the unique nature of this crisis and apply these new rules of transformation have the opportunity to emerge even stronger and become the leaders of tomorrow.
Julie Sweet is the CEO of Accenture.


fortune--2020-06-26--Trump administration’s new bid to end Obamacare makes no mention of coronavirus

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In the midst of the coronavirus pandemic, the Trump administration on Thursday urged the Supreme Court to overturn the Affordable Care Act.
The administration’s latest high court filing came the same day the government reported that close to half a million people who lost their health insurance amid the economic shutdown to slow the spread of COVID-19 have gotten coverage through HealthCare.gov.
The administration’s legal brief makes no mention of the virus.
Some 20 million Americans could lose their health coverage and protections for people with preexisting health conditions also would be put at risk if the court agrees with the administration in a case that won’t be heard before the fall.
In the case before the Supreme Court, Texas and other conservative-led states argue that the ACA was essentially rendered unconstitutional after Congress passed tax legislation in 2017 that eliminated the law’s unpopular fines for not having health insurance, but left in place its requirement that virtually all Americans have coverage.
After failing to repeal “Obamacare” in 2017 when Republicans fully controlled Congress, President Donald Trump has put the weight of his administration behind the legal challenge.
If the health insurance requirement is invalidated, “then it necessarily follows that the rest of the ACA must also fall,” Solicitor General Noel Francisco wrote Thursday.
The Trump administration’s views on what parts of the ACA might be kept or replaced if the law is overturned have shifted over time. But in legal arguments, it has always supported getting rid of “Obamacare” provisions that prohibit insurance companies from discriminating against people on account of their medical history.
Nonetheless, Trump has repeatedly assured Americans that people with preexisting conditions would still be protected. Neither the White House nor congressional Republicans have specified how.
The new sign-ups for health coverage come from the Centers for Medicare and Medicaid Services. The figures are partial because they don’t include sign-ups from states that run their own health insurance marketplaces. Major states like California and New York are not counted in the federal statistics.
An estimated 27 million people may have lost job-based coverage due to layoffs, and it’s unclear what — if anything — they’re turning to as a fallback. People who lose employer health care are eligible for a special sign-up period for subsidized plans under the Obama-era law. Many may also qualify for Medicaid.
The Trump administration has been criticized for not doing as much as states like California to publicize these readily available backups. In response, administration officials say they have updated the HealthCare.gov website to make it easier for consumers to find information on special sign-up periods.
Thursday’s report from the government showed that about 487,000 people signed up with HealthCare.gov after losing their workplace coverage this year. That’s an increase of 46% from the same time period last year.


fortune--2020-06-26--Bain Capital makes a giant bet on the beleaguered airline industry

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Bain Capital LP agreed to buy collapsed Virgin Australia Holdings Ltd. in one of the biggest single bets on the airline industry since it was shattered by the coronavirus pandemic.
Administrator Deloitte named Bain as the airline’s new owner on Friday, hours after rival buyout firm Cyrus Capital Partners LP withdrew its bid. The value of the deal wasn’t disclosed, though Deloitte said there will be “a significant injection of capital” into the airline.
Bain’s investment is a brave bet on a sector enduring its biggest crisis ever, as well as on the Virgin Australia business itself. Larger rival Qantas Airways Ltd. this week depicted a bleak outlook, cutting 6,000 jobs, grounding about 100 planes and raising as much as A$1.9 billion ($1.3 billion).
While domestic travel is slowly recovering, Australia’s government has said the country’s borders could be kept largely closed until 2021. Airlines worldwide are likely to lose $84 billion and see their revenues halve this year, according to the International Air Transport Association, which expects 2020 to go down as the worst year financially in the history of aviation.
Virgin Australia collapsed in April under A$6.8 billion in borrowings as the outbreak halted global travel. Even before coronavirus-related restrictions nearly froze revenue, Virgin Australia had lost money for seven consecutive years.
Deloitte said Friday it’s still not possible to determine how much of Virgin Australia’s debt can be recovered, though more details will come in a report to creditors that’s due before the end of August.
Shareholders, though, will probably get nothing, Deloitte said. Virgin Australia was almost entirely owned by four foreign aviation groups — Singapore Airlines Ltd., Etihad Airways PJSC, HNA Group Co. and Nanshan Group Co. — that each owned 20% stakes. Richard Branson’s Virgin Group owned about 10%.
Deloitte’s decision ends an auction process that initially drew interest from more than 20 parties. Cyrus exited with a fiery attack on the sale process, accusing Deloitte of a “lack of engagement” since the U.S. investment group submitted its takeover proposal on June 22.
In a separate statement, Bain said it will strengthen Virgin Australia’s regional services and continue serving business travelers. Bain is backing Managing Director Paul Scurrah, who had already started to cut costs and simplify the airline when the virus struck.
The carrier’s headquarters will stay in Queensland, the state government said.
Bain’s deal may face a further challenge from Virgin Australia’s bondholders, who this week submitted their own plan to swap their debt for new shares under an independent board. And the sale agreement with Bain still needs to be approved by creditors.
In April, Prime Minister Scott Morrison’s government refused to give the airline even A$200 million to survive, tipping Virgin Australia in alongside U.K. carrier FlyBe as one of the world’s highest-profile corporate casualties from coronavirus.


fortune--2020-06-26--Ford reveals the redesign of its biggest moneymaker, the F-150 pickup

Ford Motor Co.’s redesign of its biggest moneymaker, the F-150 pickup, is more geared toward overhauling its interior than a radical reworking of its sheet metal, adding creature comforts like hands-free driving technology and reclining sleeper seats.
Sleep, it turns out, is in high demand from truck buyers who snapped up nearly 900,000 F-Series models last year, generating about $42 billion in revenue for the automaker. Ford conducted hundreds of hours of anthropological research on its owners only to discover what they really want is seating more akin to a first-class airline cabin than a no-frills shuttle bus.
“Whether it’s just a quick power nap when they’re on the job site or when they’re going camping with their family, we’re finding that a lot of customers use their vehicle as their sanctuary,” Hau Thai-Tang, Ford’s product development chief, said in an interview. “They’ll get home from work and not go in the house right away. They’ll actually spend ‘me time’ in the truck.”
All-new F-150 Lariat in Rapid Red Metallic Tinted Clearcoat. Ford’s latest redesign is more geared toward overhauling the truck’s interior than a radical reworking of its sheet metal. Courtesy of Ford
The interior upgrade comes as part of Ford’s realization the F-150 couldn’t rest on its laurels as the top-selling vehicle in the U.S. for the past 38 years. The pickup needed an overhaul to keep rivals General Motors Co. and Fiat Chrysler Automobiles NV at bay. Fiat Chrysler’s Ram in particular has been ascending thanks to a popular jumbo screen that’s helped the truck line overtake GM’s Chevrolet Silverado on the sales charts. Ford has managed to maintain sales leadership but been under pressure from buyers and its own dealers to match Ram’s high-tech interior.
The new F-150 going on sale later this year will feature a 12-inch touchscreen that matches the tablet-sized offering in the Ram. The automaker is unveiling its new truck late Thursday through a splashy social media stream hosted by comedian Denis Leary, who has been a paid pitchman for Ford since 2008.
“Ram came out with a screen that was bigger than ours and now it’s our turn,” Thai-Tang said. “We want to maintain our leadership. We’re very confident we will.”
Ford has a lot riding on the F-150, the flagship in the F-Series truck line that accounts for much of the company’s profits. Big pickups are the lifeblood of Detroit automakers and one of the few segments in which Japanese automakers have failed to make major inroads. The big rigs haul in an average of $10,000 in profit per unit, compared to $3,000 for a small crossover utility vehicle, according to Morningstar Inc.
“This truck has been Ford’s cash cow for years and a bright spot during this pandemic,” said Jessica Caldwell, executive director of insights at automotive researcher Edmunds. “But it has also been in need of a fresh design as the truck wars have grown more heated.”
Ford hopes to find new commercial buyers and retail customers who want to work — and sleep — in their trucks. Another new feature is a shifter that folds away into the center console, creating a flat workspace for a laptop or lunch.
The redesign is also a tech play, as Ford puts the F-150 at the center of its push toward electrification and autonomous-driving systems.
Ongoing Revenue Stream
The new truck will come in a gasoline-electric hybrid version at launch and a fully battery-powered F-150 will arrive within two years, the automaker has said. The hybrid will have an on-board generator that could power a worksite or home.
The F-150 will also become Ford’s first vehicle to offer over-the-air software updates, as Tesla Inc. has done for years in its electric cars. And Ford is outfitting the F-150 with the same hands-free driving feature that is going on the electric Mustang Mach-E coming later this year.
“There was a point where pickup trucks were expected to be basic,” said Stephanie Brinley, a principal automotive analyst at IHS Markit. “But now consumers are just as interested in technology in trucks as they are in their sedans and SUVs.”
Over-the-air software updates should also bolster Ford’s bottom line, Thai-Tang said. It allows the automaker to charge customers for optional new software-driven features throughout the life of the vehicle, creating an ongoing revenue stream.
By creating an online connection to the truck, Ford hopes to get an early warning on flaws that need fixing, thereby reducing warranty and recall costs, which helped sink the automaker’s earnings last year.
“If I’m able to identify an issue much earlier because I have the diagnostics capability from the over-the-air data stream, I can cut it off before it becomes hundreds of thousands or millions of vehicles,” Thai-Tang said.
‘No Product More Important’
Ford also needs to show it can smoothly launch the new F-150 after the botched rollout of its Explorer sport-utility vehicle last year compounded its financial woes. The degree of difficulty has only increased following a two-month production shutdown to slow the spread of the cononavirus, which Ford has said will result in a $5 billion operating loss this quarter.
A fresh F-150 will pay dividends in the longer run, but Ford is likely to temporarily lose some truck share to GM and Fiat Chrysler while it converts factories in Michigan and Missouri to produce the new truck, Credit Suisse analyst Dan Levy wrote in a report Thursday.
Ford has promised to minimize downtime and will continue producing the outgoing F-150 model in one plant, while converting the other to the new version.
“It’s the crown jewel of the business,” Thai-Tang said. “Tremendous volume, a tremendous profit pool, two assembly plants with a huge economic impact in those communities where those employees are working and living. So there’s no product more important for us.”


fortune--2020-06-26--Warning: Russian hackers may be trying to target you with ransomware. Here’s how

How low will GDP go ?
Atlanta Fed projections for Q2 dip below -40 %

Russian hackers are trying to take advantage of the millions of employees working from home because of shelter-in-place orders.
Security firm Symantec said this week that it had discovered and then notified businesses that the Russian hacking group Evil Corp has been targeting remote employees with so-called ransomware attacks.
In a typical ransomware attack, criminals send victims an email—often created to look like it’s from a colleague—that contains a link to a malicious site. When users access the fraudulent site, criminals can then take over their computers and demand payment—typically in cryptocurrency like Bitcoin—to regain control of their devices.
In the case of Evil Corp’s ransomware attack, Symantec said the hackers wanted to “cripple” a company’s “IT infrastructure by encrypting most of their computers and servers in order to demand a multimillion-dollar ransom.”
Symantec said that 31 U.S.-based organizations were compromised in the latest series of attacks, “eight of which are Fortune 500 companies.” The security firm did not reveal the names of the impacted organizations nor whether they paid any ransoms. The security firm said that while the hackers “breached the networks of targeted organizations,” the criminals were only “in the process of laying the groundwork for staging ransomware attacks,” implying that they didn’t complete their intended extortion plans.
This recent hacking attempt used a specific type of ransomware known as WastedLocker, which Symantec said was developed by Evil Corp. Two of Evil Corp’s alleged members have been previously charged by the U.S. Department of Justice for a separate “decade-long cybercrime spree” affecting unspecified banks and financial firms, Symantec said.
Eric Chien, Symantec’s technical director, said in an interview with the New York Times, that hackers were able to launch ransomware attacks on workers via malware that “was deployed on common websites and even one news site,” without describing those compromised websites containing the malicious code. From those compromised websites, users inadvertently downloaded a bogus software update that installs the malware onto their computers.
That malware inspects people’s computers to see if they have installed a corporate virtual private network, or VPN, that businesses typically require their remote employees to use in order to access sensitive corporate data. The malware learns the name of the employee’s company from the VPN and is then able to infect people’s computers once those workers visit another website.
“Once the machine is reconnected to the corporate network, the code is deployed, in hopes of gaining access to corporate systems,” the Times said.


fortune--2020-06-26--How to get promoted while working remotely

Warning : Russian hackers may be trying to target you with ransomware .
Here ’ s how

Broadside writer Kristine Gill offers advice from career experts on how you can stay on track for that raise or promotion, even if you’re working remotely amid COVID. Then, scroll on for job opportunities from Amazon, HBO Max, Wellpath, and more.
Millions of Americans forced to work from home during the pandemic aren’t just faced with Wi-Fi problems and Zoom fatigue; many of them also worried that their careers would stagnate and they’d miss upcoming promotions and raises while the world hit pause.
I was heartened to hear that, for at least a few newly remote workers, that wasn’t the case. I spoke to bosses and employees who managed to give out raises and promotions these past couple of months, and they have advice on how you can do the same—during a pandemic and otherwise.
Don’t give up hope.
When Raquel Cona learned she’d be working remotely for her Midtown Manhattan PR firm back in March, one of her first concerns was about her upcoming promotion.
“I knew I was on track, given how long I’ve been at the company, my experience, but my six-month review for the year would have been in April and it was TBD due to COVID,” she said. “So I just didn’t know if it was going to be on the table.”
By April, her bosses had kept their promise. And rather than having the formal review, Cona got a phone call saying she was getting the promotion.
“It really was awesome,” she said. “They were sending a message to say they care about the hard work I was doing. They felt it was important to just do it then and make sure I felt like I was being valued.”
How’d Cona manage it? She worked longer hours so her PR clients knew she was still on hand, and she spent more time checking in with her staff during morning calls. Cona was happy to do a few hours of extra work here and there, knowing the remote situation was temporary and hoping she could use the situation to prove her adaptability and drive to the higher-ups.
“I was working longer hours, but also showing my employers that I’m ready to do and I’m available to put in all the work,” she said. “I think it really set me apart and geared me up for the promotion.”
Sarah Murphy, Head of Marketing at Scurri, an e-commerce software company, was promoted during the lockdown from her position as Marketing Manager, even after recently returning from maternity leave.
She took much of the advice experts have given when she made the shift to remote work: She created a home office space, established a daily routine and tried to find a good separation between work and home life to maintain sanity. And she was sure to stay in communication with her boss to make sure everyone knew she was still on track despite these new challenges.
Still, Murphy believes the most important thing that set her apart was the same thing that sets all great employees apart: the quality of her work.
“Visibility is important, but the work you are delivering will speak for itself, so focus on your output rather than people’s perception of you working from home,” Murphy says.
Work the reduced face-time to your favor.
If you’re the type who likes to be seated at your desk and sipping your second cup of coffee by the time the boss rolls in, you might miss the perceived boost from those daily, visible reminders of your stellar work ethic. When you’re working remotely, those things don’t matter.
“For all productive people, congratulations. This is a terrific opportunity to showcase your productivity in a way that doesn’t rely on face time, kissing up to the boss or any other nonproductive corporate activity,” says Marc Cendella, founder and CEO of Ladders. [Note: Fortune partners with Ladders to include the job listings shared below.] “None of the stuff that doesn’t matter, matters in an all-remote environment. It doesn’t matter what you’re wearing that day, doesn’t matter what the boss says at the water cooler, doesn’t matter if you like her blouse or his shoes. It’s really just focused on your work, so take advantage of that.”
What’s important now is to make whatever communication you have with your boss count, whether it’s a daily morning call or a weekly Zoom meeting, Cendella says. Find a way to point out your successes on a daily, weekly, monthly and annual scale. If you have to, ask to schedule these check-ins formally on your boss’s calendar.
Casey Paul, a Digitial Marketing Manager at Kaizen Agency in London, managed to earn her promotion even after two months of remote work this year. Key to her success were regular check-ins with her boss. The check-ins allowed her to show she was meeting her existing goals.
“I also utilized the time to ask my CEO about how the business expectations and goals may have changed due to COVID,” she said.
Doing the same could help you to demonstrate a previously unseen knack for working during a crisis or adapting to extreme circumstances. If you’re able to finish a project you’ve been putting off or take an online training course to up your game, Paul recommends it.
“Building your skill set during this time is invaluable and showcasing that will also highlight your value as an employee,” she says.
Stay on track with your goals.
Cendella says your annual one-on-one meeting with your boss is like a contract. When you meet those goals and document them, you can demonstrate your value and still stay on track for any promotions or raises you were up for.
“Too many people think the one-on-one is their boss’s way of snooping and check in on them,” he says. “Really it’s your way to get ahead. That is your tool, that is your weapon, it’s your updraft, the wind at your back that pushes your sails forward.”
During remote work check-ins, be sure to reference those goals by providing proof of your work. The best way to do that is with numbers.
“There is no job on the planet that is not reduceable to numbers, other than mothering,” Cendella says. So figure out a way to measure time spent on individual tasks, number of engagements on social media posts, hits on blogs, increases in sales, or contacts with customers, whatever your position might entail.
And while metrics work, there are still advantages to traditional methods of “showing up,” says Amelia Green-Vamos, a Career Trends Expert at Glassdoor.
“Even minor tactics like turning on your video during virtual meetings, providing additional perspective on email threads and delivering timely status reports to your manager can go a long way in terms of communicating your value and growth in order to be considered for future promotions,” she says.
Ask for a promotion or raise anyway.
Say your company has had layoffs or furloughs, or pay cuts or dire company-wide emails warning of financial hardship in the coming months. You can still ask for those promotions and raises, Cendella says. The worst that can happen is that you’re told no.
If you’re worried COVID has frozen job opportunities, you’re wrong. You might benefit from Glassdoor’s ‘Hiring Surge’ tool, which helps clarify which employers are still actively hiring during COVID-19.
Laura Eboa Songue managed to get her new role as an international communication and marketing consultant at United Nations Development Programme during lockdown. She had her interview remotely, and sealed the deal via email after some back-and-forth negotiations.
“I even had technical difficulties due to internet issues,” she says. “It was a bit challenging and embarrassing. Glad I made it through.”
If your company has been explicit about a hiring freeze or holds on raises and promotions, don’t call 2020 a wash.
“If you’re not currently able to level up at your company, then set your own goals,” Green-Vamos says. “What new skills do you want to gain by the end of Summer 2020? Perhaps you’d like to set one virtual coffee chat per month, join an online webinar, take a new course on Skillshare or something else. Don’t forget that you have the power to continue growing even if your company is currently on pause.”
Don’t overthink it, if you’re the boss.
Aaron Bolzle is the executive director of Tulsa Remote, a program in Oklahoma that pays remote workers $10,000 to relocate to Tulsa while continuing work at their respective companies. He has advice for employers as they look to make offers, give promotions and evaluate employee productivity during the pandemic.
“There’s a natural tendency when team go remote to micromanage and to want to have proof of the work that’s being done,” he says.
When considering employees for promotions, don’t let the fact that you’re now remote affect your opinion of their job performance. Bolzle says if you’re having trouble trusting your employees while they work from home, you should also be worried about the work they do in your physical office.
“It really comes down to hiring good people, empowering them to do their jobs and then letting them do it,” he says. As Murphy said earlier: The work will speak for itself.
— Kristine Gill
Making money moves
Amazon is hiring a Senior University Recruiter based in Georgia.
Amerapex Corporation is hiring an EPC Business Development based in Houston, Texas.
Crain's New York Business is hiring an Account Executive based in New York, N.Y.
Edward Jones is hiring a Financial Advisor based in Alpharetta, Georgia.
Everlywell is hiring for dozens of positions based in Austin, Texas.
HBO Max is hiring a Publishing Strategist based in Burbank, Calif.
The Henry M. Jackson Foundation for the Advancement of Military Medicine is hiring an Urban Entomologist based in Jacksonville, Fla.
Jacobs is hiring a Senior Interior Designer based in St. Louis, Mo.
JMJ Phillip Executive Search is hiring a Vice President of Engineering based in Boston, Mass.
JPS Selection Ltd. is hiring a remote CRO (Chief Revenue Officer) - Cloud Supply Chain Software.
Randall-Reilly is hiring a Sales Director - Dealer Sales in Charlotte, N.C.
TAG, Inc. is hiring a Manager, Business Development based in Chesterfield, Mo.
Trusted Ally Home Care is hiring a Home Health Administrator based in Englewood, Colo.
Wayfair is hiring a remote Customer Service Representative.
Wellpath is hiring a Senior Tax Analyst based in Nashville, Tenn.
Events and other opportunities
July 7: Fortune's Brainstorm Health conference will be held online.
July 15: The Tory Burch Foundation is a Negotiation Tools for Small Business webinar.
July 27: Glitch is hosting a virtual event called Digital Self Defence: Helping Keep Politically Active Women Safer Online.
Aug. 24-28: Ellevate Network will host its Mobilize Women Summit virtually.
Sept. 29-Oct. 1: The Network of Executive Women is hosting the NEW Leadership Summit 2020 in Dallas, Texas.
Sept. 20-Oct. 2: Fortune will host its Most Powerful Women Summit in Laguna Niguel, Calif.
Oct. 7-9: TBEX North America 2020 will hold its summit in Lafayette, Louisiana.
Oct. 15-16: The Women of Silicon Valley's Women in Tech Event Series will take place in Santa Clara, Calif.
Nov. 5: The annual Women in Negotiation Summit will be held in New York City. The daylong event empowers women through negotiation-skills building.
Want to share a hiring or networking opportunity from your organization or elsewhere, or just have feedback about The Broadside? Email Kristine Gill.


fortune--2020-06-26--How low will GDP go? Atlanta Fed projections for Q2 dip below -40%

That’s a big number.
While plenty of economists are busy debating the shape of an eventual economic recovery, there’s still the small matter of the second quarter to get through first. And while everyone agrees U.S. GDP is in for a historic drop, there’s still a wide variety of opinions about just how big that drop will be.
One widely watched gauge is the Atlanta Fed’s GDPNow tracker, a mathematical model that feeds in new economic data as it is released, and tries to factor in how it will move the overall GDP figure for an upcoming quarter. And as of Thursday June 25, the GDPNow’s estimate for second-quarter GDP was a stunning –46.6%.
However by Friday that had improved somewhat, to –39.5%, based on better than expected consumer spending data. The next GDPNow update will be released on Wednesday July 1.
The tracker does come with a significant caveat. As a note on the site reads, “GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released.”
Elsewhere on Wall Street, forecasts for the second quarter have careened wildly, ranging from merely terrible to downright catastrophic. Goldman Sachs’s latest prediction is around –33% for the quarter, while the New York Fed’s Nowcast (a similarly real-time GDP tracker) has actually raised its second-quarter estimates to around –16.3%.
While the revised estimates from both the Atlanta Fed and the New York Fed (as well as the improving data) suggest there is light at the end of the tunnel, the second quarter could prove a deep hole to dig out of.
“The good news [is] that we are starting to grow again. The bad news is that we’re starting from an awfully deep hole” that will take a long time to recover from, UBS Global Wealth Management senior economist Brian Rose recently told Fortune.
Meanwhile, the International Monetary Fund’s chief economist Gita Gopinath said at a press briefing on Wednesday, “We are definitely not out of the woods.” The IMF lowered full-year GDP estimates for the U.S., and Gopinath noted, “This is a crisis like no other and will have a recovery like no other.”
One thing’s for sure: Whatever the actual GDP number is, it will certainly make history.