Global markets climb as coronavirus fears ease

Good morning, Bull Sheeters. We’re looking at a positive start to this trade-shortened week.

Let’s see where investors are putting their money.

Markets update

We begin in Asia. Japan’s Nikkei is soaring, up 4% in afternoon trade, and Hong Kong’s Hang Sang is having its best day in a week. (Chinese markets are closed today.) The markets are climbing on hopes we’re turning a corner in the fight against coronavirus after some promising figures from over the weekend. In a sign of investor confidence, the benchmark KOSPI of South Korea, a model country in fighting the outbreak, is up 23% since its March 19 low.

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There are green screens across Europe at the open as well. Hotspot-countries Italy, Spain and France all recorded declines in the coronavirus death toll in recent days. Now the focus in on Britain where Prime Minister Boris Johnson was hospitalized on Sunday as his coronavirus symptoms persist. The British pound sunk 0.4% initially on the news, but has since rebounded.

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The U.S. futures are set to pop at the open. The Dow looks to add 800 points, as I type, and the S&P 500 is on pace to gain close to 4% at the opening bell, which would push it well above 2,500.

That’s an important number to keep in mind as JPMorgan Chase recalculates a bottom for this market. In its analysis of the VIX, the volatility index, plus coronavirus death statistics, it sees S&P stocks plumbing no lower than 2,100, and probably no higher than 2,850.

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Elsewhere, the dollar is flat. Gold is up, and oil is down after an OPEC+ virtual meeting, scheduled for today, was canceled. Brent crude prices fell as much as 12% in early Asia trading, but have since recovered some on hopes the oil producing powers can eventually reach some kind of accord on the ongoing price war.

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To gauge how bad things could get, economists are increasingly focusing in on one big metric: jobs. The International Labor Organization, for one, has warned the coronavirus outbreak could wipe out nearly 25 million jobs worldwide if countries fail to manage the pandemic properly.

A significant number of those lost jobs could be in the United States. While several European countries are stepping in to pay most of the wages of impacted workers, the U.S. appears more content to let companies slash payrolls, and then extend unemployment benefits to the legions of laid-off.

There’s much debate about which policy is best to boost recovery. But there’s plenty of consensus on one thing: the layoffs number is about to get much worse, as Friday’s U.S. jobs report made clear. Let’s take a closer at the significance of the March numbers, the subject of today’s chart.

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End of an era

The headline figure is the 701,000 jobs lost. But we know from the 10 million jobless claims filed in the previous two weeks that Friday’s figure is a gross under-count of the U.S. unemployment picture.

The unemployment rate has now jumped to 4.4%, but it’s expected to soar in April and May. How high could it go? The St. Louis Fed predicted the unemployment rate could hit as high as 42%. Things would have to go really wrong to hit that number, but that’s the forecast being held out there as the worst-case that everyone is trying to avoid.

Postscript

Pizza. To Italians, it’s a serious dish. Italians don’t agree on a lot of things, but they’re convinced the further you venture from Rome or Naples the worse the pizza is. The deep-dish Chicago pizza? The pizzeria/nudelhaus you find in parts of Germany? These are crimes against humanity, I’ve heard my Roman friends say. They might be right.

I’m not aware of any wars having been fought over pizza, but I have witnessed Romans bicker heatedly over which pizzeria makes the best Roman pizza.

You see, Roman pizza is very different from what you’ll find in Naples, home to the original pizza margherita. Roman pizza is thin-crusted. And there’s only so many places that do it well. Da Remo in Testaccio is top of most people’s list.

During the lockdown it’s getting harder to satisfy that pizza fix. Roman pizza doesn’t travel well, making it a poor meal option for home-delivery. So a lot of Romans are doing DIY pizza, in their kitchens (which, as Bull Sheet readers may recall, is causing a run on flour and yeast at the supermarkets).

We’re entering week five of lockdown, which means we’ve now done pizza night at home over the past four Saturday evenings. My wife is an exacting cook. She works the dough, and lays down the law on which ingredients are permitted together: si! to mozzarella and basil, no! to mozzarella and oregano; prosciutto should be added at a late stage, etc. The kids handle the toppings. I’m the pizzaiolo, wielding the palate, spinning the pizzas on the slab and sneaking bites of unattended slices.

Over the first three weeks, we’ve been really frustrated with the results. We have a conventional oven, so already we’re at a disadvantage. We recently upgraded to a 15-euro stone slab that we chuck in the oven to recreate the stone-oven texture and taste. But it’d been hit or miss. If the stone surface isn’t just right, the top and bottom of the pizza will cook unevenly, leaving crisped toppings, singed crusts and a spongy center. “Fa schifo!” as the Italians say.

We fired up the oven on Saturday night and, this time, let the stone slab sit in the heat for over an hour. By the time the dough was ready, the stone was at the perfect temperature. The pizzas were hitting the slab, cooking evenly in 2-3 minutes. You could see the edges browning and the mozzarella softening in unison. When they came out, they were fabulous. They were cracker-thin in the middle, and crunched sublimely as you munched from the center to the edges.

Holding a piece aloft, my wife proclaimed, “We’ve hacked it.”

There was flour everywhere, the kitchen was a mess, but we felt as if we’d just about mastered an important lockdown survival skill: cooking Roman pizza in a Roman kitchen with a conventional Roman oven.

We promptly sent a photo to friends who live in the neighborhood. Originally from down south in Campania, in pizza country, they’ve become reliable tipsters on where to find pizza vera in the area. They too were making pizza, turns out. Pizza napolitana. Gianni, our friend, had recently bought a special oven for DIY pizza. It’s quite literally the Ferrari of pizza ovens. And this is what theirs looked like:

We exchanged compliments, but the sight of his creations got me thinking about how we could still up our game. I figure we have another month at least to perfect our DIY pizzas before facing the ultimate test: letting our Roman friends be the judge.

There’s bound to be disagreement.

Have a good day, everyone. Stay safe and sane. I’ll see you here tomorrow.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

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Today's reads

Credit crunch. After the stock market crash, brace for a credit crisis. The COVID-19 outbreak is the catalyst popping a credit bubble that has been inflating since the global financial crisis. That, coupled with the collapse in consumer demand, could spell trouble for a large segment of the credit market, specifically for non-investment-grade companies (so-called fallen angels), write Bob Diamond and Ty Wallach, respectively CEO and chief investment officer of credit at Atlas Merchant Capital, in Fortune.

Nobel laureate calls the markets. U.S. economist Robert J. Shiller, who won the Nobel prize for his work on share valuation, says we’ve never seen anything quite like the coronavirus pandemic before, making it hard to predict where the market is heading. Most likely, he writes in The New York Times, the stock market will do moderately well in the coming years, even if there is a risk that you will need to be very patient.

Bank dividends. America’s biggest banks want to continue paying dividends even though European banks are being urged by regulators to scrap the payouts to maintain strong capital buffers during the coronavirus pandemic. Top U.S. bankers argue that they have the firepower to continue paying dividends and that cutting them would be destabilizing to investors, the Financial Times reports. Investors are going to get caught in the middle of this debate.

Market candy

Quote of the day

As long as people remain afraid of getting deathly ill and maybe dying every time they go to a mall, grocery store, or barber shop, the economy will not recover.

So says Michael Merrill, an economist at the Rutgers School of Management and Labor Relations, who tells Fortune he rates the odds of the coronavirus outbreak causing a depression as "quite high.”