$850 Billion.

Equities struggled to hold gains on Tuesday as the world ponders what’s next in the unfolding coronavirus pandemic, which reached a critical new phase in the US this week as major cities began to effectively shut down and Donald Trump conceded that the country could be headed for a recession.

Steve Mnuchin is seen asking Congress for a “phase three” relief package worth some $850 billion (or more), according to sources who spoke to Politico, which notes that by comparison, the Joint Committee on Taxation “said the paid leave provision in ‘Phase Two’ cost $100 billion'”. A large part of the new package is expected to be involve a payroll tax cut.

New Zealand on Tuesday rolled out stimulus measures worth 4% of GDP, the biggest package in the world aimed at alleviating the economic and human suffering from the virus. The $7.3 billion pledge from the government is bigger than what the country deployed during the financial crisis, and larger as a percentage of GDP than the spending announced by, for example, Australia and Singapore. It includes wage subsidies, tax cuts, income support, investments in healthcare and funds for assisting the aviation sector.

“The government is pulling out all the stops to protect the health of New Zealanders and the health of our economy”, Prime Minister Jacinda Ardern said in a press briefing.

US equity futures go a fillip from the Mnuchin headline, but at one point had faded all of their gains after trading limit-up twice during the overnight session. Generally speaking, there’s no telling where things will go on Tuesday on the heels of Monday’s historic bloodbath.

Unfortunately, lawmakers on Capitol Hill refuse to acknowledge that in circumstances like these, the deficit simply doesn’t matter, and that’s assuming you thought it mattered in the first place.

“Senators in both parties acknowledged they were concerned about the current government deficit, which was already projected to be more than $1 trillion before the coronavirus hit and derailed the economy”, Politico writes, sketching the broad contours of the “phase three” plan Mnuchin is angling to secure.

“I think that all spending should be offset by cutting less important spending, so I will offer an amendment to pay for it”, Rand Paul said. “I think anytime we choose to spend money, no matter what the cause is, we should pay for it”.

It’s maddening, frankly. Rest assured, if the Chinese (just to use a hypothetical) were to conduct a bombing raid across America that killed or injured as many Americans as this virus is going to kill and sicken, nobody on Capitol Hill would be worried about the deficit when it comes to ramping up military spending in order to respond.

In any event, Asian equities were broadly higher, although at this point, you cannot read anything into the daily swings.

“Equities were, for a while, bouncing overnight [and while] US futures are still up, the mood is deteriorating quickly, in large part because stress is building in cross-currency basis again”, SocGen’s Kit Juckes wrote, noting that “with the US taking steps to ease overseas access to dollar liquidity, things were looking better, but that’s no longer in place”.

(SocGen)

Euro-dollar cross-currency basis blew out as much as much as 46bps.

“USD cross-currency basis is getting more and more expensive despite the Fed’s ‘aircraft carrier’ liquidity addition, so maybe something else/more needs to be done to calm down USD markets”, Nordea’s strategist Andreas Steno Larsen remarked. “The solution that would calm markets almost instantly is of course if authorities decided to take the credit risk”.

After a day that found market chatter around a possible coordinated closing of stock exchanges getting (much) louder, and on the heels of some Asian countries taking steps to shorten trading hours, France is looking to build support for an EU ban on short selling after the French market regulator banned it during Tuesday’s session.

Finance Minister Bruno Le Maire wants a Europe-wide restriction starting immediately and lasting at least a month. “We are ready to go further; we are ready to go as far as banning short selling for a month”, he said. “We want this decision to be taken at a European level. We are standing ready to take stronger decisions if necessary. We want to avoid speculation on markets”.

He also warned that the French government will steamroll anyone caught trying to use the crisis to undermine key French corporates. Here’s what he said during a briefing with journalists:

I want to be very clear concerning big companies that could be attacked on markets. The state has a number of means and I will not hesitate to use all the means available to me to protect big French companies. That can be capitalization, that can be by taking share, I can even use the term nationalization if necessary. We will use all the means available to us to protect our businesses.

In a Monday evening note, JonesTrading’s Mike O’Rourke reminded folks that these kinds of restrictions and emergency measures can backfire.

“Once you head into the uncharted territory of what may seem like a good idea, it very likely may be the cause of further market distortion”, he said, adding that he’s “received numerous questions on the 2008 Financial Short Sale Ban”.

“We are concerned that there are no policymakers left in office who recall what an abject policy failure the ban was [and] we fear a similar ban may be implemented now simply because it was done in the past”, O’Rourke went on to say, before reiterating that “the biggest problem is equity prices started correcting from massively overpriced levels [and] companies cared about managing their share price rather than their business and are [now] paying the price for floating debt to fund share repurchase programs the fueled the overvaluation”.

You may or may not agree with his take on the relative merits of market closures and short selling bans, but it’s hard to argue with that latter assessment. While protecting the market from undue speculation in an acute crisis is one thing, some irresponsible corporate management teams are probably just going to have to take their medicine.

I’ll just roll out this chart one more time: