Asian equity rocker and bond yields hit new lows
Stocks rose in Asia Monday morning as investors bet that world governments and central banks would step in to help a global economy criticized by the coronavirus epidemic.
But US Treasury prices have risen, driving yields down, a sign of growing concern in the financial world.
After opening to the downside, Japanese stocks rebounded and the Nikkei 225 index rose by around 0.6%. The increase came after the Bank of Japan, the country’s central bank, said it “will endeavor to provide sufficient liquidity and ensure the stability of the financial markets through appropriate market operations and asset purchases “. He has not announced any specific moves.
Hong Kong stocks also rebounded and traded about 0.8 percent more. Shares of Shanghai, a market often supported by government-linked investment vehicles, rose 1.7%.
Futures markets have indicated that investors expect Wall Street and several European markets to open later Monday.
However, the bond market continued to reflect pessimism. Yields on 10-year US Treasuries fell to 1.08%, approaching the psychologically significant threshold of 1%. The decline, driven by rising bond prices, suggests that investors are still looking for safe places to park their money.
They also assess in betting that the US Federal Reserve will reduce interest rates to support the economy.
The S&P 500 is having its worst week since 2008.
On Friday, stocks fell for the seventh consecutive day, as the S&P 500 fell about 0.8%, bringing its loss for the week to around 11.5%. It was the worst weekly decline in stocks since the 2008 financial crisis. In early October of the same year, the S&P 500 fell about 18%.
On Friday, the Dow Jones industry average fell more than 1%.
The sale was fueled mainly by concern that measures to contain the virus are hampering corporate profits and economic growth, and by fears of the epidemic worsening. The sale dragged stock references around the world in just a few days in a correction – a drop of 10 percent or more which is taken as a measure of extreme pessimism.
In Europe, the British FTSE 100 fell by more than 3% and the Dax in Germany by more than 4%. In Asia, the Nikkei 225 in Japan fell 3.7%, the KOSPI in South Korea by 3.3% and the Shanghai Composite in China by 3.7%.
Here’s how the main indices around the world fared this week:
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S&P 500 in the United States: ⬇️ 11%
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Dow Jones in the United States: ⬇️ 12%
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FTSE 100 in Great Britain: ⬇️ 11%
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DAX in Germany: ⬇️ 12%
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KOSPI in South Korea: ⬇️ 8%
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Hang Seng index in Hong Kong: 4%
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Nikkei 225 in Japan: ⬇️10%
The Fed says it is ready to act if the epidemic worsens.
Jerome H. Powell, President of the Federal Reserve moved on Friday to appease investors, releasing a statement reaffirming that the central bank will use its tools and “do the right thing to support the economy”.
While Powell said “the fundamentals of the US economy remain solid”, he also noted that “the coronavirus poses evolutionary risks to economic activity” and said the Fed “is watching developments closely and their implications for the economic outlook ”.
The president’s colleagues had previously indicated their willingness to cut interest rates if the coronavirus epidemic worsened, setting out a scenario in which the central bank could respond as infections and quarantines spread around the world.
Scott Minerd, chief investment officer of Guggenheim Investments, said officials from the New York Federal Reserve Bank spoke on Thursday to ask if he saw any signs of pressure or deterioration in the capital markets, which are essential to the functioning of Wall Street.
Although he has yet to see any funding problems, Minerd said the Fed may have to pressure the banks to continue providing funding or encourage the use of the discount window if the situation is getting worse.
He said the US economy would likely be in a recession and that stock prices could drop another 20-30% if the epidemic became a pandemic.
An important conference on video games is postponed.
One of the most important annual events for the video game industry, the Game Developers Conference, was postponed Friday evening after giant exhibitors like Facebook, Microsoft and Sony said they would not attend due to concerns. regarding the coronavirus epidemic.
Organizers of the event, which was scheduled to start on March 16 in San Francisco, said in a statement that they were “upset and disappointed” but made the decision “after close consultation with our partners”.
The organizers said they plan to host an event this summer, but did not provide any details. Refunds for passes – $ 249 for a basic package and $ 2,399 for the all-access variety – will be issued.
Over the past week, several large tech companies have said they will drop this year’s conference. Facebook, for example, said on February 20 that it would not set up a booth and advise its employees to avoid visiting because of “evolving public health risks”. Video game developers like Activision Blizzard and Epic Games had also canceled plans to attend.
The next step in the gaming event calendar is the Electronic Entertainment Expo, known as E3, scheduled to begin June 9 in Los Angeles. The Entertainment Software Association, which organizes E3, said in a statement that it “is monitoring the situation” but that, for the moment, “we are moving at full speed”.
The sentiment among Chinese manufacturers is grim.
Manufacturers across China have suffered unexpected long shutdowns since late January due to a coronavirus outbreak. Many factories are still closed. Foreign buyers have stopped coming.
Even taking this into account, the country’s first official survey of manufacturing purchasing managers since the start of the epidemic shows that the sentiment is quite dismal and much worse than expected.
The National Bureau of Statistics of China released the survey on Saturday morning and showed a score of only 35.7 for manufacturers. Any score below 50 shows that they see the manufacturing economy in decline. A reading greater than 50 indicates expansion. The score in January was exactly 50, or neutral.
In a Reuters survey of 25 economists this week, the the median index forecast was much more robust 46. Goldman Sachs had been among the most pessimistic, but even economists overestimated sentiment, predicting it would reach 38.
Among the categories measured by the index, the worst indices concerned production, 27.8, and new export orders, 28.7.
The previous lowest record for purchasing managers was recorded during the global financial crisis, when the index dropped to 38.8 in November 2008. It rebounded above 50 in March as the government Chinese was spending a lot on new high-speed rail lines, highways and other major ticket projects.
The National Office included a mandatory declaration that the Communist Party would lead a rapid recovery. “With the Party’s Central Committee and the State Council coordinating the prevention and control of the epidemic and of economic and social development, the current pace of recovery in business recovery is rapid, and production and production activities ‘exploitation are recovering in an orderly fashion,’ the office said. said.
The National Office also began to publish a much broader purchasing management index in early 2017. As this index had never measured a brutal economic slowdown before, its lowest previous was 52, established in October.
February’s score on the broader index was only 28.9, down from 53 in January.
The scare of Wall Street exceeds the stocks.
Other measures of the overall health of US financial markets and businesses are starting to show signs of tension.
The strongest signal about the future of the world economy is that interest rates are plunging to record levels. The benchmark 10-year US Treasury bond yield fell to around 1.15% on Friday, down from 1.9% at the start of the year and 2.7% a year ago.
Wall Street is also worried about risky debt. Largest U.S. bond fund – iShares iBoxx High-Yield Corporate Bond Exchange Traded Fund, which tracks a dollar risky corporate debt index – has plunged around 4% since February 20, data released Friday morning . The index posted a record exit on Tuesday as frightened investors pulled nearly $ 1.6 billion from the market.
High-yield debt, which is extended to companies considered more likely to default on their payment obligations, is usually the first to deteriorate if companies encounter difficulties. If the coronavirus makes credit difficult to find and causes cash flow to dry up, for example, companies with high demand and precarious prospects may fall behind.
Oil prices are also falling sharply.
That means some relief at the pump for motorists this weekend. The national average price for regular gasoline dropped two cents last week to $ 2.45 a gallon, according to AAA. Half of this drop occurred from Thursday to Friday, suggesting that the fall in prices is accelerating.
The country has 256.4 million barrels of gasoline in stock, 1.4 million barrels more than last year. But the sharp drop in world oil prices is a much more important factor. At around $ 45 a barrel, the price of American benchmark oil is at its lowest level since December 2018.
Oil producers are nervous because the breakeven price for many wells in American shale fields is around $ 45. So far, however, energy leaders in West Texas have reported that they have made no major changes to drilling activities due to the coronavirus epidemic and its economic fallout. The officials also declare that they have not suffered any interruption in the supply of materials and equipment.
CBS stops “The Amazing Race”.
CBS said Friday that the studio had closed the 33rd season of the competitive reality show “The Amazing Race” due to concerns about the spread of the coronavirus.
The new season, which began production on February 22, had filmed three episodes in England and Scotland. When Italy, Austria and other parts of Europe began to report cases of the virus, the producers decided to close it. No new start date has been determined.
“At the moment, no runner or production crew member traveling with them has contracted the virus or shown any symptoms, and we do not know anyone exposed to it,” a spokesperson for CBS in a press release.
The judgment coincided with growing fears regarding international production and distribution in the entertainment sector. Paramount Pictures’ Mission Impossible VII “halted a three-week scheduled shoot in Venice earlier this week. The studio is already grappling with its inability to open its national hit “Sonic the Hedgehog” in China after the country closed its cinemas last month. The animated film was to open Friday in the country.
Universal Pictures has canceled its Asian press tour for the new James Bond film, “No Time to Die”, but the film is still expected to open worldwide on April 10.
Tim Cook of Apple is more optimistic about China.
Tim Cook, CEO of Apple, has issued a more positive note than many.
“I have the impression that China controls the coronavirus. You are watching the numbers going down day by day, so I’m very optimistic there. ” he told Fox Business on Thursday.
Apple is one of the most exposed American companies in China. It assembles almost all of its products there and counts on the region for a fifth of its sales. Falling sales in China and delays in reopening factories of its suppliers prompted Apple to revise its revenue forecast earlier this month.
But Cook said the situation is improving and that Apple has reopened more than 80% of its 42 stores in China.
“The factories work through the opening conditions,” he said.
Economists are reducing growth estimates.
Forecasters have reduced their estimates of economic growth in the United States and around the world this year for fear of the effects of the coronavirus.
Projections vary widely as economists find it difficult to predict the spread of the virus and the resulting damage to growth. Bank of America researchers cut their 2020 growth forecast in the United States from 0.1% on Friday to 1.6% overall in a note titled “Gloom but not doom”. Goldman Sachs researchers also cut their forecast by 0.1% – with a slowdown in growth in the first half, then a rebound – but said in a note this week that “the risks are clearly biased down until ‘to keep the epidemic in check. . “
Many researchers expect the Federal Reserve to cut interest rates quickly – and perhaps deeply – in the face of worsening news on coronaviruses and massive sales. But Nomura researchers warned on Friday that “there is not much that monetary policy can do to limit the immediate downside risk to the US economy”.
Corona beer was also affected.
In early January, when Constellation Brands announced a $ 40 million marketing campaign for its new Corona Hard Seltzer, there were still no deaths from the coronavirus.
Now, Corona beer suffers from the similarity between its name and the coronavirus (so called because the spikes on its surface are reminiscent of a crown, or corona in Latin). Google searches for “beer”, “Corona” and “virus” have increased as infection reports have increased. In the past month, 61% of posts on Twitter mentioning Corona beer included discussions about the coronavirus, according to Sprout Social, a social media management company.
Constellation Brands shares fell more than 18% this week.
Corona spokeswoman Maggie Bowman said in a statement that “there is a lot of misinformation”, adding that sales remain solid and that “consumers, by and large, understand that there is no link between the virus and our business. “
Hand sanitizers are sold.
On Amazon, popular brands such as Purell, Germ-X and even Amazon Solimo’s own private label were largely unavailable on Friday. What was available came from third-party sellers at prices that appear to be higher. For example, a two-bottle package of 12 fluid ounces of Purell was offered Friday morning by a third-party seller for as much as $ 49.99.
Amazon did not respond to a request for comment.
Late Thursday, a spokesperson for GoJo Industries, a small Akron, Ohio-based company, which claims to have invented Purell in 1988, said in an emailed statement that the company had increased production significantly to respond increased demand for Purell and other products.
The virus is spreading in the business world.
Over the past few days, companies as diverse as United Airlines, Anheuser-BuschInBev, Mastercard, and Pfizer have said that the epidemic is a threat to their 2020 revenues, and the overall effect of the epidemic on global companies could increase the chances of a larger economic slowdown, analysts said.
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Baker McKenzie, the Chicago-based law firm, has closed its London office, which is home to approximately 1,000 people, after a possible coronavirus case.
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The Swiss government has banned all gatherings of more than 1,000 people at least until March 15, forcing the cancellation of the Geneva International Motor Show.
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Facebook has canceled one of its advertising events, which are largely attended by employees, and its annual F8 conference in California – one of the company’s most anticipated events where it presents its products and plans for the future for software developers.
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Employees of Amazon’s global operations – the company’s largest division, which manages, among other things, technology and operations for warehouses, deliveries, Prime subscriptions, and physical stores – have been advised that they should not travel within the country or abroad “until further notice”, according to emails consulted by the New York Times.
Earlier:
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A drug manufacturer told the US Food and Drug Administration of the drug shortage, citing manufacturing problems in China. the F.D.A. refused to identify the drug and said there were alternatives for patients.
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United airlines said it cut service to a handful of US airports in Tokyo, Osaka, Singapore and Seoul in March and April, citing a 75% drop in short-term demand for trans-Pacific flights.
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Travel bookings by US residents in the five weeks leading up to February 17 fell 19.3%, analyst firm ForwardKeys said. the World Association for Business Travel said nearly two-thirds of members surveyed had canceled meetings and most companies in Asia had delayed business trips to the region.
The reports were provided by Amie Tsang, Matt Phillips, Jack Ewing, Keith Bradsher, Alexandra Stevenson, Alan Rappeport, Katie Thomas, Jim Tankersley, Karen Weise, Clifford Krauss, Tiffany Hsu, Niraj Chokshi, Jeanna Smialek, Ana Swanson, Nicole Sperling , Julie Creswell and Brooks Barnes.