Shares surged in the final trading minutes on Monday, returning to one of the worst weeks for global markets since the 2008 financial crisis as investors grasped the promises that world governments would step in to help if the economy was criticized by the epidemic. coronavirus.
The S&P 500 jumped 4.6%, the largest one-day jump since late December 2018. The rally followed the announcement that central bankers from the world’s largest economies would join a conference call with ministers Finance Group of 7 Tuesday to discuss a response to the epidemic. , fueling investor expectations that governments could lower interest rates in tandem.
“This has already fueled expectations for a coordinated reduction,” said Roberto Perli, a former Fed researcher now an economist at Cornerstone Macro, in an email. “If that doesn’t happen, it will only add to the volatility of the market.”
But Perli didn’t see this as a sign that a simultaneous cut with other global central banks was bound to happen. Seth Carpenter, another former Fed researcher, also doesn’t work at UBS. “The rally in stocks today has probably perversely made it easier for the Fed to sit back and wait to see what’s going on,” he said in an email.
On Monday morning, the Bank of Japan and the Bank of England committed to closely monitor the markets and maintain financial stability. Later, the International Monetary Fund and the World Bank issued a joint statement declaring that the groups were ready to help “face the human tragedy and the economic challenge” posed by the virus, and the European Central Bank said that ‘she was “ready” to respond to signs of a slowdown.
“Around the world, you clearly see a political response,” said Rich Ross, chief executive officer of Evercore ISI. “This is what helps to energize the market.”
As health officials ran to contain the epidemic, factories have been closed and businesses have been crushed around the world. Businesses are also adjusting their annual profit forecasts and economists are lowering their global growth forecasts.
Equities in Europe also recovered from losses and most of the Asian indices ended higher. Yet bond yields fell to new record lows on Monday, suggesting that despite the rally in stocks, investors were looking for safe havens. Yields on the 10-year US Treasury note fell to 1.09%.
President Trump said the Fed should bail out the economy.
President Trump continued his lashes against the Federal Reserve on Monday, saying that Fed President Jerome H. Powell and his colleagues should quickly cut interest rates as the economic risk posed by the coronavirus becomes more severe.
“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote. on Twitter. “Germany and others are injecting money into their economies. Other central banks are much more aggressive. The United States should, for all the right reasons, have the lowest rate. “
The Fed has started to signal that a rate cut is likely, and most market participants fully expect a cut at its next political meeting on March 17 and 18, if not before.
Powell took the rare step on Friday to issue a statement saying the Fed was ready to act “as it should to support the economy.”
But the Fed can only reduce as long as interest rates are already low, between 1.5% and 1.75%. Most market participants expect a 50 basis point drop in March, with some predicting an overall decline of 100 basis points this year, or 1%.
The European Central Bank, which conducts monetary policy for Germany and other eurozone countries, joined most of its global counterparts by simply signaling vigilance in response to the virus. He was already buying bonds as part of an easing program.
The Trump administration has been criticized for encouraging the export of masks.
The Trump administration is wondering whether to encourage the export of essential medical products like face masks and surgical equipment to China – or keep these supplies for the United States.
In a notice to US companies last week, the Department of Commerce announced a change in Chinese regulations that would make it easier for US companies to export medical products useful for fighting the coronavirus to China, including equipment, temporarily protection, hand sanitizers and a mask. machinery manufacturing.
The opinion was criticized by Lloyd Doggett, a member of the Texas Democratic Congress, who said it “apparently conflicted” with congressional testimony by Alex Azar, the secretary of health, who said it There was a shortage of masks for healthcare professionals to use in the event of a coronavirus outbreak in the United States.
“Consistent with Trump minimizing the severity of this crisis, his Commerce Department is encouraging the export of highly protective equipment that is already in short supply,” said Doggett in a statement.
Commerce did not respond immediately. But internal communications from the department obtained by Mr. Doggett’s office appeared to indicate that the department had doubts about the pamphlet.
“Please keep the China Procurement Service leaflet in-house,” said the subject of an email from the department’s national health care team. “I have become a little too impatient to promote it – please stay close until we receive an updated version. More information to come, ”said the email.
Experts warn of considerably slower global growth.
A large multinational economic group has reduced its outlook for 2020 as coronavirus cases are spreading worldwide, suggesting that global growth could be cut in half if infections spread more widely outside of China.
The Organization for Economic Cooperation and Development said that if the epidemic swept across the Asia-Pacific region, Europe and North America, global growth could fall to 1.5% this year, far less than the 3% she had projected before the virus appeared.
“This scenario would put Japan and Europe in recession, and the United States close to zero,” Laurence Boone, the organization’s chief economist, told reporters on Monday.
She added, “It’s not the worst case.” The impact could be even more serious if the outbreak spreads beyond Asia, Europe and the United States and into the southern hemisphere, she said.
Policymakers have far less leeway to respond today than they did during the 2007 recession, but political leaders could encourage companies to shorten working hours rather than lay off or delay workers. paying taxes for small businesses with plummeting sales, for example.
Boone said it would be “a very positive signal” if the United States and China lowered the tariffs they had imposed during a trade war.
Twitter encourages employees to work from home
Twitter said on Monday that it was encouraging all employees around the world to work from home as a precaution to avoid spreading the coronavirus.
The company, which had previously closed offices in Japan and South Korea and banned non-essential travel, said it would allow employees in the United States and other countries to stay at home. “Starting today, we strongly encourage all employees around the world to work from home if they can,” said Jennifer Christie, Twitter human resources manager, in a statement. declaration. “We operate with an abundance of caution and the utmost dedication to keeping our Tweeps healthy.”
Twitter chief executive Jack Dorsey stepped down from a speech at South by Southwest, an annual tech conference and music festival slated for two weeks from now in Austin, Texas.
A number of other tech companies also discourage employee travel. Salesforce, an enterprise software company in San Francisco, told employees Monday that they were prohibited from “anything but the most critical domestic travel”, extending the ban on international travel.
Twitter and Salesforce announcements followed crackdown on travel by tech workers this weekend. Amazon has told employees they shouldn’t be traveling overseas or domestically, while Facebook has canceled its annual F8 conference, which brings together executives, employees and developers. The Game Developers Conference, slated for later this month in San Francisco, has also been postponed until the end of the year.
Oil prices are rising, as hopes are raised for production cuts.
Representatives from the Organization of the Petroleum Exporting Countries and Russia are scheduled to meet in Vienna this week to try to stop the plunge in oil prices, which fell about 14% last week alone. Russian President Vladimir V. Putin suggested on Sunday that his country was willing to work with OPEC to try to stabilize prices.
Hopes that the rally will lead to further deeper production cuts contributed to higher prices on Monday, ending last week’s decline. Crude Brent, the international benchmark, reached more than $ 51 a barrel.
The Saudis and other OPEC members are likely to demand cuts of a million barrels a day.
But while the coronavirus continues to spread around the world, undermining economic activity, analysts doubted that a reduction in production of this size would be enough to stem the fall in prices.
Here’s what else is going on:
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Two Amazon employees in Milan contracted the coronavirus, the company said. Amazon has stopped all travel indefinitely, including travel to the United States.
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The International Air Transport Association said on Monday that it was asking governments to suspend rules requiring carriers to maintain minimum service levels at various airports. Rules at approximately 200 airports around the world force airlines to use at least 80% of their runway capacity or risk losing it.
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The largest US banks have imposed new limits on employee travel as coronavirus cases are increasing in more countries. At Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo, employees now need senior management to approve all international business travel. Only essential travel will be allowed.
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A major energy conference in Houston has been canceled. CERAWeek, led by IHS Markit, was scheduled for the week of March 9, with the participation of executives and experts from more than 80 countries.
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The New York Times Company adjusted its forecast for digital ad revenue this quarter to 10%, according to a file from the Securities and Exchange Commission.
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Facebook said in an internal note that it would no longer allow non-employee social visits to any of the company’s global offices. And Twitter said in a blog post Sunday it would limit all non-essential business travel.
The reports were provided by Stanley Reed, Kate Conger, Jeanna Smialek, Liz Alderman, Alan Rappeport, Ana Swanson, Matt Phillips, Matt Goldstein, Jack Ewing, Niraj Chokshi, Karen Weise, Kevin Granville, Mike Isaac, Michael Corkery, Alexandra Stevenson , Sapna Maheshwari, Emily Flitter, Stanley Reed, Carlos Tejada, Vindu Goel and Karen Singh.