The economic powers swear to fight the crisis, but not yet.
On Tuesday, central bankers and political leaders from the United States and other economic powers expressed their determination to fight the economic damage caused by the coronavirus, but failed to promise interest rate cuts or other immediate rescue measures.
The joint declaration of solidarity showed that the leaders of the so-called G7 countries, which also include Britain, Canada, France, Germany, Italy and Japan, are able to cooperate. But the statement did not live up to the more aggressive action that investors hoped for and that many economists believe is necessary to prevent the virus epidemic from undermining global growth.
The announcement highlights a difficult time for the global economy. The virus could take a heavy economic toll in the G7 countries, as it leads to quarantines, closes factories and affects the confidence of investors and consumers.
Wall Street opened lower after gains in Europe.
Stocks in the United States slipped early in the session Tuesday, while stocks in Europe gave up some of their gains after the release.
The S&P 500 opened slightly lower. The British FTSE 100 and German DAX were about 2% higher, but both had reached previous highs following the G7 announcement.
Investors are looking for any sign of action from global central banks to combat the economic impact of the coronavirus. In the United States, Monday, The S&P 500 recorded its biggest gain in a day since late December 2018, following the announcement that central bankers would join the conference call with finance ministers, fueling expectations that governments could lower interest rates tandem.
On Tuesday, stocks in Taiwan led a rally in Asia as the Taiex index rose 1.4%. Stocks in the rest of the region were more limited. In China, the Shanghai composite index rose 0.7%.
Could the coronavirus epidemic cause a recession?
The global epidemic has caused upheavals in the stock markets and disrupted supply chains around the world. But so far, there have been few signs of widespread economic damage, at least in the United States.
Economists believe that a pandemic could clearly cause a recession in the United States. But for this to happen, the effects would have to extend beyond manufacturing, travel and other areas directly affected by the disease. The real sign of trouble, said Tara Sinclair, an economist at George Washington University, is that companies unrelated to the virus are starting to report a business collapse.
“The key is to watch the big macro numbers rather than obsessively looking at things related to viruses and supply chains,” said Sinclair. “If people don’t get their hair cut, that’s a bad sign.”
A recession is more than just a drop in gross domestic product. As most economists think, a recession involves a self-sustaining cycle: job cuts lead to less income, which leads to less spending, which leads to more job cuts .
So far, the impact of the coronavirus epidemic on the U.S. economy has been more like that of a hurricane than that of a financial crisis – but that could change quickly.
Australia and Malaysia are mobilizing to consolidate their economies.
Some economic decision makers took action on Tuesday to consolidate their economies as the impact of the coronavirus begins to threaten global growth.
The Reserve Bank of Australia lowered interest rates to a record low, while Bank Negara of Malaysia lowered its key rate for the second time this year.
The International Monetary Fund and the World Bank have also said they are ready to act.
Philip Lowe, Australian central banker, said on Tuesday that the virus epidemic had a “significant effect” on the travel and education sectors. The central bank lowered its rate by a quarter of a percentage point to reach a new low of 0.5%.
The central bank of Malaysia cut rates by a quarter of a point to 2.5%.
The main stock indexes in Australia and Malaysia both rose 0.7%.
What if the boss tells you to stay home?
Some companies have already taken precautions such as limiting travel to affected countries or major international conferences. Others asked employees to stay home because they visited a country where the epidemic was more severe.
But with new unexplained cases reported in the United States – and the first domestic death from the disease was reported on Saturday – an increasing number of American workers may soon be asked to change their routine or stay at home.
How it affects you will depend on many factors, including the generosity of benefits from your employer and where you live. American workers are less likely to be covered by paid sick leave policies than workers in other developed countries.
“This can put hourly workers in a bind and make employees in the United States more likely to report for work when they are sick,” said Joseph Deng, an employment and compensation law specialist at Baker. & McKenzie in Los Angeles.
Will you be paid if you are told to stay home? It largely depends on your company’s policies, but so far many large companies are making sure that affected employees are paid in one way or another.
The shortest “fix” in almost a century.
Before Monday’s rally, the S&P 500 had dropped more than 11% in one week. It was her worst weekly drop since the 2008 financial crisis, and a drop that pushed her into what is called a correction – a drop of 10% or more, which represents a psychologically significant marker for investors. .
But Monday’s push meant the correction only lasted nine days, which, according to Yardeni Research, was the shortest ever recorded in terms of calendar days since 1928, the first date for which the research group published data on S&P.
The two previous corrections for the S&P 500 took place in 2018, when the market fell 10.2% for 13 days ending in February and 19.8% for 95 days ending in December.
Here’s what else is going on:
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Late Monday, Hyatt hotels withdrew their financial forecast for 2020, partly due to the impact of travel restrictions imposed by companies since the virus epidemic, claiming that its ability to assess the impact of the virus “continues to be limited due to the rapidly changing circumstances and uncertain consumer demand for travel. “
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British Airways canceled 216 flights from London to New York, Italy, France, Germany, Belgium, Austria and Ireland from March 16-28. The airline previously canceled flights to mainland China and cut service to Italy. Irish discount airline Ryanair has canceled a quarter of its flights to and from Italy from March 17 to April 8.
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Twitter, which had previously closed offices in Japan and South Korea and banned non-essential travel, on Monday encouraged all of its employees in the United States and other countries to work from home. And its chief executive, Jack Dorsey, has withdrawn from a speech at South by Southwest, an annual technology conference and music festival scheduled to take place in two weeks in Austin, Texas.
The reports were provided by Tara Siegel Bernard, Ben Casselman, Geneva Abdul, Kate Conger, Alexandra Stevenson, Jeanna Smialek, Kevin Granville, Carlos Tejada and Jack Ewing.
