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Coronavirus Fears Reverberate Across Global Economy Coronavirus Fears Reverberate Across Global Economy
(8 days later)
Investors, fearing that the spread of the coronavirus is tipping the global economy into a recession, handed the stock market its largest weekly loss since the 2008 financial crisis on Friday amid worries that one of the longest economic expansions in history may be coming to an end.Investors, fearing that the spread of the coronavirus is tipping the global economy into a recession, handed the stock market its largest weekly loss since the 2008 financial crisis on Friday amid worries that one of the longest economic expansions in history may be coming to an end.
With the virus now detected in at least 56 countries, companies are readjusting their annual profit expectations, economists are lowering their forecasts for global growth and policymakers have signaled that they are ready, if needed, to act to stabilize the economy.With the virus now detected in at least 56 countries, companies are readjusting their annual profit expectations, economists are lowering their forecasts for global growth and policymakers have signaled that they are ready, if needed, to act to stabilize the economy.
As the stock market dropped again on Friday, Jerome H. Powell, chair of the Federal Reserve, issued a short statement affirming that the central bank would use its tools and “act as appropriate to support the economy.” After the Fed’s statement, the S&P 500 pared some of its losses, closing the day down 0.8 percent, though the index remained down 11.5 percent for the week.As the stock market dropped again on Friday, Jerome H. Powell, chair of the Federal Reserve, issued a short statement affirming that the central bank would use its tools and “act as appropriate to support the economy.” After the Fed’s statement, the S&P 500 pared some of its losses, closing the day down 0.8 percent, though the index remained down 11.5 percent for the week.
Still, there were stark signs that the economic fallout from the virus had started to take hold, as retailers and home builders reported delays in shipments from China, Amazon was running low on hand sanitizers sought by a jittery public and financial regulators began monitoring whether American businesses were starting to have difficulty borrowing money.Still, there were stark signs that the economic fallout from the virus had started to take hold, as retailers and home builders reported delays in shipments from China, Amazon was running low on hand sanitizers sought by a jittery public and financial regulators began monitoring whether American businesses were starting to have difficulty borrowing money.
“This feels different than the other market crisis in that it involves disruptions to daily life,” said Mark Zandi, chief economist at Moody’s Analytics. “This isn’t financial. This is not some obtuse thing on a screen. Schools may close. I may not be able to get pasta or oatmeal.”“This feels different than the other market crisis in that it involves disruptions to daily life,” said Mark Zandi, chief economist at Moody’s Analytics. “This isn’t financial. This is not some obtuse thing on a screen. Schools may close. I may not be able to get pasta or oatmeal.”
What began a few weeks ago as relatively tepid concerns on Wall Street about disruptions to global supply chains has mushroomed into deep worries about the possibility that millions of people around the world may have to cut back on shopping, travel and restaurants to avoid contracting the virus.What began a few weeks ago as relatively tepid concerns on Wall Street about disruptions to global supply chains has mushroomed into deep worries about the possibility that millions of people around the world may have to cut back on shopping, travel and restaurants to avoid contracting the virus.
The uncertainty of such situations has made it difficult for experts to predict the damage to the economy. Some are offering probabilities that the American and global economies will slip into recession. Moody’s Analytics said this week that the odds of that happening had risen to four in 10. Capital Economics pegged it much lower, at one in 10.The uncertainty of such situations has made it difficult for experts to predict the damage to the economy. Some are offering probabilities that the American and global economies will slip into recession. Moody’s Analytics said this week that the odds of that happening had risen to four in 10. Capital Economics pegged it much lower, at one in 10.
On Friday, Morgan Stanley researchers outlined three possible situations in a note to clients. In the most benign, the American economy does not slow at all in 2020 from previous forecasts, as the virus remains largely confined to China and Chinese factory production ramps back up in the coming months.On Friday, Morgan Stanley researchers outlined three possible situations in a note to clients. In the most benign, the American economy does not slow at all in 2020 from previous forecasts, as the virus remains largely confined to China and Chinese factory production ramps back up in the coming months.
In the most severe scenario, where the virus spreads more widely across countries and sectors of the economy, growth slows to a near halt in the United States for several quarters this year, leaving 2020 with a 0.5 percent growth rate over all. “The risks are clearly skewed to the downside until the outbreak is contained,” researchers at Goldman Sachs said in a note this week.In the most severe scenario, where the virus spreads more widely across countries and sectors of the economy, growth slows to a near halt in the United States for several quarters this year, leaving 2020 with a 0.5 percent growth rate over all. “The risks are clearly skewed to the downside until the outbreak is contained,” researchers at Goldman Sachs said in a note this week.
There was clear evidence in recent days of the economic fallout. Toll Brothers, the luxury home builder, said some home sales to Chinese buyers had been postponed and shipments of fixtures from China delayed. The shoemaker Steve Madden said some shipments would be delayed by three weeks as its Chinese factories struggle to operate with fewer workers.There was clear evidence in recent days of the economic fallout. Toll Brothers, the luxury home builder, said some home sales to Chinese buyers had been postponed and shipments of fixtures from China delayed. The shoemaker Steve Madden said some shipments would be delayed by three weeks as its Chinese factories struggle to operate with fewer workers.
Perhaps even more troubling were signs that American consumers, who drive the economy, were becoming increasingly uneasy.Perhaps even more troubling were signs that American consumers, who drive the economy, were becoming increasingly uneasy.
On Amazon, popular brands of hand sanitizers like Purell were largely unavailable. What was available was coming from third-party sellers at higher prices. On Friday morning, one pack of two 12-fluid-ounce bottles of Purell was being offered by a third-party seller for $49.99.On Amazon, popular brands of hand sanitizers like Purell were largely unavailable. What was available was coming from third-party sellers at higher prices. On Friday morning, one pack of two 12-fluid-ounce bottles of Purell was being offered by a third-party seller for $49.99.
Even the parent company of Corona, the beer brand, has seen its shares drop more than the broader market, which some have attributed to its having the same name as the virus.Even the parent company of Corona, the beer brand, has seen its shares drop more than the broader market, which some have attributed to its having the same name as the virus.
Such fears do not bode well for a modern economy and stock market that depend on optimism and a willingness to spend. As recently as nine days ago, that optimism helped drive up the stock market to a new high.Such fears do not bode well for a modern economy and stock market that depend on optimism and a willingness to spend. As recently as nine days ago, that optimism helped drive up the stock market to a new high.
But in the last week, the rosy outlook that corporate profits would keep growing has been replaced by panic, said Richard Sylla, professor emeritus at New York University’s Stern School of Business, who has studied stock market shocks through history.But in the last week, the rosy outlook that corporate profits would keep growing has been replaced by panic, said Richard Sylla, professor emeritus at New York University’s Stern School of Business, who has studied stock market shocks through history.
“There was complacency about the growth in stocks, and the virus was the trigger for a sell-off,” he said.“There was complacency about the growth in stocks, and the virus was the trigger for a sell-off,” he said.
It was an awful week for markets around the globe. The Dow Jones plummeted 12 percent. In Europe, stocks in Britain dropped 11 percent, while Germany was down 12 percent. Asian markets also fell: 10 percent in Japan and 8 percent in South Korea.It was an awful week for markets around the globe. The Dow Jones plummeted 12 percent. In Europe, stocks in Britain dropped 11 percent, while Germany was down 12 percent. Asian markets also fell: 10 percent in Japan and 8 percent in South Korea.
Many researchers expect the Federal Reserve to quickly — and possibly deeply — cut interest rates in the face of worsening coronavirus news and market downturns. President Trump, who has downplayed the economic threat to the United States from the virus, said on Friday that he hoped the Fed would step in.Many researchers expect the Federal Reserve to quickly — and possibly deeply — cut interest rates in the face of worsening coronavirus news and market downturns. President Trump, who has downplayed the economic threat to the United States from the virus, said on Friday that he hoped the Fed would step in.
“I hope it gets involved soon,” Mr. Trump told reporters at the White House.“I hope it gets involved soon,” Mr. Trump told reporters at the White House.
But unlike in previous financial shocks, those moves may not stem the damage.But unlike in previous financial shocks, those moves may not stem the damage.
Even as this week’s stock market meltdown was being compared to the losses of 2008, there were many ways that the coronavirus could prove more challenging for the Fed to tackle.Even as this week’s stock market meltdown was being compared to the losses of 2008, there were many ways that the coronavirus could prove more challenging for the Fed to tackle.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
The Great Recession of 2008 and 2009 was largely a “demand shock,” as banks neared collapse, home prices plunged and trillions of dollars in household wealth were wiped out. People and businesses suddenly had less money to spend, tipping the economy into a deep recession.The Great Recession of 2008 and 2009 was largely a “demand shock,” as banks neared collapse, home prices plunged and trillions of dollars in household wealth were wiped out. People and businesses suddenly had less money to spend, tipping the economy into a deep recession.
The virus threat is a “supply shock” — one that stems from a sudden slowdown in economic activity as China, the world’s factory, struggles to get back to work and as crucial industries come under strain against a backdrop of travel restrictions, limited public gatherings and shuttered schools.The virus threat is a “supply shock” — one that stems from a sudden slowdown in economic activity as China, the world’s factory, struggles to get back to work and as crucial industries come under strain against a backdrop of travel restrictions, limited public gatherings and shuttered schools.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said the way to think about a supply shock was “suddenly every factory and office produces 10 percent less than it did last year.”David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, said the way to think about a supply shock was “suddenly every factory and office produces 10 percent less than it did last year.”
That’s a far harder thing to fix than a demand shock, Mr. Wessel said, since simply putting more money into people’s pockets won’t make up for the fact that stores are closed, factories aren’t operating and trips are canceled.That’s a far harder thing to fix than a demand shock, Mr. Wessel said, since simply putting more money into people’s pockets won’t make up for the fact that stores are closed, factories aren’t operating and trips are canceled.
“There is nothing the Fed can do to offset the lost production if no one is taking trips and factories aren’t making parts,” he said.“There is nothing the Fed can do to offset the lost production if no one is taking trips and factories aren’t making parts,” he said.
So far, the response from the Trump administration to the outbreak has only seemed to intensify Wall Street’s worries.So far, the response from the Trump administration to the outbreak has only seemed to intensify Wall Street’s worries.
Early on Friday, Larry Kudlow, Mr. Trump’s chief economic adviser, said markets were overreacting and suggested it was a good time to buy stocks — statements that some investors said were not helpful and perhaps even irresponsible.Early on Friday, Larry Kudlow, Mr. Trump’s chief economic adviser, said markets were overreacting and suggested it was a good time to buy stocks — statements that some investors said were not helpful and perhaps even irresponsible.
“The administration runs the risk of damaging its credibility by continuing to prompt people to buy stocks if there is no clear bottom in sight,” Scott Minerd, chief investment officer of Guggenheim Investments, said in an interview.“The administration runs the risk of damaging its credibility by continuing to prompt people to buy stocks if there is no clear bottom in sight,” Scott Minerd, chief investment officer of Guggenheim Investments, said in an interview.
Mr. Minerd said he received a call on Thursday from an official at the Federal Reserve Bank of New York asking whether he was seeing any signs of pressure or deterioration in some of the markets that are crucial to Wall Street’s functioning, namely those that provide short- and longer-term debt and other forms of funding to companies from banks and other lenders.Mr. Minerd said he received a call on Thursday from an official at the Federal Reserve Bank of New York asking whether he was seeing any signs of pressure or deterioration in some of the markets that are crucial to Wall Street’s functioning, namely those that provide short- and longer-term debt and other forms of funding to companies from banks and other lenders.
Mr. Minerd said he did not see funding problems as of yet, but he said the sell-off of precious metals was a sign that investors were feeling squeezed by increased margin calls.Mr. Minerd said he did not see funding problems as of yet, but he said the sell-off of precious metals was a sign that investors were feeling squeezed by increased margin calls.
Mr. Kudlow and Treasury Secretary Steven Mnuchin, who are on the president’s coronavirus task force, are also part of a group working on a package of tax cuts intended to serve as a centerpiece of his 2020 campaign. With Democrats controlling the House, there has been little expectation of major tax legislation before the November election, and the situation with the coronavirus has not appeared to change that.Mr. Kudlow and Treasury Secretary Steven Mnuchin, who are on the president’s coronavirus task force, are also part of a group working on a package of tax cuts intended to serve as a centerpiece of his 2020 campaign. With Democrats controlling the House, there has been little expectation of major tax legislation before the November election, and the situation with the coronavirus has not appeared to change that.
On Friday, Mr. Trump sought to restore some optimism, pointing out that the number of confirmed cases of the virus in the United States was still low.On Friday, Mr. Trump sought to restore some optimism, pointing out that the number of confirmed cases of the virus in the United States was still low.
“Some countries are doing well, some countries are not doing well, you can see that for yourself,’’ he told reporters at the White House. “A lot of things are happening, we’re very well organized, we have great talent, great doctors, great everyone. There’s tremendous spirit, a lot of spirit.”“Some countries are doing well, some countries are not doing well, you can see that for yourself,’’ he told reporters at the White House. “A lot of things are happening, we’re very well organized, we have great talent, great doctors, great everyone. There’s tremendous spirit, a lot of spirit.”
Reporting was contributed by Jim Tankersley, Alan Rappeport, Matt Phillips, Jeanna Smialek, Julie Creswell, Tiffany Hsu, Peter Eavis and Sapna Maheshwari.Reporting was contributed by Jim Tankersley, Alan Rappeport, Matt Phillips, Jeanna Smialek, Julie Creswell, Tiffany Hsu, Peter Eavis and Sapna Maheshwari.