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Stocks Surge as Central Banks Vow to Act on Virus Impact Stocks Surge as Central Banks Vow to Act on Coronavirus Impact
(32 minutes later)
Stocks surged in the final minutes of trading on Monday, snapping back from one of the worst weeks for global markets since the 2008 financial crisis as investors seized on promises that the world’s governments would step in to help if the global economy was slammed by the outbreak of the coronavirus.Stocks surged in the final minutes of trading on Monday, snapping back from one of the worst weeks for global markets since the 2008 financial crisis as investors seized on promises that the world’s governments would step in to help if the global economy was slammed by the outbreak of the coronavirus.
The S&P 500 jumped 4.6 percent, the biggest single-day leap since late December 2018. The rally followed news that central bankers from the world’s biggest economies would join a conference call with Group of 7 finance ministers on Tuesday to discuss a response to the outbreak, fueling expectations among investors that governments might lower interest rates in tandem.The S&P 500 jumped 4.6 percent, the biggest single-day leap since late December 2018. The rally followed news that central bankers from the world’s biggest economies would join a conference call with Group of 7 finance ministers on Tuesday to discuss a response to the outbreak, fueling expectations among investors that governments might lower interest rates in tandem.
“It has already stoked expectations of a coordinated cut,” Roberto Perli, a former Fed researcher who is now an economist at Cornerstone Macro, said in an email. “If it doesn’t happen, it will only add to market volatility.”“It has already stoked expectations of a coordinated cut,” Roberto Perli, a former Fed researcher who is now an economist at Cornerstone Macro, said in an email. “If it doesn’t happen, it will only add to market volatility.”
But Mr. Perli did not see it as a sign that a simultaneous cut with other global central banks was necessarily coming. Nor did Seth Carpenter, another former Fed researcher, now at UBS. “The rally in equities today has perversely probably made it easier for the Fed to sit back and wait to see what happens,” he said in an email.But Mr. Perli did not see it as a sign that a simultaneous cut with other global central banks was necessarily coming. Nor did Seth Carpenter, another former Fed researcher, now at UBS. “The rally in equities today has perversely probably made it easier for the Fed to sit back and wait to see what happens,” he said in an email.
Early Monday, both the Bank of Japan and Bank of England pledged to monitor markets closely and safeguard financial stability. Later, the International Monetary Fund and the World Bank issued a joint statement saying that the groups stood ready to help “address the human tragedy and economic challenge” posed by the virus. Early Monday, both the Bank of Japan and Bank of England pledged to monitor markets closely and safeguard financial stability. Later, the International Monetary Fund and the World Bank issued a joint statement saying that the groups stood ready to help “address the human tragedy and economic challenge” posed by the virus, and the European Central Bank said it “stands ready” to respond to signs of a slowdown.
“Throughout the world you are seeing clearly a policy response,” said Rich Ross, a managing director at Evercore ISI. “That’s what’s helping to buoy the market.”“Throughout the world you are seeing clearly a policy response,” said Rich Ross, a managing director at Evercore ISI. “That’s what’s helping to buoy the market.”
As health officials have raced to contain the outbreak, factories have been shut and businesses squeezed across the globe. Companies are also readjusting annual profit expectations, and economists are lowering forecasts for global growth.As health officials have raced to contain the outbreak, factories have been shut and businesses squeezed across the globe. Companies are also readjusting annual profit expectations, and economists are lowering forecasts for global growth.
On Monday, the Organization for Economic Cooperation and Development said that if the outbreak sweeps through the Asia-Pacific region, Europe and North America, global growth could fall to just 1.5 percent in 2020, far less than the 3 percent it projected before the virus surfaced.
“This scenario would put Japan and Europe in recession, and the U.S. close to zero,” Laurence Boone, the organization’s chief economist, told reporters during a conference call Monday.
She added, “This is not a worst-case scenario.” The impact could be even more dire if the outbreak spreads beyond Asia, Europe and the United States and into the southern hemisphere, she said.
But policymakers have far less room to move today than they had headed into the 2007 recession. In the United States, the federal funds rate was above 5 percent back then and was ultimately lowered to near zero.
Political leaders could provide incentives for companies to shorten work hours rather than lay people off, or delay tax payments for small businesses suffering from plunging sales, for example. Ms. Boone said it would be “a very positive signal” if the United States and China were to drop the tariffs they had imposed as part of a trade war.
Shares in Europe also recovered from losses, and most indexes in Asia ended higher. Still, bond yields fell to fresh record lows on Monday, suggesting that despite the stock rally, investors were looking for safe havens. Yields on the 10-year U.S. Treasury note fell to 1.09 percent.Shares in Europe also recovered from losses, and most indexes in Asia ended higher. Still, bond yields fell to fresh record lows on Monday, suggesting that despite the stock rally, investors were looking for safe havens. Yields on the 10-year U.S. Treasury note fell to 1.09 percent.
President Trump continued his browbeating of the Federal Reserve on Monday, saying the Fed chair, Jerome H. Powell, and his colleagues should quickly slash interest rates as the economic risk posed by the coronavirus becomes more stark.President Trump continued his browbeating of the Federal Reserve on Monday, saying the Fed chair, Jerome H. Powell, and his colleagues should quickly slash interest rates as the economic risk posed by the coronavirus becomes more stark.
“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote on Twitter. “Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate.”“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote on Twitter. “Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate.”
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The Fed has begun signaling that a rate cut is likely, and most market participants fully expect a cut at its next policy meeting on March 17 and 18, if not before.The Fed has begun signaling that a rate cut is likely, and most market participants fully expect a cut at its next policy meeting on March 17 and 18, if not before.
On Friday, Mr. Powell took the rare step of issuing a statement saying that the Fed was prepared to act “as appropriate to support the economy.”On Friday, Mr. Powell took the rare step of issuing a statement saying that the Fed was prepared to act “as appropriate to support the economy.”
But the Fed can cut only so much, given interest rates are already low, at a range between 1.5 percent and 1.75 percent. Most market participants expect a 50-basis-point cut in March, with some predicting an overall cut this year of 100 basis points — or 1 percent.But the Fed can cut only so much, given interest rates are already low, at a range between 1.5 percent and 1.75 percent. Most market participants expect a 50-basis-point cut in March, with some predicting an overall cut this year of 100 basis points — or 1 percent.
The European Central Bank, which runs monetary policy for Germany and other euro area countries, has joined most of its global counterparts in simply signaling vigilance in response to the virus. It was already buying bonds as part of an easing program. The European Central Bank, which runs monetary policy for Germany and other eurozone countries, has joined most of its global counterparts in simply signaling vigilance in response to the virus. It was already buying bonds as part of an easing program.
The Trump administration is grappling with whether to encourage the export of critical medical products like face masks and surgical gear to China — or save those supplies for the United States.The Trump administration is grappling with whether to encourage the export of critical medical products like face masks and surgical gear to China — or save those supplies for the United States.
In a notice issued to American businesses last week, the Commerce Department advertised a change in Chinese regulations that would temporarily make it easier for American businesses to export medical products that are useful in battling the coronavirus to China, including protective gear, hand sanitizers and mask manufacturing machines.In a notice issued to American businesses last week, the Commerce Department advertised a change in Chinese regulations that would temporarily make it easier for American businesses to export medical products that are useful in battling the coronavirus to China, including protective gear, hand sanitizers and mask manufacturing machines.
The notice came under fire from Lloyd Doggett, a Democratic congressman from Texas, who said that it “seemingly conflicts” with congressional testimony by Alex Azar, the health secretary, who said that there was a shortage of face masks for medical professionals to use in the event of a coronavirus epidemic in the United States.The notice came under fire from Lloyd Doggett, a Democratic congressman from Texas, who said that it “seemingly conflicts” with congressional testimony by Alex Azar, the health secretary, who said that there was a shortage of face masks for medical professionals to use in the event of a coronavirus epidemic in the United States.
“Consistent with Trump downplaying the severity of this crisis, his Commerce Department is encouraging the export of the very protective gear already in short supply,” Mr. Doggett said in a statement.“Consistent with Trump downplaying the severity of this crisis, his Commerce Department is encouraging the export of the very protective gear already in short supply,” Mr. Doggett said in a statement.
The Commerce Department did not immediately respond to comment. But internal department communications obtained by Mr. Doggett’s office appeared to show that the department had second thoughts about the flyer. The Commerce Department did not immediately respond. But internal department communications obtained by Mr. Doggett’s office appeared to show that the department had second thoughts about the flyer.
“Please keep China procurement service flyer internal,” said the subject line of an email from Commerce’s domestic health care team. “I got a little too eager to promote it — please hold close until we receive an updated version. More info to come,” the email read. “Please keep China procurement service flyer internal,” said the subject line of an email from the department’s domestic health care team. “I got a little too eager to promote it — please hold close until we receive an updated version. More info to come,” the email read.
Global supplies of medical masks have been tight as governments, medical facilities and consumers rush to stockpile protective gear.
The Chinese government is pushing medical equipment manufacturers around the country back to work and offering generous subsidies to raise their production of products like masks. China’s Ministry of Industry and Information Technology said last week that its daily production capacity for masks had reached 70 million, up from 20 million at the beginning of February.
As the coronavirus disrupts travel plans, many airlines have reduced service and waived passenger fees for changes. Now the industry is seeking a waiver of its own.
Citing “serious declines in demand,” the International Air Transport Association said on Monday that it was asking governments to suspend rules obliging carriers to maintain minimum levels of service at individual airports.
Rules at about 200 airports worldwide say airlines must use at least 80 percent of the runway capacity they are awarded or risk losing it. About 43 percent of all travelers leave from such “slot-controlled” airports, according to the association.
“Research has shown that traffic has collapsed on key Asian routes and that this is rippling throughout the air transport network globally, even between countries without major outbreaks,” Alexandre de Juniac, chief executive of the association, said in a statement.
On Sunday, American Airlines said it was eliminating change fees for tickets booked through March 16, provided the changes are made at least two weeks before the scheduled travel. Last week, JetBlue and Alaska Airlines announced similar waivers.
The largest American banks have imposed new limits on their employees’ travel as cases of the coronavirus crop up in more countries. At Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo, employees now need senior managers to approve all international business trips. Only essential trips will be allowed.
“In relevant countries, we have implemented modified working arrangements, such as telecommuting, staggering work hours, and reducing travel between offices, which have proven effective at enabling Wells Fargo to continue business operations while reducing the risk to our employees,” Beth Richek, a Wells Fargo spokeswoman, said in an email.
Bank of America did not respond to requests for comment.
A major multinational economic group cut its outlook for 2020 as coronavirus cases show up around the globe, suggesting that global growth could be cut in half if infections spread more widely outside China.A major multinational economic group cut its outlook for 2020 as coronavirus cases show up around the globe, suggesting that global growth could be cut in half if infections spread more widely outside China.
The Organization for Economic Cooperation and Development said that if the outbreak swept widely through the Asia-Pacific region, Europe and North America, global growth could fall to 1.5 percent this year, far less than the 3 percent it had projected before the virus surfaced.The Organization for Economic Cooperation and Development said that if the outbreak swept widely through the Asia-Pacific region, Europe and North America, global growth could fall to 1.5 percent this year, far less than the 3 percent it had projected before the virus surfaced.
Even if the outbreak is mild and mostly contained outside China — the O.E.C.D.’s expected scenario — global growth could be lowered about half a percentage point relative to previous forecasts, according to an update the group released on Monday ominously titled “Coronavirus: The World Economy at Risk.” “This scenario would put Japan and Europe in recession, and the U.S. close to zero,” Laurence Boone, the organization’s chief economist, told reporters during a conference call Monday.
She added, “This is not a worst-case scenario.” The impact could be even more dire if the outbreak spreads beyond Asia, Europe and the United States and into the southern hemisphere, she said.
Policymakers have far less room to move in response today than they had headed into the 2007 recession, but political leaders could provide incentives for companies to shorten work hours rather than lay people off, or delay tax payments for small businesses suffering from plunging sales, for example.
Ms. Boone said it would be “a very positive signal” if the United States and China were to drop the tariffs they had imposed as part of a trade war.
Officials from the Organization of the Petroleum Exporting Countries and Russia are expected to meet in Vienna this week to try to halt plunging oil prices, which sank about 14 percent last week alone. President Vladimir V. Putin of Russia suggested on Sunday that his country was willing to work with OPEC to try to stabilize prices.Officials from the Organization of the Petroleum Exporting Countries and Russia are expected to meet in Vienna this week to try to halt plunging oil prices, which sank about 14 percent last week alone. President Vladimir V. Putin of Russia suggested on Sunday that his country was willing to work with OPEC to try to stabilize prices.
Hopes that the gathering will lead to new and deeper production cuts helped lead to price rises on Monday, ending last week’s slide. Brent crude, the international benchmark, rose to more than $51 a barrel.Hopes that the gathering will lead to new and deeper production cuts helped lead to price rises on Monday, ending last week’s slide. Brent crude, the international benchmark, rose to more than $51 a barrel.
The Saudis and other OPEC members are likely to push for cuts of one million barrels a day.The Saudis and other OPEC members are likely to push for cuts of one million barrels a day.
But as the coronavirus continues to fan out across the globe, sapping economic activity, analysts were doubtful that a cut in production of that size would be enough stem the slide in prices.But as the coronavirus continues to fan out across the globe, sapping economic activity, analysts were doubtful that a cut in production of that size would be enough stem the slide in prices.
As retailers started to report fourth-quarter earnings in the past week, coronavirus has become a major topic for executives and analysts.
The shoe company Steve Madden said that it expected lower sales and earnings for the year, in part because of the virus, noting that 88 percent of its products were made in China in 2019. Ed Rosenfeld, Steve Madden’s chief executive, said on a Thursday earnings call that the brand was mainly seeing an impact on its supply chain, which was leading to production delays.
Several chains, like Big Lots and Foot Locker, emphasized that their forecasts for the year did not yet include potential effects from the outbreak and that they were monitoring the crisis closely.
Two Amazon employees in Milan have contracted the coronavirus, the company said. Amazon has indefinitely halted all travel, including trips within the United States.Two Amazon employees in Milan have contracted the coronavirus, the company said. Amazon has indefinitely halted all travel, including trips within the United States.
A major energy conference in Houston was canceled. CERAWeek, run by IHS Markit, had been scheduled for the week of March 9, with executives and experts from over 80 countries attending. The International Air Transport Association said on Monday that it was asking governments to suspend rules obliging carriers to maintain minimum levels of service at individual airports. Rules at about 200 airports worldwide require airlines to use at least 80 percent of the runway capacity they are awarded or risk losing it.
The largest American banks have imposed new limits on their employees’ travel as cases of the coronavirus crop up in more countries. At Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo, employees now need senior managers to approve all international business trips. Only essential trips will be allowed.
A major energy conference in Houston was canceled. CERAWeek, run by IHS Markit, had been scheduled for the week of March 9, with executives and experts from more than 80 countries attending.
The New York Times Company adjusted its expectation for digital advertising revenue this quarter to a decline of 10 percent, according to a Securities and Exchange Commission filing.The New York Times Company adjusted its expectation for digital advertising revenue this quarter to a decline of 10 percent, according to a Securities and Exchange Commission filing.
Facebook said in an internal memo that it would no longer allow social visits from non-employees at any of the company’s global offices. And Twitter said in a blog post on Sunday that it would restrict all nonessential business travel.Facebook said in an internal memo that it would no longer allow social visits from non-employees at any of the company’s global offices. And Twitter said in a blog post on Sunday that it would restrict all nonessential business travel.
Reporting was contributed by Stanley Reed, 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.Reporting was contributed by Stanley Reed, 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.