Five Things You Need to Know to Start Your Day
Get up to date on what's moving global markets this morninmorning
(Bloomberg) --
U.S. stocks experience the biggest sell-off since 1987. The coronavirus outbreak has reached new levels as New York City declared a state of emergency and France shut down all schools. And the Federal Reserve is offering more than $5 trillion of liquidity to quench markets. Here are some of the things people in markets are talking about today.
Stocks were primed for heavy losses in Asia after the worst Wall Street session since 1987, with investors fretting that emergency fiscal and monetary packages won’t be enough to stave off a recession. The S&P 500 lost 9.5% and futures on Japan’s Nikkei 225 were down 8%. The global equities rout took Brazil’s benchmark down 15% on Thursday and Canada’s main gauge posted its worst day since 1940. Oil and precious metals fell, with palladium entering a bear market, and the dollar surged. “Markets remain in a free fall as uncertainty persists with no reliable anchor which can create near-term stability,” said Ben Emons, managing director of global macro strategy at Medley Global Advisors in New York. Elsewhere, Bitcoin plunged on Thursday, at one point sinking through $6,000 for the first time since May as a sell-off in cryptocurrencies became a rout amid wider market turmoil sparked by the coronavirus pandemic. While nothing here looks good, President Donald Trump is trying to put a positive spin on it all, promising that markets will “bounce back big” after the rout.
The coronavirus outbreak has reached new levels. New York City declared a state of emergency, choosing to ban events over 500 people (that includes closing Broadway theaters). Italy’s death counted surged, despite a nationwide lockdown. Confirmed cases hit 128,393 globally. Deaths hit 4,742. The leading U.S. infectious-disease official said the testing system in the country is failing. And France will close all schools starting next week, as President Emmanuel Macron called the coronavirus the epidemic of the century. Macron was also slated to speak with President Donald Trump on Friday amid Europe’s anger about flight bans the U.S. has imposed which delivered a hammer blow to airlines. As the virus proliferates around the world, it’s little wonder that global airlines are face the worst demand decline on record. It seems that no one is safe from the virus, after Tom Hanks contracted the pathogen yesterday, as well as an NBA player. Even President Trump is at risk after meeting a Brazilian official who tested positive for the virus. All that makes for serious concerns about whether the Tokyo Olympic Games should go ahead in July, but the International Olympic Committee are resolute: The show must go on.
The Federal Reserve is offering more than $5 trillion of liquidity to quench markets. It ramped up the amount of cash it’s prepared to inject into funding markets over the next month, a cumulative total above $5 trillion, in a signal that officials will do whatever it takes to keep short-term financing rates from spiking. In the third upsizing of its repo schedule this week, the Fed’s New York branch on Thursday offered $500 billion in a three-month repo operation amid signs that the financial impact of the coronavirus outbreak was starting to strain borrowing markets as well as trading in U.S. Treasuries. The bank will repeat that exercise Friday along with a $500 billion one-month operation, and it plans to offer that amount on 10 occasions in total in the next month. Add it all up and throw in the shorter repo maturities the Fed has scheduled, and the sum will reach $5.4 trillion. The promise of increased injections came as stocks plunged anew Thursday and on signs of a dash for cash by companies, which is putting extra strain on global funding markets.
Distress over the coronavirus and an oil price war might see Australia’s benchmark stock index plunge 50% from its record by the end of 2020, according to IG Markets. In the worst-case scenario, the pandemic “sends the world into deep recession, and the issues in oil markets spark a crisis in U.S. corporate credit markets as feared,” said Kyle Rodda, an analyst at IG Markets in Melbourne. The S&P/ASX 200 index would be around 3,500 as the year wraps up, he said. That means it would lose about half of its value from the Feb. 20 peak of 7,162.494. Australian shares crashed into a bear market Wednesday, just 14 trading days after hitting a record, as a slump in crude following the demand shock from coronavirus was compounded by an escalating price war between top producers Russia and Saudi Arabia. U.S. President Donald Trump’s European travel ban added to declines. The benchmark index’s fear/greed indicator, which measures the ratio of buying to selling strength, has plunged to levels last seen in 2008 in a sign of extreme pessimism.
You may not heard of “revenge spending,” but it’s saving China from the coronavirus’s almighty whack to the economy. So what is it? The term was previously coined to describe pent-up Chinese consumer demand that was unleashed in the 1980s after the chaos and poverty of the Cultural Revolution. Now, Chinese shoppers are slowly returning to the glitzy malls and boutiques where they’ve been driving growth of the global luxury industry as coronavirus quarantine measures relax. Store traffic in China is creeping back up after falling as much as 80% at the virus outbreak’s peak there earlier this winter, hammering sales of brands ranging from Burberry Group Plc to Kering SA’s Gucci. And, the recovery could accelerate in the coming weeks — luxury clients have pockets flush with cash after weeks of canceled plans. Still, Chinese shoppers made up more than one-third of the luxury industry’s sales, and about two-thirds of its growth in recent years. When Beijing imposed lockdowns in late January to stem the spread of the coronavirus, sales ground to a halt. So what had previously seemed like a disastrous first quarter for the industry is poised to turn into a poor first half, as luxury hubs like Italy ramp up their own quarantine measures and the virus spreads in major markets like the U.S.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- The virus has jolted China to curb its animal trade before hosting a UN summit.
- From Singapore to Dallas, executives are slashing their own pay.
- A Berlin biotech company got a head start on coronavirus tests. They can test for 4 million.
- Travelers are facing losses for cancellations… And great bargains for the brave.
- Black-lung coal miners are facing a serious threat from the virus’s spread.
- A virus cure depends on rare lab mice. But there aren’t enough.
- Daily power cuts may become a thing of the past for Zambians and Zimbabweans.
To contact the editor responsible for this story: Alyssa McDonald at amcdonald61@bloomberg.net
©2020 Bloomberg L.P.
