· CORONAVIRUS UPDATES:
California monitoring 8,400 people, stocks continue free fall
California Gov. Gavin Newsom said Thursday that 33 people have tested positive for COVID-19 and the state is currently monitoring at least 8,400 others —a day after U.S. health officials confirmed the first possible community transmission of the coronavirus in a Solano County resident.
Confirmed Cases and Deaths by Country, Territory, or Conveyance
The novel coronavirus COVID-19 is affecting 52 countries and territories around the world and 1 international conveyance (the "Diamond Princess" cruise ship harbored in Yokohama, Japan).
IMF likely to downgrade global growth
The International Monetary Fund said it is likely to downgrade its global economic growth forecast because of the fast-spreading coronavirus.
“Clearly the virus is going to have an impact on growth,” IMF spokesman Gerry Rice said without giving specific details. He said he expected a decision soon on the impact of the coronavirus for the IMF and World Bank spring meetings in April, noting that many options were under consideration. Reuters reported Wednesday that officials were considering scaling back the meetings or holding them by teleconference.
Investment advisors worry U.S. response to coronavirus is too little too late
Investment-advisors are increasingly worried that U.S. authorities are not be doing enough to prevent a widespread outbreak of coronavirus in the country, potentially adding further downside to already-battered markets.
Their criticisms include the number of people so far tested by the U.S. Centers for Disease Control and Prevention (CDC), which some say is too small, the possible difficulties of imposing lockdowns on U.S. cities and concerns that the White House could bungle containment efforts.
The worries have magnified the uncertainty that has accompanied the coronavirus outbreak over the last several weeks, as investors scramble to adjust their portfolios to price in the virus’ potential for damage to the global economy and assess its further impact on asset prices.
Fed seen cutting rates amid virus threat, low inflation
The Federal Reserve may need to move aggressively to cut borrowing costs to cushion the economy from the effects of the rapid spread of the new coronavirus, which sent global stocks tumbling this week.
Traders of futures contracts tied to the U.S. central bank’s policy rate are already betting on it. On Thursday they were pricing in about a 76% chance of the Fed starting to cut rates as soon as next month and trimming an extraordinary three-fourths of a percentage point by September, according to CME Group’s FedWatch.
That would bring the short-term target rate to below 1% for the first time since 2017.
Traders saw just a 33% chance of a March rate cut on Wednesday. But that was before a report showing new cases in Iran, Italy and elsewhere were growing faster than in the outbreak’s epicenter of China, and leaders around the world began rallying their nations to prepare for a broader epidemic.
Fed’s Evans Says Too Soon to Say if Coronavirus Shock Needs Rate Cut
Chicago Fed President Charles Evans said Thursday that the U.S. central bank is closely monitoring the fallout from the spread of the coronavirus, but would look for an impact on the economy before thinking of a monetary policy response.
That could take time, as the evolution of the epidemic is still uncertain, he said at an event in Mexico City. Despite the recent market selloff driven by fears about the effects the coronavirus could have on economic growth, it is too early to think of reducing U.S. growth forecasts.
The global economy is heading for its worst year since the financial crisis, Bank of America says
Global economic growth is likely to be the worst this year since the Great Recession as headwinds from the coronavirus and other factors build, according to Bank of America.
Gross domestic product growth worldwide is projected to slow to 2.8% for 2020, which BofA Global Research said would be the first sub-3% reading since the recession and financial crisis ended in mid-2009.
The biggest weight is the coronavirus outbreak, which has slammed economic activity in China as the disease spreads. BofA economists say the U.S-China trade war, political uncertainty, and weakness in Japan and some regions of South America also are part of the “large spillover effects” weighing on output.
“Extended disruptions in China should hurt global supply chains. Weak tourist flows will be another headwind for Asia,” BofA economist Aditya Bhave said in a note. “And limited outbreaks, similar to the one in Italy, are possible in many countries, leading to more quarantines and weighing on confidence.”
As part of the slowdown, BofA also sees China growth at 5.2% in 2020, down from 5.9% in 2019. Global GDP not including China is expected to rise just 2.2%, also the lowest since the recession.
South Korea vows to calm markets, sees virus slamming economic data
South Korea’s vice finance minister on Friday vowed to deploy “all possible measures” to stabilize financial markets as he sees economic indicators from production to consumption dwindling from the increasing number of new coronavirus infections.
Speaking before a policy meeting in Seoul, Kim Yong-beom said the government plans to include support measures for businesses hit by the virus outbreak as it drafts supplementary budget.
South Korea reported 505 additional coronavirus infections in its largest daily increase on Thursday, taking the national tally to 1,766.
South Korea's factory output contracts in January even without virus impact
South Korea’s factory output contracted sharply in January, data showed on Friday, though the fast-spreading coronavirus will likely pull down the data further going forward.
Industrial output shrank by a seasonally adjusted 1.3% in January from a month earlier, beating a 2.0% fall tipped in a Reuters survey. It rose 3.7% in December.
On a year-on-year basis, the factory output slid 2.4%, much worse than a 6.2% rise in December.
The virus epidemic, however, has not yet been reflected in the January data.
Australia’s growth outlook dims as China’s momentum falters amid coronavirus outbreak
The new coronavirus outbreak that started in China and spread across the world will have a major impact on Australia’s near-term growth outlook, experts said.
“The world looks at Australia as a proxy for China. Simply put, they sneeze and we are sick. China shutdown will cut into their GDP growth and definitely (would) do damage to Australian GDP growth,” he said.
Europe looking for positive signal from U.S. on trade: EU lawmaker
The European Union hopes to de-escalate trade tensions with the United States but wants Washington to lower steel tariffs or make another goodwill gesture after a series of concessions by Brussels in recent years, a top EU lawmaker said Thursday.
Malaysia’s economy could miss out on a much-needed boost because it has no government
Malaysia’s weak economy needs a boost as the new coronavirus outbreak threatens to slow it down even more — but it isn’t clear it can get the support it needs given the latest political upheaval in the country.
Mahathir Mohamad, a 94-year-old veteran politician, unexpectedly resigned as Malaysia’s prime minister this week. Events that followed his resignation broke apart the coalition of parties that was governing the country.
Such developments have come at a time when many of Malaysia’s regional neighbors have announced, or are planning, stimulus packages worth billions of dollars to support their economies through the coronavirus outbreak.
· Dollar falls, euro has best day since May 2018
The dollar fell on Thursday as investors bet the Federal Reserve would cut interest rates to offset the impact of the spreading coronavirus, giving the euro its largest daily gain since May 2018.
Trader expectations of an interest rate cut in March increased to 54.3% versus 33.2% on Wednesday, according to CME Group’s FedWatch tool. Expectations for a European Central Bank rate cut have also risen.
Investors have rushed for the safety of U.S. government debt. Ten-year U.S. Treasury yields slumped for the third consecutive day to a record low of 1.241%.
The dollar dropped 0.52% to 109.84 Japanese yen as the yen’s safe-haven appeal began to return.
China’s offshore yuan strengthened to a one-week high, with the dollar down 0.18% at 7.008 yuan per dollar. The Australian dollar, seen as a proxy for investor sentiment towards China, rebounded 0.6% to $0.658, away from 11-year lows touched on Wednesday.
· Oil prices dive to lowest in over a year on coronavirus fears
Oil prices tumbled for a fifth day on Thursday to their lowest level in more than a year, as new reports of novel coronavirus cases outside China spurred investor fears that the rapidly spreading outbreak could slow the global economy.
Brent crude LCOc1 dropped $1.25, or 2.3%, to settle at $52.18 a barrel, off the session low of $50.97 a barrel, which was the lowest since December 2018. West Texas Intermediate (WTI) futures CLc1 sank $1.64, or 3.4%, to $47.09, after hitting their lowest level since January 2019.
Reference: Reuters, CNBC, Wall Street Journal
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