Your level-headed briefing on how the coronavirus epidemic is affecting the markets, global business, our workplaces and daily lives, with expert input from our reporters and specialists across the globe.
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Latest news
The leaders of the Group of Seven industrial powers have vowed to do “whatever is necessary” to support a global economy shaken by the coronavirus pandemic. In a joint statement following a call between the leaders of the G7 countries — US, Canada, France, Germany, Italy, UK and Japan — the group called on central banks to continue support for the financial system and pledged weekly finance ministerial meetings to co-ordinate recovery policies.
US airlines are seeking more than $50bn in government assistance as coronavirus roils business.
Unreported cases of Covid-19 were largely responsible for the rapid spread of the outbreak in China, say US scientists.
Big bazookas fail to calm markets
Investors failed to take much solace from Sunday’s concerted action by the US Federal Reserve and other central banks, as European stocks plunged and Wall Street tumbled once again on opening.
Oil markets were also hit. The price of Brent crude slipped below $30 a barrel as the coronavirus hit demand in Europe and North America.
The Fed had cut US interest rates to between zero and 0.25 per cent — a level last seen in 2015 — but some analysts believe regulators are approaching the limit of what can be achieved by market intervention.
“The Fed has thrown everything at this. If we are now facing the end of central bank action, it means we are on our own,” said one strategist.
With investor confidence starting to crack, ever-bigger bazookas from governments may not be enough to ward off a full-blown financial crisis, warns Patrick Jenkins, FT Deputy Editor.
Markets
Stock and futures markets are coming under huge pressure thanks to large trading volumes as employees work from home. The most active equity traders in Australia were told on Monday to trade up to 25 per cent less than on Friday to ease the strain. Some have even called for a co-ordinated global markets shutdown.
The US bond market is at its most volatile since the 2008 financial crisis. Wild swings in US Treasuries have fuelled concerns about the world’s most liquid debt market. Treasury yields have plunged since mid-February and trading has become increasingly fraught as nervous banks and other dealers retreat from markets.
Thanks to the pandemic’s impact on credit markets, US investors are bracing for a ratings downgrade. Top companies, from Occidental Petroleum to Ford, are being treated as though they will soon lose their top-quality credit ratings, sending their debt into “junk” status.
Business
“By the end of May 2020, most airlines in the world will be bankrupt.” That was the stark message from Capa, the aviation research company, after 24 hours of borders closing and travel ban announcements. United Airlines, IAG (parent of British Airways, Aer Lingus and Iberia), Air France-KLM, easyJet, Finnair, Air New Zealand and Aeroflot all joined the chorus of doom. The UK government has promised to intervene.
Europe’s car industry hit crisis mode as PSA and FCA Chrysler said they would close plants, while Volkswagen said it could shut down production as supply chains were disrupted. The sector is on a rocky road, says the FT’s Lex column.
Travel companies and those with complicated supply chains are obvious victims of the coronavirus but so too are US workers in “human contact industries” such as restaurants, bars and theatres. “You can’t ever resell a hotel room from last night,” commented one bankruptcy lawyer.
Global economy
Chinese industrial output shrank at the fastest pace ever, as did urban unemployment, suggesting President Xi Jinping’s moves to shore up the economy have had no effect, or at least not yet. China’s robust public health response will, however, enhance its credibility in future trade and globalisation talks, says the FT’s Trade Secrets newsletter. It will also enable the government to use its approach as a good argument against democracy, says Gideon Rachman.
Latin America could be tipped into recession by the double whammy of coronavirus and oil price shocks, says a new report. Capital Economics predicts that Latin America’s economy excluding Venezuela will grow just 0.2 per cent in 2020, down from an earlier forecast of 1.2 per cent.
Eurozone stability is at great risk, writes columnist Wolfgang Munchau, thanks to the botched announcement of the crisis response from Christine Lagarde, the European Central Bank president. This would have been a good moment to create a eurozone-wide financial instrument that could be used to provide emergency funding, he writes. Instead, we are back to arguing about Italy’s solvency.
The essentials
The 26-state Schengen passport-free travel zone in Europe could close borders to external countries in a plan that may be finalised later today. The sweeping move follows a jump in infections and unilateral actions by member states to seal their borders.
Asian countries such as Taiwan seem to be handling the crisis in a much more coherent manner than the US and Europe, thanks to their experience of dealing with Sars in 2003. There are lessons to be learnt on early travel restrictions, testing, screening and quarantine rules. Universal healthcare and efficient public health messaging are also key.
Four out of five Britons are expected to become infected with the coronavirus and almost 8m may need to be taken into hospital, according to a leaked “reasonable” worst-case scenario. Following criticism of the UK’s communications strategy, Boris Johnson, the UK’s prime minister, said there would now be daily press conferences on the government response.
Final thought
It’s not all bad news for corporates. France’s Air Liquide, in the middle of selling its Schülke unit, a maker of handwashes and other cleaning products, is now asking would-be buyers for a higher price. The premium is less linked to the sudden uptick in demand for its products than to the belief that everyone will be a lot more hygiene-conscious in the long term.
Get in touch
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