Much of Europe begins the week in lockdown as coronavirus continues to spread.
Germany is set to close its borders with Austria, Switzerland, France, Luxembourg and Denmark in an effort to curb the disease.
Brussels is planning an emergency EU anti-coronavirus package to toughen cross-border health checks and ease the movement of goods and people.
The US is also preparing to step up its response. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned at the weekend that the US “could get as bad as Italy” if proper measures were not taken to limit the spread of the virus, including staying at home if possible.
The leading White House coronavirus expert said life “is not going to be the way it used to be” in the US for a period, as he urged people to avoid unnecessary public outings.
Gulf states are ramping up measures to contain the disease as infections across the region rise.
A host of central banks meet to set policy this week — many of them running out of wriggle room — as the pandemic tightens its grip and some economists start warning the world has already fallen into recession, even though official forecasts remain more optimistic.
The US Federal Reserve will be the most closely watched on Wednesday, having already taken emergency action, the Bank of Japan is set to have one of its most interesting meetings in a long time, and Brazil, China, Russia, South Africa and Turkey are among the others scheduled to meet over the next few days.
Many of the week’s other scheduled events, meetings and visits have been postponed or cancelled and more are likely to follow.
G7 leaders are due to discuss their response to the crisis by video conference on Monday to co-ordinate research efforts on a vaccine and treatments, as well as their economic and financial response.
EU finance ministers meet on the same day, again by video conference, to discuss the impact of coronavirus and measures to restart their economies.
Discussions are likely to follow on from the European Commission’s plan unveiled on Friday to boost spending on sectors of the economy hit by coronavirus. Brussels has already announced plans to set aside €37bn of EU budget money to counter the crisis and buttress fiscal stimulus measures by individual member states.
Cobra, the UK government’s emergency planning committee, will meet on Monday to discuss the government’s response to the pandemic, as Britain’s food retailers struggle to keep shelves stocked amid a spate of panic-buying.
Also this week . . .
● Democratic presidential primaries in Arizona, Florida, Ohio and Illinois are scheduled for Tuesday.
● Andrew Bailey starts his new job as Bank of England governor on Monday while Christopher Woolard starts as interim chief executive of the Financial Conduct Authority.
Central banks
The US Federal Reserve will be the centre of attention when it announces its policy decision on Wednesday.
The market expects at least a three-quarter of a percentage point cut to the benchmark rate, but more and more analysts are pointing to whole percentage point cut to zero — something that has not happened in more than a decade.
This would follow the Fed’s announcement last Thursday that it would pump trillions of dollars into the financial system in a dramatic attempt to ease stresses in short-term funding and US Treasury markets that have accompanied the spread of coronavirus.
Another option for the central bank at this meeting could include buying mortgage-backed securities — as it did in its previous asset-purchasing programmes during the crisis, which were aimed at easing financial conditions.
Further reading
Economists are all but certain Brazil’s central bank will for the sixth meeting in a row cut its key rate from the record low of 4.25 per cent on Wednesday. Even before coronavirus hit, Latin America’s biggest economy expanded just 1.1 per cent last year, dashing hopes of a quick economic revival under president Jair Bolsonaro.
There is a wave of central bank action on Thursday. Most analysts expect the Bank of Japan will do something to fall in line with its counterparts around the world and ease its policy stance.
It is unlikely the BoJ will cut its negative policy rate further, but some extension of the bank’s ¥6tn-a-year programme to purchase exchange traded funds is possible.
The creation of a special lending facility to help both the banking sector and small and medium-sized companies, whose revenues are being squeezed by coronavirus, is another option.
Central banks in the Philippines, Indonesia and Taiwan all meet under pressure to act.
The Swiss National Bank is expected to keep rates at the record low of -0.75 per cent.
South Africa is expected to heed the calls for action and cut rates.
In Turkey the central bank faces a tough call on whether or not to keep cutting the rate, now at 10.75 per cent, in line with president Recep Tayyip Erdogan’s goal of reaching single figures while the lira is trading at its lowest levels against the dollar since the currency crisis of 2018.
Central bank meetings in Russia and China on Friday round off the week. The People’s Bank of China is forecast to cut both its one and five-year loan prime rates.
A rate rise is a possibility for Russia as the oil price war with Saudi Arabia has sent the rouble down, meaning inflation will rise above the central bank’s 4 per cent target by the end of the year.
Companies
Saudi Aramco will hold an earnings call on Monday when the market will seek more clarity on what the oil price war means for the company’s corporate strategy.
Saudi Arabia’s move to launch a price war, prompted by the collapse of its oil alliance with Russia, will have an outsized effect on the group.
The state energy company, which has seen its shares drop below its initial public offering price in December, said on Sunday that it would cut capital spending as it prepares for a prolonged period of lower oil prices triggered largely by its biggest shareholder.
Capital expenditure was $32.8bn in 2019 and it is expected to fall to $25bn-$30bn in 2020. “Capital expenditure for 2021 and beyond is currently under review,” the company said.
The spending cut comes after Saudi Aramco took a big financial hit in 2019. Net income was down 21 per cent year on year to $88.2bn, it said, after crude prices fell and it suffered from lower chemicals and refining margins.
Wm Morrison, Britain’s fourth-largest supermarket chain, is expected to report a 3 per cent rise in 2019-20 profit on Wednesday. Its post-Christmas trading update revealed sales were down 1.7 per cent on a same-store basis in the 22 weeks to January 5. It also plans to cut 3,000 managerial positions as part of a staffing revamp.
Fourth-quarter results from Lufthansa, Europe’s largest airline, are on Thursday expected to reflect the global air travel downturn caused by coronavirus and its earlier profit warnings.
Retailer Next also has preliminary full-year results on Thursday, where investors will seek the latest on how coronavirus is hitting high-street demand and whether it is disrupting the supply chain for summer clothing lines.
Antofagasta, Volkswagen, Zara owner Inditex and JD Wetherspoon also report.
There is very little in the way of earnings from the US this week. Tiffany reports on Friday when investors will be on the lookout for updates on the takeover by Louis Vuitton owner LVMH and also how coronavirus has hit demand — Hong Kong is a key market for the luxury jeweller.
Parcel delivery group FedEx, General Mills and Accenture also report.
Economic data
China kicks off the week with industrial production and retail sales for the first two months of the year, adding more detail to the picture emerging of the damage the coronavirus lockdown brought to the world’s second-largest economy.
The numbers are expected to show fairly normal conditions for January and, unsurprisingly, sizeable disruptions from Covid-19 in February, where the figures are also likely to be skewed due to a lack of data.
Germany’s Zew investor confidence survey on Tuesday is set to show its worst monthly fall on record, taking expectations back to the cyclical trough seen in August.
US retail sales figures for February released the same day will at least show how the economy was bearing up before coronavirus hit, as will UK labour figures for the three months to January (also on Tuesday).
Japan’s trade balance for February is forecast to show a surplus of ¥970.0bn from a ¥312.6bn deficit in January.
South Africa inflation is likely to be unchanged at 4.5 per cent on Wednesday.
Canada rounds off the week with retail sales on Friday.
Source: Economy - ft.com
