Here’s what you need to know:
- Stocks fluctuate while bond yields reach a new low.
- Experts warn of significantly slower global growth.
- Investors hope central banks will step in.
- White House stock boosterism creates unease.
- The market’s biggest concerns can’t be addressed by central banks.
- Amazon says two employees are infected, and tech companies add new restrictions.
- Spotting scams and online snake oil.
Stocks fluctuate while bond yields reach a new low.
Stocks were unsteady in global markets on Monday as investors bet that the world’s governments and central banks would step in to help a global economy slammed by the coronavirus outbreak.
In Europe, stock markets started the day with gains, but those began to fade as trading continued with shares in Germany and France falling by early afternoon.
Most Asian indexes finished the trading session higher. Futures markets indicated that investors expect Wall Street to open lower later on Monday.
Oil prices rose on Monday, reversing last week’s slide, as confidence grew that the Organization of the Petroleum Exporting Countries and Russia would agree to a cut in production this week.
Investors were heartened by separate statements from the Bank of Japan and Bank of England, both pledging to monitor markets closely and protect monetary stability.
Yields on the 10-year U.S. Treasury bond fell to 1.08 percent. The drop, driven by rising bond prices, suggests that investors are still looking for safe places to park their money, as well as growing expectation that the Federal Reserve will cut interest rates to support the economy.
The steadier opening for stocks followed one of the worst weeks for global markets since the 2008 financial crisis, with several major indexes around the world falling more than 10 percent in a few days — a stunning decline that came as investors grappled with the potential economic toll that the outbreak could take.
The virus, now detected in at least 61 countries, has shuttered factories and squeezed businesses across the globe. Companies are also readjusting their annual profit expectations, economists are lowering their forecasts for global growth, and policymakers have signaled that they are ready, if needed, to act to stabilize the economy.
The selling has left markets in their most precarious state since stocks started climbing in March 2009 after the financial crisis. In such cases, investors tend to sell to limit their losses or wait for clarity to emerge, which in this case could take weeks, if not months.
Here’s how the major indexes fared last week:
S&P 500 in United States: ⬇️ 11%
FTSE 100 in Britain: ⬇️ 11%
DAX in Germany: ⬇️ 12%
KOSPI in South Korea: ⬇️ 8%
Hang Seng Index in Hong Kong: ⬇️ 4%
Nikkei 225 in Japan: ⬇️10%
Experts warn of significantly slower global growth.
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.
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.”
Investors hope central banks will step in.
Rumors swirled on Friday that the biggest central banks might make take coordinated action over the weekend to soothe tumultuous markets, though several economists said chances had dimmed after Federal Reserve Chair Jerome H. Powell released a statement late Friday afternoon pledging to act as needed.
“Some have speculated that globally coordinated easing could come as early as this weekend, and we would certainly welcome that,” economists at Evercore ISI wrote in a note on Friday. “But we think of the Powell statement as probably a substitute for such early concrete action.”
No such coordinated intervention took place on Monday, but the Bank of England and Bank of Japan both said they were monitoring the situation closely.
Bank of Japan said in a statement that it would “strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.” It did not announce any significant actions.
The Bank of England pledged to “ensure all necessary steps are taken to protect financial and monetary stability.” The bank said in a statement that it was working closely with the Treasury, international partners and the Financial Conduct Authority.
Central bank coordination is rare and reserved for moments of major concern. The major central banks cut interest rates simultaneously as markets collapsed in October 2008. A group led by the Fed and European Central Bank lowered borrowing costs by up to half a percentage point outside their regularly scheduled meeting, the first time the U.S. central bank had joined in on such a move.
White House stock boosterism creates unease.
With equity markets cratering, Larry Kudlow, director of the National Economic Council, has been urging Americans to purchase stocks while they are cheap. But some of his predecessors are not buying his advice and, in fact, believe such boosterism of markets from the White House sets a dangerous precedent.
“Nobody can time markets accurately,” said Lawrence H. Summers, who led the National Economic Council under President Barack Obama. “I don’t give my friends market timing advice, let alone as a public official.”
Last week, Mr. Kudlow said that investors should “buy the dip” and that “stocks look pretty cheap to me” as the major American indexes had their worst week since the 2008 financial crisis.
Mr. Summers, who is also a former Treasury Secretary, noted that during moments of serious market volatility in the 1980s and 1990s, economic officials from both parties tended to offer calm reassurance that the economy was being closely monitored.
“Making these kinds of confident assertions about the unknowable will always lead to substantial errors that undercut officials’ credibility,” Mr. Summers said. “This is one kind of high order blunder.”
Gene Sperling, who was director of the National Economic Council under former President Bill Clinton and Mr. Obama, noted that Mr. Kudlow’s first suggestion to “buy the dip” came before stock markets plunged another 11 percent and that investors who took his advice could regret it.
“I think this is so inappropriate on so many levels,” said Mr. Sperling. “The top economic advisers of the president should be fundamentally focused on the actual fundamentals of the economy, not on the day by day movements of the stock market.”
The market’s biggest concerns can’t be addressed by central banks.
Even if the world’s major central banks do take action, lowering borrowing costs will get the global economy only so far.
Rates are historically low across advanced economies. They are negative across Europe, where infections are rapidly mounting, and in Japan. Officials in those economies had been trying to coax households and businesses to spend amid lackluster growth by buying huge quantities of bonds.
And it is unclear whether monetary policy is the ammunition needed to fight this type of economic threat, at least at the outset. Policymakers cut rates to ward off a downturn — or to contain one that has already arrived — by making it cheaper to borrow money, assuming that it will help prod the economy.
Rate cuts, or even hints that they are coming, can help calm markets and keep credit flowing. But a rate cut can do little to restart production lines hobbled by workers placed in quarantine or told to stay home. Nor can central banks do much to lure tourists back to back to Venice or encourage people to fly again.
“You need to show that the virus is under control,” said Jack Janasiewicz, a portfolio manager with Natixis Investment Managers. “Until that happens, we’re going to be in these volatile swings.”
Amazon says two employees are infected, and tech companies add new restrictions.
Two Amazon employees in Europe have contracted the coronavirus, the company said, and other tech companies have begun introducing strong measures to prevent their employees around the world from being affected by the outbreak.
An Amazon spokesman, Drew Herdener, said on Sunday that the internet retailer was “supporting the affected employees, who were in Milan and are now in quarantine.” Northern Italy has become a center of the outbreak.
He added that Amazon, which is based in Seattle, did not know of any employees in the United States who had become sick.
Late last week, Amazon, the second largest private employer in the United States, indefinitely halted all travel, including trips within the U.S.
Other tech firms were also working to secure their offices while minimizing the potential for spreading the virus.
Over the weekend, 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 for its employees and partners.
Spotting scams and online snake oil.
Fear of the coronavirus has presented a business opportunity for people promoting dubious products and bogus cures.
LinkedIn, the professional networking website, began looking into a company called “coronavirus masks” that created an employer post on its platform. The post directed traffic to a website where orders could be placed for masks and other preventive gear.
But the contact email for the company did not work, and the mailing address listed on the page was an apartment complex in Washington, D.C.
By day’s end, the LinkedIn posting was disabled. Fred Han, a LinkedIn spokesman, said the page had been removed for violating its policy against inappropriately promotional content. “We appreciate you flagging it to us so our teams could investigate,” he wrote in an email.
Companies and regulators have dealt with other scams already.
Last Thursday, Amazon said it had barred more than 1 million products from being sold on its platform because the sellers had made inaccurate claims about the product being able to cure or protect against the coronavirus. And Tuesday, the Securities and Exchange Commission suspended trading in shares of a company called Eastgate Biotech, which claimed to have the “international marketing rights to an approved coronavirus treatment.”
Reporting was contributed by Jeanna Smialek, Alan Rappeport, Matt Phillips, Matt Goldstein, Jack Ewing, Karen Weise, Kevin Granville, Mike Isaac, Michael Corkery, Alexandra Stevenson and Carlos Tejada.
https://www.nytimes.com/2020/03/02/business/stock-market-today.html
2020-03-02 11:53:00Z
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