Fresh Coronavirus Concerns Hit Share Prices

March 27, 2020

The global tally of identified Covid-19 infections is at 549,430 people and has produced 24,872 deaths thus far. Spain saw its death count jump by 493 in the past day to 4,858 overall. In the U.K., both Prince Charles and Prime Minister John have tested positive. The United States now tops the leader board in number of reported cases at 85,749, while Italy has suffered the most deaths.

The Reserve Bank of India is the latest central bank to call an emergency meeting and approve a slew of stimulus measures. These include a 75-basis point cut of the repo rate to 4.40%, which brings the cummulative drop to 135 basis points since last August and to 210 basis points over the past 13 months. RBI policymakers also cut the reserve requirement ratio by a full percentage point to 3% and the reverse repo rate by 90 basis points, thus widening the differential between those two rates.Other steps to be taken involve targeted long-term repo operations, the marginal standing facility accommodation, a moratorium on term loans, deferred interest on working capital facilities, easier working capital financing, and deferred implementation of the net stable funding ratio and last tranche of the capital conservation buffer. The statement explaining this plan mentions three priorities — preserve financial stability, mitigate negative effects of the virus and reviving growth — and it includes a powerfully worded paragraph framing the situation in military terms:

COVID-19 stalks the global economy and the outlook is highly uncertain and negative. Several nations are battling its exponential contagion; countries are shutting down to prevent being sucked into that black hole. Authorities all over the world are mobilizing on a massive scale to fight an invisible assassin. India has locked down. Economic activity and financial markets are under severe stress. Finance is the lifeline of the economy. Keeping it flowing is the paramount objective. The time has come for the Reserve Bank to unleash an array of instruments from its arsenal to staunch and mitigate the impact of COVID-19, revive growth and, above all, preserve financial stability. The aggressive action and stance of the MPC provides a befitting launching pad.

Stock markets in Europe are down overnight by at least 3.0% in Germany and Italy and at least 4.0% in the U.K., France and Spain. Australia’s market tumbled 5.3%, but Japan rose 3.9%.

The price of gold is 1.4% lower, and WTI oil slipped 0.3% overnight.

There have been some outsized overnight declines in ten-year sovereign debt yields of 9 basis points in Canada and the United States, 8 bps in Spain and 7 basis points in France.

Although down strongly for the week, the dollar rose today by 1.8% against the peso, 0.5% versus the kiwi, as well as 0.2% relative to the yuan, loonie and euro. But the U.S. currency has fallen 0.6% against the yen, 0.2% vis-a-vis sterling and 0.1% relative to the Swiss franc.

More data emerged that reflected the economic fallout of Covid-19.

For instance, New Zealand consumer confidence dived 12.9% in March after back-to-back dips of 0.5% in January and February.

Chinese corporate profits in January-February were 38.3% lower than a year earlier (most in at least ten years) compared to a drop in full 2019 of 3.3%.

Italian consumer confidence dropped 8.9% in March to a 62-month low, while business confidence among manufacturers dropped 9.4% to an 83-month low.

Finnish consumer confidence in March sank to a 51-month low.

Consumer confidence in South Korea plunged 24.8% between January and March to an 11-year low. Consumer sentiment in Taiwan weakened to a 33-month low in March.

Turkish economic sentiment weakened almost 6% in March to a half-year low.

Vietnamese on-year GDP growth of 3.8% in the first quarter of 2020 was just over half the size recorded in 4Q19 and represented the weakest result in 43 quarters.

Irish retail sales posted successive monthly declines of 3.4% in January followed by 4.3% in February.

Austria’s manufacturing purchasing managers index relapsed from 50.2 in February to a 5-month low of 45.8 this month.

French consumer confidence this month was comparatively resilient, easily beating analyst forecasts with a dip of only one index point to a 3-month low.

Swedish and Norwegian retail sales in February posted increases from a year earlier of 2.8% and 2.0%.

Producer prices in February in Singapore recorded a 1.5% on-year decline after a 0.6% increase in January.

Consumer price inflation in Tokyo in March was 0.4% both overall and when excluding fresh food.

Monthly U.S. personal income growth surprised on the upside, rising 0.6% for a second straight time, but personal spending as expected only went up 0.2% in February. The PCE price deflator that month matched January’s monthly rise of 0.1% and on-year advance of 1.8%. Core PCE inflation was also 1.8%.

Still to come and eagerly awaited: the March U.S. consumer sentiment index compiled by U. Michigan and Reuters.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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