By Lorcan Roche Kelly
French President Emmanuel Macron said that the country would guarantee up to 300 billion euros ($335 billion) of bank loans to companies in an effort to stop businesses failing as governments in Europe step up their response to the coronavirus shutdown. In the U.S., there was a change of tone from the administration with President Donald Trump stating that “it’s bad,” warning against gatherings of more than 10 people and saying the outbreak could last until August. The Senate is on track to quickly pass the House package of measures, with lawmakers eager to follow up with a more ambitious bill once the current one has the president’s signature.
It is shaping up to be another wild day in markets. S&P 500 futures, which were trading limit-up at the start of the European session, turned negative 90 minutes later. Overnight, the MSCI Asia Pacific Index eked out a 0.1% gain while Japan’s Topix index closed 2.6% higher as the yen slipped against the dollar. In Europe, stocks opened higher, but those gains proved fleeting with the Stoxx 600 Index down 2.7% by 5:40 a.m. Eastern Time. The 10-year Treasury yield was at 0.802% and gold dropped again.
Economists are rushing to update their projections for economic growth — sharply downwards. Morgan Stanley now sees a global recession as its base case, saying the slump is likely to be worse than 2001. Goldman Sachs Group Inc., who are already predicting a 5% slump in U.S. GDP in the second quarter, are predicting China’s economy will shrink 9% in the first three months of the year. Bloomberg’s monthly survey of economists showed that most view the coronavirus outbreak pushing the U.K. into its first recession since the global financial crisis.
The industry hardest hit by the movement restrictions introduced by governments around the world is air travel, with a growing list of airlines announcing huge capacity reductions as customer demand evaporates. Boeing Co. has asked White House and Congressional officials for short-term aid for itself, suppliers and airlines, as the industry rushes to tap emergency credit lines. President Trump signaled support for carriers, saying the government will back them 100%. In Europe, governments are considering packages to save the industry as the continent imposes restrictions on foreign travelers.
U.S. February retail data at 8:30 a.m. is expected to show sales growth in positive territory, while industrial production and manufacturing production at 9:15 a.m. are also expected to show growth. Investors are unlikely to have much interest in those numbers as the data will already be viewed as very stale. Instead, they may focus on the results of the Federal Reserve’s $500 billion overnight repo operation to gauge any signs of funding stresses. Traders will look for guidance from FedEx Corp. when the company announces results today.