Scarred and scared: post-Covid consumers not their old selves

By Mark John

LONDON (Reuters) – Michael Clark of Amy’s Housewares has one big fear as its London stores prepare to reopen on June 15 along with other retailers around Britain: “Customers not spending, having no trust in the economy.”

His concern, captured in a survey by the British Independent Retailers Association (BIRA) before a nationwide easing of social distancing measures, may be well-founded.

Across the world, consumers are emerging from lockdowns warier and more thrift-conscious than before. That will drag on any recovery and could encourage governments and central bankers to follow up on coronavirus handouts with more costly stimulus.

The new thrift is showing up in various ways: some households are hoarding the cash they saved during lockdowns; some are flocking to cheaper brands or sticking with essentials.

GRAPHIC: Savings rates in Europe rise Savings rates in Europe rise – https://graphics.reuters.com/ECONOMY-EU/SAVINGS/yxmvjkqlnpr/chart.png

Other risks to consumer demand include the outright collapse of purchasing power among those whose livelihoods were ruined by the pandemic and even imponderables such as what happens to spending patterns if more people continue to work from home.

In China, shopping malls began to fill up again from April after lockdown eased. Online sales have surged in some categories, often helped by discounts and state coupons.

But a lingering wariness about items deemed non-essential means consumers may still not emerge as the pillar of growth which Beijing hopes they will be.

“Consumers are placing a greater focus on essential spending categories,” Fitch Solutions said in a June 4 report, predicting a fall in Chinese household spending this year and slashing its 2020 growth forecast to just 1.1% from 5.6% before the pandemic.

DOLLAR STORE CLIENTELE GROWS

In the United States, commonplace brands such as chocolate giant Hershey or toothpaste-maker Colgate say consumers have traded down. Dollar stores, meanwhile, expect to open their doors to a new set of customers as they did after the 2008-09 Great Recession.

“In 2008, folks lost jobs … and they found us. And I think that’s some of what we’re planning for as we take a look into our crystal ball at back half of the year and 2021,” Dollar Tree Chief Executive Gary Philbin said on May 28.

Much hangs now on what happens to the mountain of savings built up by those U.S. households which weathered the worst of the lockdown fall-out and have pushed the overall U.S. savings rate to a record 33% of income.

GRAPHIC: Savings rates in the U.S. rise – https://graphics.reuters.com/ECONOMY-USA/SAVINGS/nmovakbjdva/chart.png

While that rate will fall, those who expect cash to flood back into the economy may be disappointed. A 2012 paper by IMF researchers found that lingering uncertainty after the onset of the 2008-09 recession boosted saving rates durably, leading to lower consumption and growth in the wider economy.

Moreover many U.S. households are about to suffer “income cliffs” with one-off tax rebates expiring in May and pandemic unemployment compensation ending in July, Oxford Economics said, forecasting lower household income through the rest of the year.

“This will likely act as a constraint on the consumer spending recovery well into 2021,” it said in a June 3 note.

Such a scenario could force policy makers across the world to encourage savers to spend by speeding up moves to ease lockdowns, offering more economic support or pushing interest rates further towards, and even into, negative territory.

The same dilemma exists in Europe. The European Central Bank expects household savings to rise six points to 19% of income this year and remain high next year due to what economists call “scarring”, when an event leaves a durable impact on behaviour.

Citing the risk of cash-hoarding, French Finance Minister Bruno Le Maire has called for direct incentives to boost demand. The budget he will present next week will forecast a drop in consumer spending of 10% this year as households amass savings.

Germany has announced a cut in valued-added tax for the second half of the year to drive consumption, coupling that with cash handouts to parents.

Presenting hefty downgrades of the bank’s eurozone growth protections on Thursday, ECB President Christine Lagarde said the depth of scarring of domestic demand was one big factor that will determine the size of the contraction and recovery to come.

She warned: “Overall, the (ECB) Governing Council sees the balance of risks … to the downside.”

(Additional reporting by Reuters bureaux; editing by Philippa Fletcher)

Factbox: Latest on the worldwide spread of the coronavirus 5-25-20

(Reuters). – * The number of deaths in the United States from the new coronavirus was heading towards the 100,000 mark.

The U.S. Centers for Disease Control and Prevention said on Saturday that the toll had risen 1,852 to reach 96,002. It also reported 1,595,885 cases, an increase of 24,268 from its previous count.

* British Prime Minister Boris Johnson backed his senior adviser Dominic Cummings on Sunday, despite calls from within his own Conservative Party for the aide to resign for traveling 250 miles during the coronavirus lockdown. Cummings, who masterminded the 2016 campaign to leave the European Union, came under pressure after it emerged that he had traveled from London to Durham in late March when Britain was under a strict lockdown to combat the coronavirus outbreak.

* Americans flocked to beaches and outdoor areas on Saturday, snarling roadways and forcing some closures on the Memorial Day weekend after weeks in lockdown.

In Destin, Florida, The Back Porch restaurant was full. In Arizona, holidaymakers flooded Interstate-17, causing a 15-mile backup on the highway used to reach some of the desert’s most beautiful canyons.

President Donald Trump played golf at his Trump National club in northern Virginia.

DEATHS AND INFECTIONS

* More than 5.27 million people were reported to have been infected globally with the virus and 339,267 have died, according to a Reuters tally.

* For an interactive graphic tracking the global spread, open https://tmsnrt.rs/3aIRuz7 in an external browser.

* For a U.S.-focused tracker with state-by-state and county map, open https://tmsnrt.rs/2w7hX9T in an external browser.

 

EUROPE

* Russia on Sunday reported 153 coronavirus deaths over the previous 24 hours, the epidemic’s highest daily toll there, raising total fatalities to 3,541, its coronavirus crisis response center said. It also said 8,599 new cases had been documented, fewer than on the previous day, pushing the nationwide tally of infections to 344,481.

* The University of Oxford’s COVID-19 vaccine trial has only a 50% chance of success as the coronavirus seems to be fading rapidly in Britain, the professor co-leading the development of the vaccine told the Daily Telegraph newspaper.

Adrian Hill, director of Oxford’s Jenner Institute, which has teamed up with drugmaker AstraZeneca Plc to develop the vaccine, said that an upcoming trial involving 10,000 volunteers threatened to return “no result” due to low transmission of COVID-19 in the community.

* First indications of the effectiveness of a potential vaccine against coronavirus may be available in the autumn, the head of the GAVI vaccine alliance told a Swiss newspaper, forecasting a long road from there to broad availability.

* Spain will reopen its borders to tourists in July and its top soccer division will kick off again in June, the prime minister said, marking another phase in the easing of one of the world’s strictest lockdowns. Pedro Sanchez’s announcements coincided with calls for his resignation over the lockdown’s impact on the economy from the far-right Vox party, which called protests in cities across Spain drawing thousands of horn-blaring cars and motorbikes.

* The public returned to St Peter’s Square on Sunday to receive Pope Francis’s blessing from his window for the first time in nearly three months. The few dozen people kept to social distancing rules and most wore masks.

* Police arrested about 60 protesters on Saturday as part of city-wide demonstrations against restrictions due to the coronavirus pandemic, German newspaper Tagesspiegel reported.

The protesters had violated official guidelines to keep the virus contained, and some had attacked police officials, the newspaper said.

AMERICAS

* Americans flocked to beaches and outdoor areas on Saturday, snarling roadways and forcing some closures on the Memorial Day weekend after weeks in lockdown. President Donald Trump played golf at his Trump National club in northern Virginia.

* Mexican health authorities registered 3,329 new cases of the novel coronavirus and 190 new deaths, a health official said on Saturday, bringing the total number to 65,856 cases and 7,179 deaths.

* Argentina extended until June 7 a mandatory lockdown in Buenos Aires on Saturday and tightened some movement restrictions, after a steady increase in the city’s confirmed coronavirus cases in recent days.

ASIA-PACIFIC

* Three large Indian states have sought to delay the planned opening of their airports on Monday as new cases of the novel coronavirus jumped, complicating the federal government’s plan to resume flights after a two-month lockdown.

India registered 6,767 new cases of the novel coronavirus on Sunday, its biggest 24-hour rise yet, taking the total to over 131,000.

* The Philippines’ tally of coronavirus cases surpassed 14,000 on Sunday and the number of fatalities rose to 868, the health ministry said.

* China recorded no new confirmed COVID-19 cases on the mainland for May 22, the first time it had seen no daily rise in the number of cases since the pandemic began in the central city of Wuhan late last year.

* Coronavirus cases in Singapore topped 30,000 as the city-state reported hundreds of new infections in cramped migrant worker dormitories every day. In Malaysia, a new cluster of coronavirus infections has broken out a detention center for undocumented migrants, authorities said.

MIDDLE EAST AND AFRICA

* Finance minister Mohammed al Jadaan said Saudi Arabia’s economy is solid and has the ability to deal with the coronavirus crisis despite the need to cut spending.

* Underground production at AngloGold Ashanti’s Mponeng mine in South Africa will remain shut down until further notice after 53 employees tested positive for the coronavirus, the provincial health department said.

* A 107-year-old Iranian woman who was infected with the new coronavirus has recovered, Iran’s Fars news agency reported.

* Zambia’s information minister Dora Siliya said she had tested positive for the coronavirus but was asymptomatic and had gone into self-isolation.

“Even after taking all precautions…yesterday I did test positive for COVID-19,” she said on social media.

ECONOMIC FALLOUT

* Chinese lenders could post flat or even falling profits in 2020 despite earnings growth in the first quarter as the coronavirus outbreak brings difficulties to the economy, the central bank said. For the first quarter of 2020, China’s commercial banks realized net profits of 600.1 billion yuan ($84.2 billion), up 5% year-on-year, mainly due to the expansion of banks’ assets and lower management costs, according to an article by the research bureau of the People’s Bank of China.

The possibility could not be ruled out that banks could log zero or even negative profit growth within 2020, due to mounting bad loans and a fast-draining of cash buffers, as the difficulties in the real economy spills over into the financial area, the PBOC said.

* France’s state debt to gross domestic product (GDP) ratio is set to increase to more than 115% by the end of the year due to the cost of coronavirus crisis measures, Budget Minister Gerald Darmanin said.

* Car rental firm Hertz Global Holdings Inc HTZ.N filed for bankruptcy protection after its business was decimated during the coronavirus pandemic and talks with creditors failed to result in much needed relief. The firm is reeling from government orders restricting travel and requiring citizens to remain home.

(Compiled by Angus MacSwan; Editing by John Stonestreet)

Take Five: Coronavirus vaccine race is on

(Reuters) – U.S. President Donald Trump has put his faith in anti-malarial drug hydroxychloroquine to ward off COVID-19, but governments and investors are focusing on a vaccine. Without one, it’s unlikely economic activity can resume fully.

So the race is on, and the rewards are rich: AstraZeneca has vaulted into the position of the most valuable British company after receiving a U.S. pledge for up to $1.2 billion for its experimental vaccine.

Pharma/biotech shares have outperformed broader equities since Feb 19. Investors twitchy for vaccine news sent the share price of biotech company Moderna 20% higher when it said its vaccine trials showed promise. Rivals Novavax and Inovio also rose when they secured vaccine development funding.

The United States has vaccine development deals with Johnson & Johnson and Sanofi, too. But many others, big and small, are in the race: Imperial College, Gilead Sciences, Roche, China’s CanSino Biologics and India’s Glenmark to name just a few.

THE RUBICON

European clashes over how to handle the economic impact of the COVID-19 crisis raised fears for the bloc’s future, but a Franco-German proposal aimed at helping the worst-hit states represents a pivotal moment. The markets want to see the details, however. All eyes will be on the European Commission, which on Wednesday presents its pandemic recovery plan.

The task is to ensure weaker states such as Italy can access funding without adding to their debt burden. But EU states remain divided over whether recovery funds should be funneled through loans or transfers. If those opposed to big-spending manage to water down the plan, the euro and southern European bonds will take a knock.

The change in Germany’s previously hardline stance was momentous. Now it’s the turn of others such as Austria and the Netherlands to decide whether they are ready to cross the Rubicon.

TRYING TIMES

Beijing’s control has long been a sore point for some Hong Kongers. Its latest proposal for a tougher national security regime for the city will almost certainly lead to further violent confrontations on the streets and open a new venue for Sino-U.S. tension.

Only this time it may be worse, which is why the Hang Seng index was hit harder on Friday than even the worst days in the March selldown. China has replaced the leadership in its Hong Kong Liaison office and, foreign envoys reckon, quietly doubled the number of staff there.

The United States has already warned of a tough response. Investors will look there, and to the situation on the ground for cues. As for markets, Hong Kong’s property index posted its worst drop in 11.5 years on Friday. European luxury shares and banks such as HSBC also took a hammering on Friday, meaning ripples could spread.

CLOUD STOCKS FLOAT HIGHER

Coronavirus is a double-edged sword for cloud-computing firms. It has supercharged demand for data center services to support video-streaming and other remote services but is also forcing corporates to slash budgets amid a deep recession.

Cloud computing players take the spotlight on Wall Street in the coming days as they report quarterly results and guide investors on the outlook. Autodesk and Workday report on Wednesday. Salesforce.com  – viewed as the gold standard – follows on Thursday, along with systems software seller VMWare.

The First Trust Cloud Computing index ETF  has gained over 10% in 2020, although some big-name cloud-computing stocks have yet to fully recover from their March lows.

DOOM AND GLOOM

Armed with less fiscal firepower and weaker healthcare systems than richer peers, emerging economies have been less able to counter coronavirus-induced drops in consumption, foreign investment and exports, or alleviate the effects of job losses.

That strain shows up in economic data, not least the 6.8% Q1 contraction in China’s economy, the biggest in decades. Soon four other emerging market heavyweights – Turkey, Mexico, Brazil and India – will tell us how their growth fared in the January-April quarter.

Expect gloomy readings. India, not long ago, the fastest-growing big economy, is expected to have expanded 2% in Q1; Turkey’s economy is seen contracting this year for the first time in over a decade. For Brazil and Mexico Goldman Sachs predicts full-year contractions of 7.4% and 8.5% respectively.

(Reporting by Sujata Rao, Dhara Ranasinghe and Tom Arnold in London, Tom Westbrook in Singapore and Lewis Krauskopf in New York; Editing by Hugh Lawson)

What you need to know about the coronavirus right now

(Reuters) – Here’s what you need to know about the coronavirus right now:

Back on the road

The U.S. auto industry is slowly returning to life with assembly plants scheduled to reopen on Monday and suppliers gearing up in support as the sector that employs nearly 1 million people seeks to recover from the coronavirus pandemic.

General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV (FCA) all have been preparing for weeks to reopen their North American factories in a push to restart work in an industry that accounts for about 6% of U.S. economic activity.

The reopening will be a closely watched test of whether workers across a range of industries can return to factories in large numbers without a resurgence of infections.

Hitting new lows

Japan’s economy became the world’s largest to slip into recession after the pandemic, first-quarter data showed on Monday, putting the nation on course for what could be its deepest post-war slump.

The GDP numbers underlined the broadening impact of the outbreak, with exports plunging the most since the devastating March 2011 earthquake as global lockdowns and supply chain disruptions hit shipments of Japanese goods.

But analysts warn of an even bleaker picture for the current quarter as consumption crumbled after the government in April requested citizens to stay home and businesses to close.

China on alert for new wave

While much of the rest of the world is experimenting with easing restrictions, one Chinese province is back in a partial lockdown after a spate of infections.

Jilin in the northeast reported two more confirmed cases over the weekend to take its total number of new infections to 33 since the first case of the current wave was reported on May 7. Separately, the financial hub of Shanghai reported one new locally transmitted case for May 17, its first since late March.

Pop-up carparks

Australia’s most populous state New South Wales encouraged its residents to avoid peak-hour public transport as it began its first full week of loosened lockdown measures, which saw people heading back to offices.

To help with maintaining social distancing, extra bicycle lanes and pop-up car parking lots will be made available, officials said.

“We normally encourage people to catch public transport but given the constraints in the peak…, we want people to consider different ways to get to work,” state premier Gladys Berejiklian told reporters in Sydney.

Furloughs no cure-all

Temporary unemployment schemes have spread far wider and faster than during the 2008-2009 global financial crisis, but are not likely to save jobs in sectors which face a tougher recovery post-pandemic, such as leisure and tourism.

These schemes, which typically provide at least 80% of pay for workers for whom there is no work now, mean companies do not face firing and potential re-hiring costs. Workers are more inclined to keep spending and so help prop up the economy.

“If it’s more than a year, you need other solutions and will need other policies like retraining,” said Gregory Claeys, senior fellow at economic think-tank Bruegel. “It’s good in a lockdown, but if there is more social change, you need alternatives.”

(Compiled by Karishma Singh and Mark John; Editing by Mark Heinrich)

With over a million coronavirus cases, economic freefall looms

By Cate Cadell and Lisa Shumaker

BEIJING/NEW YORK (Reuters) – Global cases of the new coronavirus have shot past 1 million with more than 53,000 fatalities, a Reuters tally showed on Friday, as death tolls soared in the United States and western Europe while the world economy nosedived.

In the space of just 24 hours, 6,095 infected people died – nearly twice the total number of deaths in China, where the virus and COVID-19, the disease it causes, originated.

Atop the grim tally of officially reported data are Italy, with 13,915 deaths, and Spain, with 10,935. But the United States is becoming the new epicentre, with 243,635 cases – by far the most of any nation – and 5,887 deaths.

In China, where draconian containment measures stabilised the epidemic, coronavirus “martyrs” will be mourned on Saturday with a three-minute silence.

Though the official figures are shocking enough, health experts and even some governments acknowledge they do not capture the full spread. The virus mostly goes undetected in people with minor symptoms or none at all.

With airlines largely grounded, businesses closed, layoffs mounting and millions of people under lockdown, the economic fallout is set to be worse than the 2008 financial crisis.

Rather, comparisons are being drawn with such traumatic periods as World War Two or the 1930s global Depression.

ECONOMIES IN FREEFALL

Morgan Stanley predicted that the U.S. economy, the world’s biggest, would shrink 5.5% this year, the steepest drop since 1946, despite an unprecedented aid package. An eye-watering 38% contraction is predicted for the second quarter.

The bank said Britain was heading for a slump that could be worse in the short term than the 1930s.

Global stocks slipped, but then recovered as Wall Street headed into positive territory in morning trade.

Morgues and hospitals in New York City were struggling to treat or even bury victims of the virus, and state governor Andrew Cuomo predicted similar misery for the rest of the country.

Staff at one medical centre in Brooklyn were seen disposing of gowns and caps in a sidewalk trash can after loading bodies into a refrigerated truck.

After initially playing down the crisis, U.S. President Donald Trump’s administration was set to advise Americans to wear masks if venturing out.

Spain and Italy were also counting their daily dead, but prayed they were plateauing as data at least showed a slowdown in daily increases.

Some 900,000 Spanish workers have lost their jobs. Double that number have done so in Turkey, the opposition said.

Britain, accused by the opposition of being slow to respond to the threat of the virus, unveiled a hospital installed in an exhibition centre in under two weeks to provide thousands of extra beds, and promised a tenfold increase in testing.

But Prime Minister Boris Johnson’s extended self-isolation, after testing positive, was a reminder of the risk.

In a video message from Downing Street, he said he still had fever.

In France, the government did something that was shunned even in wartime, cancelling the end-of-high-school “baccalaureat” exam for the first time since its inception in 1808 under Napoleon Bonaparte.

DISASTER FOR DEVELOPING WORLD

While prosperous nations reel, there are fears of potentially far worse impact in places already struggling with poverty, insecurity and weak health systems.

In Iraq, three doctors and two officials said there were thousands of cases, many times more than publicly reported.

In India, many poor labourers were desperate, and hungry, after losing jobs in a lockdown ordered at four hours’ notice by Prime Minister Narendra Modi.

“I’m very sure that he works only for the big people and not for a man like me,” said former Modi supporter Ravi Prasad Gupta, laid off from a pipe plant.

Aware that religious gatherings have in some parts aided the virus’s spread, both Pakistan and Bangladesh sought to stop people going to mosques for Friday prayers, while Saudi Arabia imposed a curfew in the holy cities of Mecca and Medina.

Though there was little cause for cheer anywhere, one positive offshoot of the crisis has been a massive drop in atmospheric pollution. One expert said carbon dioxide emissions could fall this year by the largest amount since World War Two.

New Google data from mobile phones in 131 countries showed huge changes in human behaviour as people are told to stay home and businesses shut. For example, in Italy and Spain, visits to retail and recreation locations including restaurants and cinemas plunged 94% in March.

But authorities are still nervous about public criticism in many places, not only authoritarian states.

The U.S. Navy relieved the captain of the aircraft carrier Theodore Roosevelt of his command on Thursday, punishing him for the leak of a scathing letter to superiors seeking stronger measures to a curb a coronavirus on board.

(Reporting by Reuters bureaux worldwide; Writing by Daniel Wallis and Andrew Cawthorne; Editing by Howard Goller and Kevin Liffey)

Factbox: Global economic policy response to the coronavirus pandemic

LONDON (Reuters) – Governments and central banks around the world have unleashed unprecedented amounts of fiscal and monetary stimulus and other support over the past month for national economies reeling from the coronavirus pandemic.

Following is a summary of the main policy steps so far.

UNITED STATES

MONETARY STIMULUS – The Federal Reserve cut interest rates by 150 basis points total in two emergency meetings on March 3 (50 basis points) and March 15 (100 bps), taking the federal funds rate to 0-0.25%, along with $700 billion in asset purchases, or quantitative easing (QE).

It also cut the discount window rate by 150 basis points. The Fed followed on March 23 with unlimited and open-ended QE, planned purchases of corporate, municipal government bonds.

LIQUIDITY OPERATIONS AND FUNDING – Trillions of dollars in repurchase agreements flooding the markets with cash; swap lines with other major central banks to provide dollar funding; program to support money market funds; various easing of bank capital buffers; funding backstop for businesses to provide bridging loans of up to four years; funding to help credit flow in asset-backed securities markets; also plans to extend credit to small- and medium-sized businesses.

FISCAL STIMULUS (FEDERAL) – U.S. Senate passed a $2 trillion stimulus package on March 25 including a $500 billion fund to help hard-hit industries and a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families. The U.S. House of Representatives will vote on Friday.

EURO ZONE

MONETARY STIMULUS – The European Central Bank on March 12 added 120 billion euros to its existing asset-purchase program of 20 billion a month, more quantitative easing (QE). On March 19, the ECB added another 750 billion euros in QE, taking the total to about 1.1 trillion euros this year, and added Greece to the portfolio of bonds it would purchase. On March 26, it eliminated a cap on how many bonds it can buy from any single euro zone country.

LIQUIDITY OPERATIONS AND FUNDING – The ECB cut the interest rate on its Targeted Long-Term Refinancing Operations (TLTROs), cheap loans to banks by 25 basis points to -0.75% on March 12. It provided additional LTROs to bridge bank funding through to June and relaxed capital rules.

FISCAL/OTHER: Suspension of limits on EU government borrowing; considering allowing a precautionary credit line worth 2% of national GDP from the ESM bailout fund.

GERMANY

FISCAL STIMULUS – Agreed a package worth up to 750 billion euros on March 23; 100 billion euros for an economic stability fund that can take direct equity stakes in companies; 100 billion euros in credit to public-sector development bank KfW for loans to struggling businesses; stability fund will offer 400 billion euros in loan guarantees to secure corporate debt at risk of defaulting.

FRANCE

FISCAL STIMULUS – 45 billion euros of crisis measures on March 17 in to the economy to help companies and workers; guaranteeing up to 300 billion euros of corporate borrowing from commercial banks on March 16.

ITALY

FISCAL STIMULUS – Emergency decree worth 25 billion euros on March 16 which suspends loan and mortgage repayments for companies and families and increases funds to help firms pay workers temporarily laid off.

SPAIN

FISCAL STIMULUS – A 200 billion-euro package announced on March 17; half of the economic assistance measures are state-backed credit guarantees for companies and the rest include loans and aid for vulnerable people.

UNITED KINGDOM

MONETARY STIMULUS – The Bank of England cut interest rates by a total of 65 basis points in two emergency meetings on March 11 (50 bps) and March 19 (15 bps); taking Bank Rate to a record low of 0.10%; announces 200 billion pounds of bond purchases.

LIQUIDITY OPERATIONS AND FUNDING – The BoE also introduced a new program for cheap credit and reduced a capital buffer to help banks lend. A BoE corporate financing facility will buy commercial paper with a maturity of up to 12 months from businesses that had an investment-grade credit rating or similar pre-crisis.

FISCAL STIMULUS – A 30 billion-pound stimulus plan on March 11; 330 billion pounds in loan guarantees to businesses; offered to pay 80% of wage bills if staff put on leave up to a maximum of 2,500 pounds ($2,930) a month each – if firms kept them on. Businesses also allowed to temporarily hold on to 30 billion pounds ($35 billion) of value-added tax (VAT).

CANADA

MONETARY STIMULUS – The Bank of Canada cut rates by 100 basis points in two emergency meetings on March 4 (50 bps) and March 13 (50 bps), taking the overnight interest rate to 0.75%.

LIQUIDITY OPERATIONS AND FUNDING – eligible collateral for term repo operations expanded; C$50 billion ($34.6 billion) insured mortgage purchase program; C$10 billion credit support program for businesses.

FISCAL STIMULUS – C$55 billion in tax deferrals for businesses and families; C$27 billion aid package for workers and low-income households.

JAPAN

MONETARY POLICY – The Bank of Japan eased monetary policy by ramping up purchases of exchange-traded funds (ETFs) and other risky assets, including corporate bonds. The central bank also decided to create a new loan program to extend one-year, zero-rate loans to financial institutions.

FISCAL STIMULUS – The government announced 430.8 billion yen ($4.1 billion) of extra spending, much aimed at supporting affected small and medium-sized businesses. The government will also fund upgrades to medical facilities, and subsidize working parents forced to go on leave because of closed schools.

No fiscal stimulus plans have been announced, but something is expected in April, which may include cash payouts. They could be worth more than 30 trillion yen ($270 billion).

AUSTRALIA

MONETARY STIMULUS – The Reserve Bank of Australia cut rates by a total of 50 basis points in two decisions (25 bps at the March 3 meeting and another 25 bps at a March 19 emergency meeting), taking the cash rate to 0.25%; introduces first use of quantitative easing, setting a target of around 0.25% for bond yields.

LIQUIDITY OPERATIONS AND FUNDING – A$90 billion ($53.3 billion) funding facility to banks at fixed rate of 0.25%; A$15 billion purchase program of residential mortgage-backed and other asset-backed securities; A$715 million support program for airlines.

FISCAL STIMULUS – A$66.1 billion in assistance for companies and additional welfare payments; A$17.6 billion package in subsidies for apprentices, small businesses, pensioners and others.

SOUTH KOREA

MONETARY STIMULUS – Bank of Korea cut interest rates by 50 basis points to 0.75% on March 16.

FISCAL STIMULUS – Supplementary budget of 11.7 trillion won; 50 trillion won in emergency financing for small businesses; further loosened key capital flow rules temporarily to encourage local financial institutions to supply more dollars.

CHINA

MONETARY STIMULUS – People’s Bank of China cut its one-year Loan Prime Rate, first introduced in August, by 10 basis points to 4.05% on Feb 20, following various liquidity injections and other mild policy easing. The PBOC cut the cash banks must hold as reserves for the second time this year on March 13, releasing 550 billion yuan ($79 billion).

LIQUIDITY AND FUNDING – China offered easier funding for small- and medium-sized businesses, increasing yuan re-lending and re-discount quotas by 500 billion yuan on Feb 25. Also increased policy banks’ loan quota by 350 billion yuan to make loans targeting these businesses.

FISCAL STIMULUS – China is set to unleash trillions of yuan of fiscal stimulus. The ramped-up spending will aim to spur infrastructure investment, backed by as much as 2.8 trillion yuan ($394 billion) of local government special bonds, according to sources on March 19. The national budget deficit ratio could rise to record levels, sources added.

Various small measures and fiscal expenditure such as tax breaks, reduced power charges and fee reductions.

BRAZIL

MONETARY STIMULUS – Central Bank of Brazil cut interest rates by 50 basis points to 3.75% and eased capital requirements for financial institutions.

LIQUIDITY OPERATIONS AND FUNDING – 1.2 trillion reais ($233.8 billion) central bank program to inject liquidity through purchases of bank loan portfolio packages; new rules allowing banks to offer firms and households increased loans and better terms; central bank intervention in FX markets and repurchases of dollar-denominated sovereign bonds.

FISCAL STIMULUS – 150 billion reais budget boost to support most vulnerable population and jobs; presidential decree declaring national emergency over the coronavirus passed in Congress, allowing the government to waive fiscal targets and free up budget resources. [nL1N

INDIA

FISCAL STIMULUS – The Federal government announced on March 26 a 1.7 trillion rupee ($22.6-billion) economic stimulus plan providing direct cash transfers and food security measures.

SOUTH AFRICA

MONETARY STIMULUS – The South African Reserve Bank (SARB) cut its main lending rate by 100 basis points to 5.25% on March 19.

LIQUIDITY OPERATIONS AND FUNDING – The SARB announced on March 25 a program to buy bonds of varying maturities on the secondary market, but it did not give further details.

(Compiled by Reuters Polls)

Coronavirus wreaks financial havoc as infections near 100,000

By Lawrence White and Dan Whitcomb

LONDON/LOS ANGELES (Reuters) – Business districts around the world began to empty and stock markets tumbled on Friday as the number of coronavirus infections neared 100,000 and the economic damage wrought by the outbreak intensified.

An increasing number of people faced a new reality as many were asked to stay home from work, schools were closed, large gatherings and events were cancelled, stores cleared of staples like toiletries and water, and face masks became a common sight.

In London, Europe’s financial capital, the Canary Wharf district was unusually quiet. S&P Global’s large office stood empty after the company sent its 1,200 staff home, while HSBC asked around 100 people to work from home after a worker tested positive for the illness.

In New York, JPMorgan divided its team between central locations and a secondary site in New Jersey while Goldman Sachs  sent some traders to nearby secondary offices in Greenwich, Connecticut and Jersey City.

The outbreak, which has killed more than 3,300 people globally, has radiated across the United States, surfacing in at least four new states plus San Francisco.

More than 2,000 people were stranded on the Grand Princess cruise ship after it was barred from returning to port in San Francisco because at least 35 people aboard developed flu-like symptoms. Test kits were delivered at sea to the vessel.

Moves by some major economies including the United States to cut interest rates and pledge billions of dollars to fight the epidemic have done little to allay fears about the spread of the virus and the economic fallout with supply chains crippled around the world, especially in China.

“There’s concern that while there has been a response from the Fed, given the nature of the problem, is this something the central bank can really help with?” said John Davies, G10 rates strategist at Standard Chartered Bank in London.

SINKING MARKETS

European stocks continued their slide after the Japanese market dropped to a six-month low, with 97% of shares on the Tokyo exchange’s main board in the red.

Airline and travel stocks have been among the worst affected as people cancelled non-essential travel. Norwegian Air Shuttle <NWC.OL>, the hardest-hit stock among European carriers, has fallen almost 70% since the start of February.

U.S. stock index futures dropped sharply over fears about the epidemic, which has prompted a sharp cut to global economic growth forecasts for 2020. The benchmark S&P 500 looked set to close out the week more than 10% below its record-high close on Feb. 19.

“If this really ramps up, we could see a lot more kitchen-sinking updates from the travel industry and airlines,” said Chris Beauchamp, chief market analyst at IG. “What’s impressive about the current move is it probably understates the degree of disruption we could be facing across the U.S. and Europe.”

Yields on long-dated U.S. Treasury bonds fell to record lows, while gold was on course for its biggest weekly gain since 2011 as investors fled to assets seen as safe havens.

In Europe, British 10-year gilt yields also dropped to a record low, while German Bund yields fell to within striking distance of record lows.

Yields fall as prices rise.

CABIN CREW MEMBER INFECTED

More than 98,000 people have been infected in over 85 countries, according to a Reuters tally. Mainland China, where the outbreak began, has seen more than 3,000 deaths, while the death toll in Italy stood at 148.

At current rates, the number of confirmed cases of the virus will surpass 100,000 on Friday.

About 3.4% of confirmed cases of the new coronavirus – known as COVID-19 – have died, far above seasonal flu’s fatality rate of under 1%, the World Health Organization said this week.

Singapore reported 13 new infections on Friday, its biggest daily jump, including a cabin crew member from Singapore Airlines.

In the United States, the world’s economic powerhouse, at least 57 new cases of coronavirus were confirmed as the virus struck for the first time in Colorado, Maryland, Tennessee and Texas, as well as San Francisco in California. Some 230 people have been infected in total and 12 have died.

Google, Facebook, Amazon, and Microsoft advised employees in the Seattle area to work from home, after some caught the virus. The companies’ work-from-home recommendation will affect more than 100,000 people in the area.

The U.S. Senate on Thursday passed an $8.3 billion bill to combat the outbreak, joining a slew of countries including China and South Korea in bolstering their war chests.

(Additonal reporting by Steve Gorman and Cath Turner in Los Angeles, Hideyuki Sano in Tokyo, Pamela Barbaglia, Karin Strohecker, Thyagaraju Adinarayan, Ritvik Carvalho and Tommy Wilkes in London, Sruthi Shankar in Bengaluru; Writing by Pravin Char; Editing by Mark Heinrich and Nick Macfie)

Coronavirus outbreak ‘getting bigger’, WHO says

By Stephanie Nebehay and Ryan Woo

GENEVA/BEIJING (Reuters) – The rapid rise in coronavirus raised fears of a pandemic on Friday, with six countries reporting their first cases, the World Health Organization warning it could spread worldwide and Switzerland cancelling the giant Geneva car show.

World share markets crashed again, winding up their worst week since the 2008 global financial crisis and bringing the global wipeout to $6 trillion.

Hopes that the epidemic that started in China late last year would be over in months, and that economic activity would quickly return to normal, have been shattered as the number of international cases has spiralled.

“The outbreak is getting bigger,” WHO spokesman Christian Lindmeier told reporters in Geneva.

“The scenario of the coronavirus reaching multiple countries, if not all countries around the world, is something we have been looking at and warning against since quite a while.”

Switzerland joined countries banning big events to try to curb the epidemic, forcing cancellation of next week’s Geneva international car show, one of the industry’s most important gatherings.

Mainland China reported 327 new cases, the lowest since Jan. 23, taking its tally to more than 78,800 cases with almost 2,800 deaths.

China’s three biggest airlines restored some international flights and the Shanghai fashion show, initially postponed, went ahead online.

TROOPS DEPLOYED

But as the outbreak eases in China, it is surging elsewhere.

Five more countries have reported their first case, all with travel history connected to Italy. They were Nigeria, Estonia, Denmark, Netherlands and Lithuania, Lindmeier said.

Mexico also detected its first cases of infection in two men who had travelled to Italy, making the country the second in Latin America to register the virus after Brazil.

Countries other than China now account for about three-quarters of new infections.

Bulgaria said it was ready to deploy up to 1,000 troops and military equipment to the border with Turkey to prevent illegal migrant inflows as steps up measures against the coronavirus. It has not reported any cases.

Mongolia, which has yet to confirm a case, placed its president, Battulga Khaltmaa, in quarantine as a precaution after he returned from a trip to China, state media reported.

A Chinese official called the epidemic the most difficult health crisis in the country’s modern history. Another said some recovered patients had been found to be infectious, suggesting the epidemic may be even harder to eradicate than previously thought.

Lindmeier said the WHO was looking very carefully into reports of some people getting re-infected.

In addition to stockpiling medical supplies, governments ordered schools shut and cancelled big gatherings to try to halt the flu-like disease.

U.S. President Donald Trump’s administration was considering invoking special powers to expand production of protective gear.

In Europe, France’s reported cases doubled, Germany warned of an impending epidemic and Greece, a gateway for refugees from the Middle East, announced tighter border controls.

The death toll in Italy, Europe’s worst-hit country, rose to 17 and those testing positive increased by more than 200 to 655.

Germany has nearly 60 cases, France about 38 and Spain 23, according to a Reuters count.

OLYMPIC DOUBTS

South Korea has the most cases outside China. It reported 571 new infections on Friday, bringing the total to 2,337 with 13 people killed.

The head of the WHO’s emergency programme, Dr Mike Ryan, said Iran’s outbreak may be worse than realised. It has the most deaths outside China – 34 from 388 reported cases.

U.S. intelligence agencies are monitoring the spread of coronavirus in Iran and India, where only a handful of cases have been reported, sources said.

U.S. Secretary of State Mike Pompeo said the United States had offered to help Iran, raising doubts about its willingness to share information.

Japan is scheduled to host the 2020 Olympics in July but Ryan said discussions were being held about whether to go ahead.

Organisers will decide next week on the ceremonial torch relay, due to arrive on March 20 for a 121-day journey past landmarks including Mount Fuji and Hiroshima’s Peace Memorial Park.

A woman wearing a face mask collects food purchased through group orders at the entrance of a residential compound in Wuhan, the epicentre of the novel coronavirus outbreak, Hubei province, China February 28, 2020. REUTERS/Stringer CHINA OUT.

As of Friday, confirmed cases in Japan had risen above 200, with four deaths, excluding more than 700 cases on a quarantined cruise liner, Diamond Princess.

A British man infected on the ship had died, bringing the death toll among passenger to six, Kyodo newswire reported.

Prime Minister Shinzo Abe had called for schools to close and vowed to prevent a severe blow to an economy already teetering on the brink of recession.

In Moscow, authorities were deporting 88 foreigners who violated quarantine measures imposed on them as a precaution, the RIA news agency cited Moscow’s deputy mayor as saying.

Chinese-ruled Hong Kong, where the coronavirus has killed two and infected more than 90, quarantined a pet dog of a coronavirus patient after it tested “weak positive”, though authorities had no evidence the virus can be transmitted to pets.

 Follow this link for Interactive graphic tracking global spread of coronavirus.

(Reporting by Stephanie Nebehay in Geneva, Ryan Woo, Yingzhi Yang in Beijing, Lisa Lambert and Mark Hosenball in Washington, Sangmi Chai in Seoul, Leika Kihara in Tokyo, Kate Kelland in London, Tsvetelia Tsolova in Sofia, Michael Shields and Brenna Hughes Neghaiwi in Zurich, Daina Beth Solomon in Mexico City; Writing by Robert Birsel, Giles Elgood and Nick Macfie; Editing by Simon Cameron-Moore, Jon Boyle and Timothy Heritage)

Rate futures surge as coronavirus seen pushing Fed to ease

(Reuters) – U.S. interest rates futures surged to their highest levels since last fall as a global sell-off in stocks and panicked buying of government bonds fueled growing expectations that the Federal Reserve will soon be forced to respond with interest rate cuts.

The fed funds futures contract tied to the Fed’s July policy meeting reflected a probability of more than 80% that the central bank’s benchmark overnight lending rate would be at least a quarter percentage point lower after that meeting’s conclusion. It currently stands at 1.50%-1.75% after three rate cuts last year.

The moves come as Italy, South Korea and Iran all reported sharp increases in the number of coronavirus infections.

(Reporting By Dan Burns; Editing by Alex Richardson)

DSV plans Shanghai-Alabama cargo flights to ease capacity constraints amid coronavirus

COPENHAGEN (Reuters) – Freight-forwarder DSV Panalpina said on Friday it would start direct cargo flights between Shanghai and Huntsville, Alabama from next week to cope with capacity constraints caused by the coronavirus outbreak in China.

The global freight industry has been hard-hit by uncertain demand and crews’ health concerns following the outbreak of the deadly virus in China, leading airlines and freight firms to scale back services, causing delivery delays and mounting backlogs.

Starting on Feb. 25, DSV plans to operate flights between Shanghai and Huntsville thrice weekly using the firm’s Boeing 747-8 freighter plane, it said in a statement.

“Due to the risk of spreading of the coronavirus (COVID-19), multiple airlines have either suspended or reduced the number of flights to and from mainland China,” it said.

Crew on DSV’s plane would rest in South Korea before flying to Shanghai and would virtually not disembark the plane while in Shanghai before returning to the United States with cargo.

“By doing it this way we can safely have this setup,” Flemming Nielsen, executive vice president, told Reuters.

Last week DSV said the coronavirus was squeezing air and sea freight capacity, but that it was still possible to ship goods on airplanes to countries neighboring China and fly them out from there.

DSV said it estimates capacity has shrunk by 5,000 tons a day due to the suspension of flights to China.

(Reporting by Nikolaj Skydsgaard; Editing by Susan Fenton)