Stocks and Bond Yields Plummet After Fed Cut

Stocks globally plunged Monday even after the Federal Reserve slashed its benchmark interest rate to near zero as investors remained concerned that the emergency measures won’t suffice to ward off a recession caused by the coronavirus pandemic. (…)

“It’s basically using up all their ammunition within a three-week span,” said Mr. Wong. “There’s nothing left. They can’t use monetary loosening as part of their arsenal anymore.”

In addition to slashing borrowing costs, the Fed said it would buy $700 billion in Treasurys and mortgage-backed securities, cut the rate charged to banks for short-term emergency loans from its discount window and activate swap lines with five other central banks. (…)

Jerome Powell told reporters that plunging oil prices were a factor in the Fed’s decision. (…)

U.S. Policy Makers Weigh Next Stage of Stimulus U.S. policy makers are contemplating a significant fiscal stimulus to protect businesses and consumers from the economic disruptions caused by the coronavirus epidemic.

Lawmakers are seeking to achieve two goals: one is to help workers who miss paychecks and companies that lose business, such as restaurants and retailers. Another is to provide broad support for the economy to prevent or soften a recession.

Possibilities for the next round of government assistance include broad tax cuts, cash payments to households, targeted assistance and increased federal spending. Also on the table: suspension of student-loan payments, infrastructure projects and aid to state and local governments. (…)

President Trump on Friday criticized the bill that Democrats and his administration have been working on, a sign of how difficult a larger package might be. (…)

Mr. Mnuchin (…) urged corporations that have benefited from the Trump administration’s tax cuts to accept lower profits and keep workers on payrolls. (…)

Mr. Mnuchin also said he was particularly interested in assistance for the airline industry because of the importance of maintaining a domestic travel network. Such aid could be done by deferring tax payments or through other means, such as loan guarantees. Other affected industries—including hotels and cruise lines—could also be considered.

Those may prove controversial. In a letter to Mr. Trump earlier this week, Senate Democrats said they didn’t necessarily want to boost companies’ returns.

“Our focus should be on helping workers, including hourly workers and those workers at small or retail businesses who often don’t have access to short term savings or paid time off,” they wrote. (…)

…Senate Democrats thereby demonstrating their lack of understanding of how businesses are run. You need profits and reasonably sound balance sheets to run a lasting biz, hire and keep workers.

Germany wields ‘bazooka’ in fight against coronavirus Package expands loans to companies as EU warns of ‘major shock’ to economy

Bank of Canada Cuts Rates by Half Percentage Point Central bank says emergency cut is a proactive measure amid the coronavirus pandemic

The Bank of Canada issued an emergency half-percentage-point rate cut Friday, to 0.75%, saying the combination of the coronavirus pandemic and a plunge this week in energy prices will have “serious consequences” on the broader economy.

Bank of Canada Gov. Stephen Poloz unveiled the decision at a press conference in Ottawa featuring Finance Minister Bill Morneau and the head of Canada’s banking watchdog, Jeremy Rudin. The conference was designed as a show of strength, to show that the country’s most senior financial policymakers were prepared to act aggressively in unison to guard the economy from further damage.

‘We will do everything it takes to keep the economy strong,” Mr. Morneau said. (…)

Mr. Poloz reiterated Friday that the central bank was prepared to adjust rates further if required. Many economists now forecast another half percentage point cut, taking the benchmark rate to 0.25%. (…)

Mr. Morneau said he would next week reveal a significant package of fiscal measures to support the economy. In the meantime, he was establishing 10 billion Canadian dollars ($7.2 billion) in credit facilities to help small business who might face trouble obtaining credit.

Meanwhile, Mr. Rudin, the chief banking regulator, said he would reduce the amount of capital banks would have to set aside as a buffer, thereby freeing up about C$300 billion available to lend, effectively immediately. (…)

Bank of Japan to Double Stock Purchases to Blunt Virus Impact

Coronavirus Shutdowns Deliver a Punch to China’s Economic Gut Business activity in China turned broadly negative for the first time on record as home sales, construction activity, retail sales and factory output plunged, pushing unemployment to a record high

(…) Output at China’s factories slumped 13.5% in the combined January-February period from a year earlier, the statistics bureau said Monday. Retail sales slumped 20.5%. Fixed asset investment, a measure of construction, fell 24.5%, while real estate construction slid 44.9%. Home sales fell 34.7% and investment in the real-estate sector was off 16.3%. All of these figures were much worse than analysts forecast, and also represented a contraction after positive growth readings in the earlier comparable periods.

China’s record-high jobless rate, officially 5.7% for February [from 5.2% in December], is particularly concerning to Communist Party authorities whose political mandate includes improving the economic situation for its people. (…)

The figures for the first two months include almost a whole month of largely uninterrupted activity in January, before Wuhan was locked down on Jan. 23, two days before Lunar New Year. Mr. Mao, the bureau spokesman, said activity was normal until late January, indicating the bulk of the pullback occurred last month.

Biggest U.S. Banks Halt Buybacks to Free Up Capital for Coronavirus The pandemic ‘is an unprecedented challenge for the world and the global economy,’ the forum says

The biggest U.S. banks put share buybacks on hold Sunday and pledged to put their capital to use helping consumers and businesses struggling with the rapid economic slowdown caused by the novel coronavirus outbreak.

The Financial Services Forum, which represents the biggest U.S. lenders and custody banks, announced the decision to suspend buybacks after the Federal Reserve cut its benchmark interest rate to near zero and took steps to prevent market disruptions and keep money flowing through the financial system.

The novel coronavirus pandemic “is an unprecedented challenge for the world and the global economy,” the forum said. (…)

Oil Crash Is Bad News for Regional Banks That Went Big on Energy Lenders are bracing for loan losses and depressed earnings from an oil crash that is hammering the North American energy industry.

US investors brace for ratings downgrades About $300bn of bonds rated triple B trade with junk-like yields above 6 per cent

Most airlines face bankruptcy by end of May, industry body warns Carriers call for state support to avoid coronavirus ‘catastrophe’ as they slash capacity

Saudi Aramco Cuts Spending, Hikes Dividend Amid Price War

(…) The company’s net profit for 2019 fell 21% to 330.69 billion riyals ($88.11 billion), down from 416.52 billion riyals ($111 billion) a year earlier.

(…) it expects capital spending for 2020 to be between $25 billion and $30 billion, down from $32.8 billion a year earlier, due to market conditions and recent price volatility.

The decision to cut expenditures follows the company’s announcement last week that the Saudi government has ordered it to boost production capacity by 1 million barrels a day to 13 million barrels a day. Saudi Arabia has said an upgrade of this kind would typically cost $30 billion. (…)

The price war has driven down shares in Aramco, which had remained relatively resilient in the face of the coronavirus’ damaging effect on oil demand.

“It’s an ideological move” on the part of Crown Prince Mohammed bin Salman to cut prices, said a Saudi government adviser. (…)

The company’s shares have declined 8.3% from the IPO price of 33 riyals.

Senior staff and consultants at the company have purchased swaths of Aramco shares and many are concerned that the plans they have been asked to execute could cause them to lose money, according to current and former Saudi government advisers.

Over 5 million individuals, nearly all of them Saudis, bought into the IPO. Some middle-class Saudis invested their savings or took out loans to buy into the listing. For them, the sustained drop in share prices “could be a tragedy,” said a former Saudi government adviser. (…)

Coronavirus Will Change How We Shop, Travel and Work for Years

(…) On the supply side, international manufacturers are being forced to rethink where to buy and produce their goods — accelerating a shift after the U.S.-China trade war exposed the risks of relying on one source for components.

In the white-collar world, workplaces have amped up options for teleworking and staggered shifts — ushering in a new era where work from home is an increasing part of people’s regular schedule.

“Once effective work-from-home policies are established, they are likely to stick,” said Karen Harris, managing director of consultancy Bain’s Macro Trends Group in New York. (…)

In China, where the virus first erupted in Wuhan late last year, the top legislature has already imposed a total ban on trade and consumption of wild animals amid scientists’ warnings that the deadly coronavirus migrated from animals to humans. Additional strict hygiene rules are expected that will accelerate a push by wary consumers to online shopping, similar to how the 2003 SARS outbreak changed shopping habits as people avoided the mall. (…)

Governments may spend much more on health care to avoid the massive cost associated with epidemics, according to a new paper on the macroeconomic impact of the virus published by the Brookings Institution and co-authored by Warwick McKibbin and Roshen Fernando of the Australia National University. (…)

“Long brewing debates about how to revamp the U.S. health care system might benefit from a renewed sense of urgency, enabling structural change.” (…)