rss

Fitch is on the lookout for coronavirus economic impacts – on trade, ports, output & more

E’ryone seems to have chilled on the virus impacts on economies.

All it took was a bit of number juggling:
  • China has changed its definition of ‘confirmed cases’ in latest coronavirus guidelines
Fitch is not quite so mellow:
  • says global ports vulnerable to coronavirus-related volume declines
  • says decreased production in China because of extended work holiday & factory closures will affect import & export volumes in Q1 2020
  • some rated APAC ports will be affected if slowdown in trade is prolonged due to coronavirus
  • if more firms suspend Chinese operations or withdraw from production in China due to coronavirus shipping volume may take longer to recover
  • Middle East export volumes will be hurt by significant declines in Chinese demand for oil
  • reduced trade due to virus exacerbates effects of 2018-2019 trade barriers on US west coast port volumes in particular
  • rated Australian coal export terminals to see volume impact from prolonged slowdown in industrial activity in china due to coronavirus
  • US-China trade levels expected to pick up with phase 1 of trade deal may take longer to take hold due to virus-related production slowdown
E'ryone seems to have chilled on the virus impacts on economies.

More Powell testimony: Will see virus impact in data fairly soon

More from chair Powell’s testimony in the Senate

  • we will see virus-infected data fairly soon
  • affects could be important in China
  • supply chains is an important issue.
  • Financial markets can also transmit a reaction to virus

Fed Powell concludes his testimony at 11:24 AM ET.

Overall, the comments were in line with yesterday’s testimony and really didn’t shed any new light that we don’t already know. Coronavirus major concern but it’s too early to tell. The Fed is in continue repo operations the 2nd quarter. The economy is in a good place.
US stocks have been waffling back and forth but moving back higher. The S&P index is just off the day’s high level as is the NASDAQ index. The Dow industrial average is a little further off the intraday record high levels

China Pres. Xi: Believes China will win battle against virus

China’s Xi trying to stay positive in the face of the coronavirus outbreak

China Pres. Xi is on the wires trying to stay positive in the face of the coronavirus outbreak. He says:
  • Believes China will win battle against virus
  • China will complete economic and social targets that have been set
  • China will be more prosperous after battle against virus is 1
  • prevention and control work on coronavirus is having positive results

Hubei reports 2,097 additional coronavirus cases, death toll tops 1000

The latest coronavirus news

The latest coronavirus news
Hubei province announces 2,097 additional coronavirus cases and an additional 103 deaths. That pushed the death toll above 1000.
The pace of news cases is slower than 2,531 a day ago.
In important related news, the Chinese National Health Commission has changed their definition of “confirmed case” in their latest guidelines. Starting from Sunday, those who have tested positive but have no symptoms will no longer be regarded as confirmed. This is in contrast to WHO guidance.
Since then, some provinces have been cutting totals.

Is the coronavirus’ impact on financial markets overblown?

A look at the key question in markets right now

CMS 1
The Coronavirus continues to see an outbreak globally with the latest estimates putting the death total over 900 persons. With fear continuing to spread and millions disrupted, financial markets have certainly been impacted.

Typically, most problematic geo-political or economic events have always managed to yield some material effect on markets. This was seen earlier this year with the rising tensions between the US and Iran.

However, the Coronavirus is itself an entirely different animal, whose impact is far more globally reaching. This article will explore how the virus has correlated to financial markets and which instruments should be looked at.

How does the virus affect global markets?

(more…)

Airline Cathay Pacific is asking its 27,000 workers to take 3 weeks off without pay

Cathay is a Hong Kong carrier, citing a “significant” drop in demand for flights caused by the coronavirus outbreak.

  • wants staff to take 3 weeks of  unpaid leave
  • between March 1 and the end of June
Examples of the economic impact the virus are mounting.

Death toll in China’s coronavirus outbreak has risen to at least 212

And the number of cases of coronavirus confirmed across thje glove is now over 8,100 9,000

For Hubei province (Wuhan is the capital city of Hubei and the epicentre of the outbreak)
  • 42 deaths confirmed
  • 1,200 new cases confirmed over the past 24 hours
More figures will come as the morning progresses in China, but as a heads up it appears more than 70% of new cases are outside of Hubei province.

Fed Powell press conference highlights

Feds Powell conducts press conference after January 2020 interest rate decision

Fed's Powell
  • Fed wants to avoid misinterpretation with inflation wording
  • Not comfortable with inflation persistently under 2%
  • Want to signal not comfortable with prices below goal
  • We expect Bill purchases to make reserves ample in 2nd quarter
  • Fed will know when adjustments have run course when reserves are durably at a sustainable level
  • At some point the Fed will raise minimum bid rate on repos
  • reserve levels will have to be at a level high enough to remain ample. 1.5 trillion will be the bottom end of the range
  • he expects reserve fluctuation particularly around tax season
  • Fed will provide more details and will keep the process a smooth one
  • Fed’s attention is just to raise the level of reserves. That is our sole intention
  • Asked if Bill buying is QE , he says many things affect financial markets.
  • Most forecasts underestimated labor participation gains
  • Labor market continues to perform well
  • Labor wages have moved from about 2% to 3% currently
  • It is a bit surprising that wages haven’t risen more given such low unemployment

Market reaction:

  • Gold has moved to new session highs at $1575.84
  • US rates have moved lower with the 10 year falling to 1.5942%
  • NASDAQ index up 47 points at 9316.69. S&P index up 11.3 points (was up 13 points)
  • EURUSUD moved to New York session highs at 1.1015.  A trendline on the hourly chart is just ahead at 1.1017 and the falling 100 hour moving average is 1.10232
EURUSD looks to test topside trend line and falling 100 hour moving average

  • USDCHF is moving toward session lows.  Markets trading at 0.9728 from 0.9743. USDJPY moves lower as well (109.10 currently from 109.20).
More from Powell presser:
  • virus is a serious issue, significant human suffering
  • coronavirus likely to disrupt activity in China, maybe world
  • very uncertain about how far virus will spread
  • Fed’s carefully monitoring situation around coronavirus
  • sees grounds for cautious optimism on global economy
  • supportive financial conditions, trade tensions easing and lower odds of hard Brexit all contributed to more positive outlook
  • We will continue to adjust IOER as appropriate to help move the effective rate for the middle of the range
  • there is no current urgency to make decision on standing repo facility
  • over the long term it is possible there is a financial stability risk from climate change
  • in the very early stages of the impact from climate change
On China and USMCA
  • Phase 1 deal with China and USMCA is without question positive and should support the economy over time
  • Trade policies uncertainty remains elevated
  • Still have 2 or 3 active trade discussions going on at the moment
  • There is a wait and see attitude for businesses on trade
  • We need to be patient on trade deals economic impact
  • Does not yet see a decisive recovery for manufacturing
There is some modest moves to the downside in stocks and the USD has tilted to the downside (3:04 PM ET):
  • S&P index up 6.5 points
  • NASDAQ index up 32 points
  • The USD has ticked lower through the presser on a modest basis.
More from the Powell press conference:
  • We don’t think there is imminent risk on Chinese debt
  • Fed sees asset value valuations somewhat elevated, but not extreme
  • household that is in a good place
  • business debt is rising but not threatening stability
  • vulnerabilities to financial stability is moderate overall
Press conference ends at 3:23 PM ET.

British Airways suspends bookings of direct flights to China until March

In response to the coronavirus outbreak situation

The airline has halted bookings on its website for direct flights from London to Beijing and Shanghai until March, after warnings over travel to China.

They are still offering connecting flights though, with the layover being in Hong Kong (mostly) before passengers have to continue with a different airline.

Reuters tried to get in contact with BA on the matter, but a spokeswoman just said that they were “assessing the situation”.

If we do see more airlines and countries take more drastic measures, expect that to weigh further on the Chinese economy and in turn, the global economy to start the year.

Warning on the potential for a recession due to the coronavirus – a critical ‘cushion’

Stephen Roach warns on the potential for the coronavirus outbreak to shock the world in a recession

  • Historically, the rapid expansion of cross-border trade has been an important part of the global growth cushion that shields the world economy from all-too-frequent shocks. 
  • Now, however, reflecting the unusually sharp post-crisis slowdown in global trade growth, this cushion has shrunk dramatically, to just 13% over the 2010-19 period. With the world economy operating dangerously close to stall speed, the confluence of ever-present shocks and a sharply diminished trade cushion raises serious questions about financial markets’ increasingly optimistic view of global economic prospects.
Who is Roach?
  • a senior fellow at Yale University’s Jackson Institute for Global Affairs
  • a senior lecturer at Yale School of Management
  • formerly chairman of Morgan Stanley Asia and chief economist at Morgan Stanley
Stephen Roach warns on the potential for the coronavirus outbreak to shock the world in a recession