(Associated Press) It was less than 11 weeks ago that the first cases of pneumonia were detected in Wuhan, China. The speed at which what would soon be named COVID-19, the disease caused by the new coronavirus, knocked the global economy askew is unparalleled in our lifetimes.
Following are developments Thursday related to the outbreak, the efforts by governments to stabilize their economies, the companies that must navigate through an altered landscape, and the millions of people who have had their lives upended.
CENTRAL BANKS AND GOVERNMENTS: The Federal Reserve created a program to exchange dollars for foreign currency with nine central banks to support dollar lending in global markets that are under pressure from the impact of the viral outbreak. The maneuver, announced Thursday, enables foreign banks to provide dollars to their banks that sometimes lend and trade in US currency. It is the latest effort by the Fed to smooth the functioning of financial markets, as investors, banks, and companies rush to stockpile cash amid plunging stock markets and a sharply slowing economy.
The European Central Bank launched an expanded program to buy financial assets in a bid to calm markets. The purchases are aimed at keeping borrowing costs down and making sure the bank’s low rates get through to the economy. The purchases will total up to 750 billion euros ($830 billion) by the end of this year and will include government and private-sector bonds as well as commercial paper. Market borrowing costs for heavily indebted Italy rose and as the eurozone faces a drastic economic slowdown with many businesses closed.
MARKETS: Stocks are falling in early trading on Wall Street, but the losses are more subdued than the wild swings that have dominated recent weeks. At least for now.
European stocks rose early in their trading day, but the gains dissipated. Asian markets also dropped following the brutal 5.1% loss for U.S. stocks the prior day.
Crude, which plunged below $20 per barrel for the first time in decades Wednesday, has surged 10%. The price for crude is still down almost 60% in the past 30 days, with a growing list of economists predicting a recession that will smother energy demand.
NATIONAL ECONOMICS: Mass disruptions have spread across globe as governments struggled to slow the spread of the coronavirus while trying to keep afloat their economies.
The number of Americans filing new claims for unemployment benefits surged last week by 70,000, indicating that the impact of the coronavirus was starting to be felt in rising layoffs in the job market. The Labor Department reported Thursday that applications for benefits, a good proxy for layoffs, rose by 70,000 to a seasonally adjusted 281,000 last week.
A leading German economic index fell by the most since 1991, indicating Europe’s largest economy is plunging into recession due to the disruption from the virus outbreak.
The Munich-based Ifo institute said Thursday its survey of business optimism fell to 87.7 points from 96 in February. That’s its lowest level since August 2009, when Lehman Brothers collapsed and the global economy reeled from the financial crisis. “As things stand, the German economy could shrink by 1.5 percent this year,” the institute said, adding that “the downside risk in the present forecast is considerable.
Saudi Arabia will cut spending by 5%, or about $13.3 billion, to offset the impact of plunging oil prices and the effects of the new coronavirus on its economic outlook and deficit. Saudi Arabia has around $500 billion in foreign reserves, but with oil prices plummeting to around $26 a barrel and tourism revenue drying up due to a suspension of the Muslim pilgrimage to Mecca, it was expected the kingdom would make cuts to its spending.
Australia’s central bank on Thursday cut its benchmark interest rate to a record low 0.25% to ease the cost of credit and alleviate the shocks to the economy from the virus outbreak. The move comes two weeks after a cut of the same quarter of a percentage point magnitude and marks the first time since July 1997 that the Reserve Bank has acted on interest rates outside its monthly cycle of board meetings.
AIRLINES: Germany’s Lufthansa said that airlines may need government help to survive if the coronavirus outbreak lasts for an extended time. The airline has already slashed routes and frozen new hires. Lufthansa said members of its executive board also decided to take a 20% cut in basic pay for 2020.
The International Air Transport Association, which represents around 290 airlines worldwide, on Thursday put the price tag on combined lost revenue to date at $7 billion. It will get a lot worse. The group estimates total costs worldwide could reach $113 billion. The group called for emergency aid of up to $200 billion for airlines globally.
Seven Middle Eastern countries have suspended all commercial flights, while other airlines halted international flights amid a near total collapse in demand for travel. Vietnam Airlines was the latest with a halt to all international flights until the end of April.
MANUFACTURING: More companies are closing factory gates a day after the top U.S. automakers announced shutdowns of production in America.
On Thursday, South Korea’s Hyundai plant in the Czech Republic said it would close for two weeks starting Monday. The plant produced almost 310,000 cars last year and employs some 3,300 people. The move echoes similar moves by major carmakers across Europe, including Volkswagen and Fiat Chrysler.
Ford, General Motors, Fiat Chrysler, Honda, and Toyota said earlier that they would shut down all factories in North America, citing concerns for employees who work in close quarters building automobiles. Nissan will close U.S. factories. Hyundai shut down its Alabama plant after a worker tested positive for the virus.
SUPPLY CHAIN: Factories in China, struggling to reopen after the coronavirus shut down the economy, face a new threat from U.S. anti-disease controls that might disrupt the flow of microchips and other components they need. Chinese manufacturers assemble more than 80% of smartphones for Apple, Samsung and other brands, half of the world’s personal computers and a big share of home appliances and other goods. But they need U.S. processor chips and other high-value components. It isn’t clear how U.S. anti-coronavirus curbs might affect trade.
GROCERIES: British supermarkets have brought in measures to control the coronavirus-induced panic-buying that’s seen many of their shelves emptied and elderly and vulnerable people often unable to get the products they need.
Tesco, Britain’s largest supermarket chain, is limiting customers to three items each across its entire product range. And Sainsbury’s reserved the first hour of trading in its stores Thursday for elderly and vulnerable customers. Businesses in the U.S. that sell groceries are making similar moves, including Target and ShopRite.
The run on food is also extending to some of those that offer meal kits, including Blue Apron. The company, which last month said it may put itself up for sale, saw its stock soar by Wednesday’s close and up more than 50% in Thursday premarket trading.
FACTORY REPURPOSING: Germany-based Beiersdorf, whose brands include Nivea and Coppertone, says it is launching production of medical disinfectant in Europe to support the fight against the virus. Beiersdorf said Thursday that it initially will provide 500 tons of disinfectant for hospitals, medical staff and emergency responders such as police and firefighters. The disinfectant will be produced at plants in Hamburg, Waldheim in eastern Germany and the Madrid suburb of Tres Cantos.
And Tesla CEO Elon Musk said in a tweet that the automobile maker will make ventilators if there is a shortage.