By Lorcan Roche Kelly
Light at the end of the tunnel
President Donald Trump said he is seeing signs that the coronavirus outbreak in the U.S. may be leveling off, while warning of a “very deadly period” over the next two weeks. The number of daily fatalities in New York, the epicenter of American infections, dropped slightly to 594 yesterday. Governor Andrew Cuomo said it was too early to call a plateau in the state. British Prime Minister Boris Johnson was hospitalized yesterday as a “precautionary measure” as he struggles to recover from the virus. Elsewhere in Europe, there continue to be indications that authorities are getting the pandemic under control with fewer new cases reported in Italy, Germany, France and Spain.
Government spending and central bank actions aimed at cushioning the economic toll of the coronavirus are mounting. In Japan, Prime Minister Shinzo Abe’s government will deploy a two-phase stimulus package to help workers and businesses as the country seems set to introduce states of emergency in the worst-hit areas. Singapore unveiled a third package of economic support measures. The government in Spain is aiming to roll out basic income soon, and House Speaker Nancy Pelosi hopes to introduce the next U.S. stimulus package “later this month.” EU finance ministers are set to meet tomorrow to reach a consensus on proposals for a region-wide bailout.
A meeting of OPEC and its allies, originally scheduled for today, has been moved to Thursday as global oil producers try to reach an agreement on cutting production following the collapse of crude prices. President Trump said he didn’t think he would need to impose tariffs on imported oil to protect domestic producers, but he said he would do it if he had to. One Russian policymaker said that his country and Saudi Arabia are “very, very close” to a deal while analysts suggest that even a cut in output by around 10 million barrels per day would not be enough to help remove the current glut estimated at 35 million barrels. All this makes for another volatile session for oil, with a barrel of West Texas Intermediate for May delivery trading at $27.50, paring an earlier loss of as much as 11%.
The early signs that there may be some easing of the virus outbreak are helping global markets start the week on an optimistic note. Overnight, the MSCI Asia Pacific Index added 2.6% while Japan’s Topix index closed 3.9% higher. In Europe, the Stoxx 600 Index was 2.9% higher at 5:50 a.m. Eastern Time, with the rally led by automakers and travel stocks. S&P 500 futures pointed to a bounce at the open, the 10-year Treasury yield was at 0.665% and gold gained.
Banks must submit their capital plans today for the Fed’s stress tests as they try to prove they can withstand a hypothetical disaster just as a real one unfolds. Almost all of today’s events center around the Federal Reserve as they offer another total of $1.5 trillion in liquidity across three repo operations, while the central bank also opens the temporary swap operation for foreign monetary institutions.