Coronavirus Biggest Threat To Global Growth Since The 2008 Financial Crisis
Coronavirus Biggest Threat To Global Growth Since The 2008 Financial Crisis
Stocks Jump Ahead Of Emergency G7 Coronavirus Call
Oscar Williams-Grut Senior City Correspondent
Yahoo Finance UK 3 March 2020
European Central Bank president Christine Lagarde said on Monday night the ECB stands ready to take 'appropriate' action. (Michael Probst/AP)
European stocks climbed on Tuesday, amid hopes of coordinated international action to support the global economy.
Equities rallied ahead of an emergency call between G7 finance ministers and central bankers at 12pm GMT to discuss their response to the coronavirus outbreak.
Possible actions could include coordinated spending by governments, the buying up of debt, lending to banks to ease liquidity pressures, or even a coordinated interest rate cut, something not seen since the financial crisis.
Australia’s central bank cut interest rates overnight and US President Donald Trump called for a rate cut from the US Federal Reserve on Twitter on Tuesday morning.
European Central Bank (ECB) president Christine Lagarde, who will be on Tuesday’s call, said in a statement on Monday night the ECB is “closely monitoring developments” and stands “ready to take appropriate and targeted measures”.
Bank of England governor Mark Carney said Tuesday to expect a “powerful and timely” response that will include “a combination of fiscal measures and central bank initiatives”.
The FTSE 100 (^FTSE) was up 1.8% by lunchtime, the German DAX (^GDAXI) climbed by 1.8%, and the French CAC 40 (^FCHI) surged 1.5%.
Stocks surged in the US overnight. The S&P 500 (^GSPC) closed up 4.6%, the Dow Jones (^DJI) climbed 5%, and the Nasdaq (^IXIC) closed 4.4% higher.
Michel Hewson, chief market analyst at CMC Markets, said investors were betting on “a joined up and cohesive response to the economic disruption caused by the various coronavirus shutdowns.”
The OECD on Monday warned coronavirus is the biggest threat to global growth since the 2008 financial crisis. The group said global growth could be as low as 1.5% this year if the epidemic transforms into a pandemic.
However, Reuters reported overnight that a draft text of the G7 coronavirus statement does not detail either a monetary or fiscal response.
“If true there is likely to be some disappointment that nothing concrete has been decided yet,” Deutsche Bank strategist Jim Reid and team wrote in a note to clients on Tuesday.
“The 2008 template suggests that the biggest response is unlikely to come at the first meeting. They will probably need a fair bit more time to be truly co-ordinated.”
Neil Wilson, chief market analyst at Markets.com, said: “The stage is set for a let-down and we have yet to see any real momentum from the US session carry forward into Asia.”
Overnight in Asia, Japan’s Nikkei (^N225) closed down 1.2%, the Hong Kong Hang Seng closed down flat (^HSI), while the Shanghai Composite (000001.SS) ended up 0.7%.
The Bank of England declined to comment on Monday night when asked about a G7 call. The Treasury didn’t respond to a request for comment.