Business Maverick

March 27: Five Things You Need to Know to Start Your Day

By Bloomberg 27 March 2020
Caption
A pedestrian wearing a protective face mask walks past a boarded up building in San Francisco, California, U.S., on Tuesday, March 24, 2020. Governors from coast to coast Friday told Americans not to leave home except for dire circumstances and ordered nonessential business to shut their doors. Photographer: David Paul Morris/Bloomberg

China is blocking foreigners from coming in, G-20 leaders said they were injecting over $5 trillion into the global economy, and Australia’s quantitative easing program is showing early signs of success. Here are some of the things people in markets are talking about today. 

Chinese Wall

China announced it will block almost all foreigners from entering the country starting Saturday, a recognition that most new coronavirus cases were coming from overseas now that the government slowed the spread of the disease among its own people. Foreigners won’t be allowed to enter even with valid visas and work permits, the foreign ministry said in a statement late Thursday, in what it called a “necessary and temporary” step. Diplomats aren’t included in the order, and neither are people coming to China “to engage in necessary economic, trade, scientific and technological activities, and for urgent humanitarian needs,” it said. The move mimics travel bans imposed by many other countries, which China had resisted when the majority of global cases were within its borders. The decision comes as the U.S. surpassed Italy in cases, with more than 80,700, and is poised to now overtake China as having the most infections in the world. Here’s how Bloomberg is mapping the outbreak across the world.

Markets Rally

A global rally in risk assets looked set to gather pace on Friday in Asia as investors bet the massive fiscal and monetary responses to the coronavirus crisis will ease its economic impact. The S&P 500 rose more than 6%, for its first three-day rally since February, while the dollar slumped for a third day. Equity futures in Japan, Hong Kong and Australia were all more than 3% higher. The MSCI All Country World Index is on course for a 13% advance this week, following the rout that dragged stocks around the globe into bear markets. Treasuries edged higher, while crude retreated. Data is beginning to show the extent of the economic damage of the outbreak — U.S. jobless claims surged to a record 3.28 million last week as businesses shut down to help prevent its spread. While the reading exceeded estimates, U.S. government aid may help to cushion the impact on workers and businesses. But have we hit a false bottom, or is this the start of something really big? Here’s more on this rally’s stamina.

“Whatever It Takes”

Leaders from the Group of 20 nations on Thursday said they were injecting over $5 trillion into the global economy and committed to do “whatever it takes” to overcome the coronavirus pandemic and its fallout. “The virus respects no borders,” they said in a joint statement after an extraordinary G-20 leaders’ summit convened virtually amid the outbreak. The gathering, chaired by Saudi Arabia, was joined by leaders from member countries and included representatives of international organizations such as the United Nations. Coordination among G-20 countries was instrumental for action to stabilize the global economy during the financial crisis that started in 2008. “We will continue to conduct bold and large-scale fiscal support,” the leaders said. “The magnitude and scope of this response will get the global economy back on its feet and set a strong basis for the protection of jobs and the recovery of growth.” Still, there was one more issue not actually mentioned in the joint statement that seemed a glaring omission: the oil shock triggered by the price war between Saudi Arabia and Russia.

So Far So Good

Australia’s central bank is one week into buying government bonds in order to lower interest rates across the economy and the early verdict: so far so good. The Reserve Bank of Australia has bought A$18 billion of securities ($10.7 billion) since last Friday, after setting an objective for three-year government bond yields of 0.25%, the same as the cash rate. That yield has held within 4 basis points of the target, while signs of funding stress in money markets have eased. “A week into the RBA’s QE program and there are some signs of success,” said Martin Whetton, head of bond and interest-rate strategy at Commonwealth Bank of Australia. The RBA is running two tracks at the moment with bond buying: one to return order to the market and the other to bring down borrowing costs in the economy via yield curve control. It got off to a good start as as the initial announcement sent three-year maturities down toward the 0.25% target. The spread to 10-year yields has dropped by almost half from last week’s six-year peak and the gap between three-month bank bill rates and overnight indexes swaps — a key measure of how banks can readily raise funds — is back close to its five-year average. Here’s what Bloomberg Economists have to say.

Surprise Surplus

Hong Kong’s exports rose unexpectedly in February after plunging the most in more than a decade the previous month as the impact of the escalating coronavirus outbreak on global trade was offset by the timing of the Lunar New Year holiday. Exports rose 4.3% in February from year-ago levels to HK$238.6 billion ($30.8 billion), better than the -20% median forecast among economists surveyed by Bloomberg. Imports dropped 0.1% to HK$277.1 billion, extending declines for a 15th straight month. The trade deficit widened to HK$38.6 billion. The moderate increase in February stemmed largely from “distortions from the timing of the Lunar New Year,” the government said in a statement. The major holiday period fell in February last year and in January this year. Taking the two months together, exports fell 12% in value terms, reflecting the serious disruptions to regional trade caused by the Covid-19 outbreak, the government said. The decline is the worst for a combined two-month period since 2009, according to data compiled by Bloomberg.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours.

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