Tag Archives: Economy

Coronavirus causes historic market drop, global scramble to contain ‘invisible enemy’

By Doina Chiacu and Guy Faulconbridge

(Reuters) – Coronavirus fears led to a historic drop in U.S. stocks, shut borders and disrupted daily life around the world, as governments took increasingly drastic measures to try to reduce the severity of the global outbreak.

Financial markets had their worst day in 30 years despite emergency action by global central banks to try to prevent a recession, with U.S. stock markets falling 12% to 13%, wiping out trillions of dollars in market value.

Just a month ago, financial markets were hitting record highs on the assumption the outbreak would largely be contained in China and not cause disruptions beyond what was seen with earlier viral outbreaks of Ebola, SARS and MERS. There have now been more cases and more deaths outside mainland China than inside, with 180,000 cases worldwide and over 7,000 deaths.

Canada, Chile and other countries closed their borders to visitors. Peru deployed masked military personnel to block major roads, while Ireland launched a campaign to recruit more healthcare workers. Airlines slashed flights, shed jobs and asked governments for billions of dollars in loans and grants.

In contrast to much of the world, Mexico and Brazil still held large political rallies and the United Kingdom kept its schools open.

GRAPHIC: Track the spread of coronavirus – https://graphics.reuters.com/CHINA-HEALTH-MAP/0100B59S39E/index.html

‘INVISIBLE ENEMY’

U.S. states pleaded with the Trump administration on Monday to coordinate a national response to the outbreak, saying patchwork measures enacted by state and local authorities were insufficient to confront the coast-to-coast emergency that has killed at least 74 Americans.

A few hours later, President Donald Trump urged Americans to halt most social activities for 15 days and not congregate in groups larger than 10 people in a newly aggressive effort to reduce the spread of the coronavirus.

Calling the highly contagious virus an “invisible enemy,” Trump said the worst of the outbreak could be over by July, August or later and warned a recession was possible.

However, the United States was not yet closing its borders or mandating curfews or business closures on a national scale.

Many states and cities had already taken those steps or were preparing to. San Francisco area residents will be urged to shelter in place for three weeks starting on Tuesday, the San Francisco Chronicle reported.

A White House adviser said the United States could pump $800 billion or more into the economy to minimize economic damage.

EU finance ministers were planning a coordinated economic response to the virus, which the European Commission says could push the European Union into recession.

‘TEST, TEST, TEST’

The World Health Organization (WHO) called on all countries on Monday to ramp up testing programs as the best way to slow the advance of the pandemic.

“We have a simple message to all countries – test, test, test,” WHO Director General Tedros Adhanom Ghebreyesus told a news conference in Geneva. “All countries should be able to test all suspected cases. They cannot fight this pandemic blindfolded.”

In Italy, another 349 people died on Monday, taking the total to 2,158, with nearly 28,000 cases, after 368 deaths were reported on Sunday, a daily toll more dire than even China was reporting at the peak of the outbreak.

“Many children think it is scary,” Norwegian Prime Minister Erna Solberg told a news conference dedicated to answering children’s questions about the pandemic.

“It is OK to be scared when so many things happen at the same time,” Solberg said.

Several countries banned mass gatherings such as sports, cultural and religious events to combat the fast-spreading respiratory disease that has infected nearly 179,000 people globally and killed more than 7,000.

Spain and France, where cases and fatalities have begun surging at a pace just days behind that of Italy, imposed severe lockdowns over the weekend.

The Middle East business and travel hub of Dubai said it was closing all bars and lounges until the end of March. Thailand plans to close schools, bars, movie theaters and popular cockfighting arenas.

Public health experts in the United States and elsewhere are hoping the measures will help spread out the number of new cases over time so as not to overwhelm hospitals and healthcare systems as has happened in Italy.

Italy’s Prime Minister Giuseppe Conte told daily Corriere della Sera that the outbreak was still getting worse, though the governor of Lombardy, the northern region that has suffered the worst, said he saw the first signs of a slowdown.

The International Olympic Committee will hold talks with heads of international sports organizations on Tuesday, a source close to a federation briefed on the issue said, amid doubts the Tokyo 2020 Olympics set to start on July 24 can proceed.

(Reporting by Doina Choicu in Washington and Guy Faulconbridge in London; Additional reporting by Leela de Krester and Maria Caspani in New York; Jeff Mason, Lindsay Dunsmuir, Nandita Bose, Howard Schneider and Ann Saphir in Washington; Kate Holton in London; Jan Strupczewski and Francesco Guarascio in Brussels; Francesca Landini and Elvira Pollina in Milan; John Revill in Zurich; Emma Farge in Lausanne; Kevin Yao in Beijing; Jaime Freed in Sydney; Gwladys Fouche in Oslo; Kay Johnson in Bangkok and Tracy; Rucinski in Chicago; Writing by Raju Gopalakrishnan, Nick Macfie and Lisa Shumaker; Editing by Peter Graff and Bill Berkrot)

‘It’s okay to feel scared’: Coronavirus brings countries close to standstill

By Doina Chiacu and Guy Faulconbridge

NEW YORK/LONDON (Reuters) – Bars, restaurants, cinemas and schools were shutting down from New York and Los Angeles to Paris and Dubai in a worldwide effort to combat the coronavirus pandemic, as financial markets tumbled despite emergency action by global central banks.

The U.S. Federal Reserve cut interest rates for the second time in less than two weeks, but Wall Street opened with a dizzying plunge that set off circuit breakers.

EU finance ministers were planning a coordinated economic response to the virus, which the European Commission says could push the European Union into recession.

Leaders of the G7 countries were due to hold a video conference on Monday to discuss a joint response.

European stocks fell on Monday to their lowest level since 2012, with investors still worried about the threat to the global economy. Wall Street’s S&P 500 index fell more than 9% as trading resumed after an initial automatic 15-minute cutout.

In Italy, hardest-hit country in Europe, there were 368 new deaths from the COVID-19 outbreak on Sunday, a daily toll more dire than even China was recording at the peak of the outbreak that first hit its central city Wuhan.

“Many children think it is scary,” Norwegian Prime Minister Erna Solberg told a news conference, at her office, dedicated to answering children’s questions about the pandemic.

“It is okay to be scared when so many things happen at the same time.”

Several countries banned mass gatherings such as sports, cultural and religious events to combat the disease that has infected over 169,000 people globally and killed more than 6,500.

Just a month ago, financial markets were hitting record highs on the assumption that the outbreak would largely be contained in China. But there have now been more cases and more deaths outside mainland China than inside.

New York Mayor Bill de Blasio said on Sunday he was ordering restaurants, bars and cafes to sell food only on a take-out or delivery basis. He also said he would order nightclubs, movie theatres, small theater houses and concert venues to close.

“These places are part of the heart and soul of our city,” he said. “But our city is facing an unprecedented threat, and we must respond with a wartime mentality.”

Los Angeles Mayor Eric Garcetti issued similar orders.

Spain and France, where cases and fatalities have begun surging at a pace just days behind that of Italy, imposed severe lockdowns over the weekend.

The Middle East business and travel hub of Dubai said it was closing all bars and lounges until the end of March. Thailand plans to close down schools, bars, movie theatres and popular cockfighting arenas.

“The worst is yet ahead for us,” said Dr Anthony Fauci, the top infectious diseases expert in the United States.

GETTING WORSE IN ITALY

U.S. Surgeon General Dr Jerome Adams said it was important to react aggressively.

“Do we want to go the direction of South Korea and really be aggressive and lower our mortality rates or do we want to go the direction of Italy?” he told Fox News.

Italy’s Prime Minister Giuseppe Conte told daily Corriere della Sera that the outbreak was still getting worse, though the governor of Lombardy, the northern region that has suffered the worst, said he saw the first signs of a slowdown.

Britain has asked manufacturers including Ford <F.N>, Honda <7267.T> and Rolls Royce <RR.L> to help make health equipment including ventilators to cope with the outbreak and will look at using hotels as hospitals.

The worldwide financial policy actions were reminiscent of the sweeping steps taken just over a decade ago to fight a meltdown of the global financial system, but the target now is forcing entire societies to effectively shut down.

“The issue for investors that still remains is that the virus’s economic impact is still not known, if this is a one-month event or if this is a one-year event, and how deep the cutback in consumer spending is going to be,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

Airlines said they would make more drastic cuts to their flying schedules, shed jobs and seek government aid because of sweeping global travel restrictions.

China said industrial output contracted at the sharpest pace in 30 years in the first two months of 2020.

The International Olympic Committee will hold talks with heads of international sports organisations on Tuesday, a source close to a federation briefed on the issue said, amid doubts the Tokyo 2020 Olympics starting on July 24 can proceed.

The Jewish faithful should avoid kissing the stones of the Western Wall, the chief rabbi of the Jerusalem site said.

And Starbucks <SBUX.O> has moved to a “to go” model in all its company-owned stores in the United States and Canada, the coffee chain said, temporarily abandoning reusable cups.

(Reporting by Doina Choicu, Leela de Krester in New York; Lindsay Dunsmuir, Nandita Bose, Howard Schneider and Ann Saphir in Washington; Guy Faulconbridge and Kate Holton in London; Jan Strupczewski and Francesco Guarascio in Brussels; Francesca Landini and Elvira Pollina in Milan; Kevin Yao in Beijing; Jaime Freed in Sydney; Gwladys Fouche in Oslo; Kay Johnson in Bangkok and Tracy Rucinski in Chicag; Writing by Raju Gopalakrishnan and Nick Macfie; Editing by Stephen Coates, Timothy Heritage and Peter Graff)

Explainer: Fed may go into its crisis tool kit soon. What’s in it?

Reuters
By Jonnelle Marte and Howard Schneider

(Reuters) – Analysts and economists increasingly expect the Federal Reserve to roll out measures beyond interest rate cuts and bond purchases to ensure financial markets keep operating smoothly and banks have ample liquidity during the coronavirus outbreak.

The unexpected move by aircraft maker Boeing Co  to draw on nearly $14 billion in credit lines from its banks, as travel restrictions aimed at containing the pandemic hurt its customers, illustrates the stress that some corporate credit markets are already starting to feel.

The Fed, which delivered an emergency rate cut last week and is expected to lower them more when it meets next week, has already taken steps to ensure liquidity in the banking system by substantially increasing the support it provides to overnight lending markets.

But the central bank has an array of other emergency lending facilities and other tools it used during the 2007-2009 financial crisis that it could turn to if needed to keep credit markets from freezing up during times of stress.

“The playbook story in these events is that the Fed would always be a provider of liquidity as needed,” said Nellie Liang, a senior fellow in economic studies at the Brookings Institution and former director of the Division of Financial Stability at the Federal Reserve Board.

Some steps the Fed can take on its own under existing authority, while others might require partnering with the Treasury Department or expanded authority from Congress.

But here is a look at some of the tools that could be adjusted or revived to support markets if credit conditions worsen significantly:

** Discount window

The Fed’s lending tool of last resort is rarely used because banks are worried that borrowing from the window could make them appear weak. But policymakers could start by reminding banks that “the discount window is open, please use it,” said Liang. Fed officials could also make the credit more attractive by lowering the rate they charge or extending the length of the loans offered from one day to 30 days or 90 days.

** Term Auction Facility (TAF)

The Fed rolled out the TAF in 2007 as a way to offer loans to banks that were too hesitant to turn to the discount window. The TAF lacked some of the stigma associated with the discount window because of the way the loans were issued. Financial firms had to bid for the funding, which meant that the rate they paid would be viewed as being determined by the market, and not as a penalty rate.

The money also was not disbursed until three days later, suggesting that the banks who borrowed in that way were not in immediate need of cash.

“It is a signal that you are not desperate,” said Liang. The Fed closed the facility in March 2010.

** Commercial paper funding facility (CPFF)

In the financial crisis, establishing the CPFF was the closest the Fed came to making direct loans to non-financial businesses.

The commercial paper market is a key source of short-term funding for a range of businesses. When it froze up in 2008, the Fed created the CPFF to help reopen that market by purchasing high-rated, asset-backed commercial paper at three-month maturities. The facility was closed in 2010.

Some measures of potential stress have appeared in this market. The spread on borrowing rates between the highest-rated non-financial borrowers and the next tier below them has widened notably this month. It is now the widest in nearly two years.

It is too early to say if the current stress will grow to an extent that allows the Fed to reopen such a facility under the “unusual and exigent circumstances” section of the Federal Reserve Act, which allows it to lend to businesses and individuals.

** Central bank liquidity swaps

The Fed has standing agreements with five other major foreign central banks – the Bank of Canada, European Central Bank, Bank of England, Bank of Japan and Swiss National Bank – that allows them to provide dollars to their financial institutions during times of stress. These were converted from temporary to standing arrangements in 2011.

The Fed could roll out more agreements with other central banks not currently party to the standing agreements to increase access to dollars if needed.

** What else?

The central bank could create new tools more tailored to today’s market, said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. “Many of these were created for the specific issues that were plaguing the financial system back then,” said Bostjancic.

“What it shows is the Fed can be innovative.”

(Reporting by Jonnelle Marte and Howard Schneider; Editing by Dan Burns and Andrea Ricci)

Fed slashes rates in emergency move to combat coronavirus risks

WASHINGTON (Reuters) – The U.S. Federal Reserve cut interest rates on Tuesday in an emergency move designed to shield the world’s largest economy from the impact of the coronavirus.

It was the Fed’s first emergency rate cut since 2008 at the height of the financial crisis, underscoring how grave the central bank views the fast-evolving situation.

In a statement, the central bank said it was cutting rates by a half percentage point to a target range of 1.00% to 1.25%.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate,” the Fed said a statement.

The decision was unanimous among policymakers.

In a news conference, Federal Reserve Chair Jerome Powell said the coronavirus would weigh on the U.S. economy for some time. He said he believed the central bank’s action would provide “a meaningful boost to the economy.”

“We saw a risk to the outlook for the economy and chose to act,” Powell said. “I do know that the U.S. economy is strong.. I fully expect that we will return to solid growth and a solid labor market as well.”

The Fed’s decision to cut interest rates before its next scheduled policy meeting on March 17-18 reflects the urgency with which the Fed feels it needs to act in order to prevent the possibility of a global recession.

U.S. stocks initially surged on the move, which had increasingly been expected as it became evident the coronavirus would not be contained to its epicenter in China. With 90,000 cases worldwide in 77 countries and territories, the virus has upended global supply chains, triggered cancellations of sports events, business meetings and other large gatherings, and torpedoed global stock prices on fears it could cause a recession.

Equities reversed many of their initial gains within minutes of the unscheduled announcement by the Federal Open Market Committee, the central bank’s policy arm. U.S. Treasury debt prices surged, sending bond yields lower. Interest-rate futures traders immediately began pricing in even more rate cuts in coming months.

“Normally, markets would welcome a rate cut, and they were hoping for it,” said Peter Kenny, Founder of Kenny’s Commentary LLC. “Now that we’ve got it, the question is what’s next.”

Powell had earlier on Tuesday taken part in a conference call with the top finance authorities from the world’s seven largest economies, which concluded with a statement that they would take all appropriate measures to support the economy. At his news conference, Powell said the Fed was in active discussions with other central banks.

“I’m a little surprised. I didn’t expect that at 10 o’clock today, I thought you’d see something coordinated among central banks,” said Justin Lederer, interest rate strategist at Cantor Fitzgerald in New York.

U.S. Treasury Secretary Steven Mnuchin applauded the Fed’s decision, saying it would help the U.S. economy. In a tweet after the Fed move, President Donald Trump called on the central bank to cut even more. “More easing and more cutting,” he said.

(Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Dan Burns and Andrea Ricci)

Coronavirus spreading fast but stigma is more dangerous: WHO

By Stephanie Kelly and Se Young Lee

GENEVA/BEIJING (Reuters) – Coronavirus now appears to be spreading much more rapidly outside China than within but can still be contained, and stigma is more dangerous than the disease itself, the World Health Organization said on Monday.

WHO chief Tedros Adhanom Ghebreyesus said almost nine times as many cases had been reported outside China as inside in the previous 24 hours, adding that the risk of coronavirus spreading was now very high at a “global level”.

He said outbreaks in South Korea, Italy, Iran and Japan were the greatest concern, but that there was evidence that close surveillance was working in South Korea, the worst affected country outside China, and the epidemic could be contained there.

“Stigma, to be honest, is more dangerous than the virus itself. Let’s really underline that. Stigma is the most dangerous enemy,” he told a news briefing in Geneva.

He said the fight against the coronavirus should become a bridge for peace, commending the United States for supporting sending medical aid to Iran despite the tensions between them.

“I think we have a common enemy now,” he said.

The global death toll exceeded 3,000, with the number of dead in Italy jumping by 18 to 52 and Latvia, Saudi Arabia and Senegal reporting cases for the first time.

Yet equity markets surged after their worst plunge since the financial 2008 crisis last week, encouraged by the prospect of government action to stem the economic impact.

Finance ministers of the G7 group of leading industrialized democracies were expected to discuss measures in a conference call on Tuesday, sources told Reuters.

Oil prices jumped 4% amid hopes of a deeper output cut by the Organization of the Petroleum Exporting Countries.

( Graphic: Tracking the coronavirus https://graphics.reuters.com/CHINA-HEALTH-MAP/0100B59S39E/index.html )

MORE THAN PREDICTED

A senior U.S. official said he was concerned about a likely jump in the number of cases in the United States, which has had more than 90, with six deaths.

“When you have a number of cases that you’ve identified and they’ve been in the community for a while, you’re going to wind up seeing a lot more cases than you would have predicted,” Dr Anthony Fauci, head of the infectious diseases unit at the U.S. National Institutes of Health, told CNN.

South Korea has had 26 deaths and reported another 599 infections on Monday, taking its tally to 4,335.

Of the new cases in South Korea, 377 were from the city of Daegu, home to a branch of the Shincheonji Church of Jesus, to which most of South Korea’s cases have been traced after some members visited the Chinese city of Wuhan, where the disease emerged.

Vietnamese students of Hanoi National University of Education, wearing protective masks, attend the first day of classes after returning to the university, which was closed for over a month due to the novel coronavirus outbreak, Hanoi, Vietnam March 2, 2020. REUTERS/Kham

The Seoul government asked prosecutors to launch a murder investigation into leaders of the church. Seoul Mayor Park Won-soon said that if founder Lee Man-hee and other heads of the church had cooperated, fatalities could have been prevented.

Lee knelt and apologized to the country, saying that one church member had infected many others and calling the epidemic a “great calamity”. “We did our best but were not able to stop the spread of the virus,” Lee told reporters.

It was not immediately known how many of South Korea’s dead were members of the church.

‘OUTBREAKS ARE CURBED’

But Wuhan itself, at the center of the epidemic, shut the first of 16 specially built hospitals that were hurriedly put up to treat coronavirus cases, the Chinese state broadcaster CCTV said.

There was also a steep fall in new cases in Hubei, the province around Wuhan, but China remained on alert for people returning home with the virus from other countries.

The virus broke out in Wuhan late last year and has since infected more than 86,500 people, mostly in China.

Only eight cases were reported in China beyond Hubei on Sunday, the WHO said.

Outside China, meanwhile, more than 60 countries now have cases, with more than 8,700 infected and more than 100 deaths.

One of the worst-hit nations, Iran, reported infections rising to 1,501, with 66 deaths, including a senior official. With stocks of gloves and other medical supplies running low in pharmacies, authorities uncovered a hoard of supplies including millions of gloves.

In Britain, which has 40 confirmed cases, Prime Minister Boris Johnson urged people to be prepared for a further spread.

ECONOMIC DAMAGE

Factories worldwide took a beating in February from the outbreak, with activity in China shrinking at a record pace, surveys showed, raising the prospect of a coordinated policy response by central banks.

The epidemic has forced the postponement of festivals, exhibitions, trade fairs and sports events and damaged tourism, retail sales and global supply chains, especially in China, the world’s second-largest economy.

Middle East airlines have lost an estimated $100 million so far due to the outbreak.

An official of the International Air Transport Association (IATA) said airlines stood to lose $1.5 billion this year due to the virus and urged governments to help them.

The Organization for Economic Cooperation and Development warned that the outbreak was pitching the world economy into its worst downturn since the global financial crisis, urging governments and central banks to fight back.

(This story corrects to say almost nine times as many cases reported outside China as inside, not vice versa, in the second paragraph)

(Reporting by Stephanie Nebehay in Geneva, Hyonhee Shin and Jack Kim in Seoul, Ju-min Park in Gapyeong, Ryan Woo, David Stanway, Se Young Lee, Emily Chow and Andrew Galbraith in Beijing, Leigh Thomas in Paris, Michelle Price in Washington, Leika Kihara in Tokyo, Jonathan Cable in London, Donny Kwok and Twinnie Siu in Hong Kong and Grant McCool in Washington; writing by Nick Macfie and Philippa Fletcher; editing by Mark Heinrich and Kevin Liffey)

U.S. construction spending increases to record high

WASHINGTON, (Reuters) – U.S. construction spending increased by the most in nearly two years in January, but the upbeat news is likely to be overshadowed by financial market fears that the fast-spreading coronavirus could tip the economy into recession.

The Commerce Department said on Monday that construction spending surged 1.8% to a record high of $1.369 trillion as investment in both private and public projects increased. Data for December was revised up to show construction outlays rising 0.2% instead of decreasing 0.2% as previously reported.

Economists polled by Reuters had forecast construction spending would increase 0.6% in January. Construction spending advanced 6.8% on a year-on-year basis in January.

The coronavirus epidemic, which has killed at least 3,000 people and infected more than 80,000, has left financial markets

fearing the end of the longest economic expansion on record, now in its 11th year.

U.S. stock indexes suffered their worst week since the 2008 global financial crisis last week as investors sold equities and bought U.S. Treasuries. The yield on the two-year Treasury note fell below 1% for the first time since 2016.

In January, spending on private construction projects jumped 1.5% to the highest level since February 2018, after gaining 0.1% in December. It was boosted by a 2.1% surge in spending on homebuilding after a 1.5% increase in December.

Residential construction is being supported by lower mortgage rates. Residential investment increased solidly in the second half of 2019, after contracting for six straight quarters, the longest such stretch since the last recession.

Spending on nonresidential structures, which includes manufacturing plant and mining exploration, shafts and wells, increased 0.8% in January. Spending on nonresidential structures fell 1.5% in December. The government in its fourth-quarter GDP report last week said spending on nonresidential structures contracted in 2019 by the most since 2016.

Outlays on private non-residential structures have been depressed by a manufacturing downturn due to trade tensions and cheaper energy products.

Investment in public construction projects increased 2.6% in January after gaining 0.6% in December.

Spending on state and local government construction projects surged 2.0% after rising 0.5% in December. Outlays on federal government construction projects soared 9.9% in January to the highest level since May 2012.

That followed a 1.5% increase in December.

((Reporting by Lucia Mutikani; Editing by Paul Simao))

Rate futures surge as coronavirus seen pushing Fed to ease

(Reuters) – U.S. interest rates futures surged to their highest levels since last fall as a global sell-off in stocks and panicked buying of government bonds fueled growing expectations that the Federal Reserve will soon be forced to respond with interest rate cuts.

The fed funds futures contract tied to the Fed’s July policy meeting reflected a probability of more than 80% that the central bank’s benchmark overnight lending rate would be at least a quarter percentage point lower after that meeting’s conclusion. It currently stands at 1.50%-1.75% after three rate cuts last year.

The moves come as Italy, South Korea and Iran all reported sharp increases in the number of coronavirus infections.

(Reporting By Dan Burns; Editing by Alex Richardson)

Trump says U.S. may give farmers more money until trade deals ‘kick in’

Trump: U.S. may give farmers more aid until trade deals ‘kick in’
WASHINGTON (Reuters) – The United States may give American farmers additional money until trade deals with China, Mexico, Canada and other countries fully go into effect, President Donald Trump said on Friday.

“If our formally targeted farmers need additional aid until such time as the trade deals with China, Mexico, Canada and others fully kick in, that aid will be provided by the federal government,” Trump wrote in a Twitter post entirely in capital letters.

It was not immediately clear how large the aid package would be or how long it would last.

The Trump administration set aside a $16 billion aid package to farmers in 2019, and $12 billion a year earlier. In January, Agriculture Secretary Sonny Perdue said farmers should not expect another bailout package in 2020.

Trump is seeking re-election in the Nov. 3 presidential election. Farmers form a key part of his electoral base, but they have been badly bruised by low commodity prices and Trump’s tit-for-tat tariff dispute with China.

The White House declined to comment. The Department of Agriculture and the U.S. Trade Representative’s office did not immediately respond to requests for comment.

Last month, Trump signed a trade deal with Canada and Mexico into law, along with a separate Phase 1 accord with China that went into effect in mid-February.

Canada has not yet ratified the deal and experts had been skeptical that China, which had pledged to increase its purchases of U.S. goods by $200 billion over two years, would be able to meet the goal even before a coronavirus outbreak hit the country’s imports and exports.

(Reporting by Makini Brice; editing by Susan Heavey and Bernadette Baum)

Fed policymakers cautiously optimistic on U.S. economy despite new risks, minutes show

By Lindsay Dunsmuir

WASHINGTON (Reuters) – Federal Reserve policymakers were cautiously optimistic about their ability to hold interest rates steady this year, minutes of the central bank’s last policy meeting showed, even as they acknowledged new risks caused by the coronavirus outbreak.

The readout on Wednesday of the policy discussion, at which policymakers unanimously voted to keep interest rates unchanged in a target range of between 1.50% and 1.75%, also showed Fed officials were skeptical about any big rethink of the central bank’s inflation target.

“Participants generally saw the distribution of risks to the outlook for economic activity as somewhat more favorable than at the previous meeting,” the Fed said in the minutes of the Jan. 28-29 meeting. It went on to say the current stance of monetary policy was likely to remain appropriate “for a time.”

Coming into this year the Fed had made clear that, after three interest rate cuts in 2019, it plans to hold interest rates steady, barring a significant change in the U.S. economic outlook.

Policymakers have pointed to U.S. consumer spending levels, dissipating U.S-China trade tensions and loose financial conditions as supporting their view, but how long such an upbeat assessment can last has already been tested by escalating concern about the global economic impact of the coronavirus outbreak that started in China.

On Monday Apple Inc <AAPL.O> issued a revenue warning due to the disruption the epidemic is causing to its supply chain. China, the world’s second-largest economy, is still struggling to get its manufacturing sector back up and running after imposing severe travel restrictions to contain the flu-like virus.

Fed Chair Jerome Powell said last week it was too early to tell if the knock-on economic impact on the United States would be severe or sustained enough to cause the Fed to change its current path.

Since the outbreak began investors have brought forward their bets of when the Fed will cut interest rates again, to around June of this year. In the minutes, policymakers said the threat “warranted close watching.”

Despite that, Fed officials offered a fairly upbeat assessment of the economy, expecting consumer spending to “likely remain on a firm footing,” job gains to expand at a healthy pace, continued moderate economic expansion and inflation returning to its 2% goal. The Fed is forecasting the economy growing 2.0% this year.

That is at odds with some economic data released since the meeting. The Commerce Department reported last week a slowdown in consumer spending in January. Business investment has also experienced a deepening downturn and the U.S. manufacturing sector remains weak.

As part of a discussion on rethinking the Fed’s inflation goal during the central bank’s review of its main policy tools, there were vocal doubts about adopting an inflation range.

“Most participants expressed concern that introducing a symmetric inflation range … could be misperceived as a signal that the Committee was comfortable with continued misses below its symmetric inflation objective,” the Fed said.

BALANCE SHEET

Elsewhere in the minutes, Fed policymakers discussed how to handle its growing balance sheet. The Fed has been buying $60 billion monthly of U.S. Treasury bills since October to increase the level of reserves in the banking system in response to a liquidity crunch.

Powell has said the Fed would aim to begin scaling back that amount sometime in the April-June period, when the level of reserves in the banking system would likely be deemed adequate.

After that, “regular open market operations would be required over time in order to accommodate trend growth in the Federal Reserve’s liabilities and maintain an ample supply of reserves,” Fed policymakers noted in the minutes.

The Fed also expects to continue offering support in the market for repurchase agreements, or repo, at least through April but in the minutes staff floated a plan that included phasing out the term repo operations after April. Those policymakers who commented on the plan were comfortable with the idea, according to the minutes.

Several policymakers asked for more discussion “before long” on the possibility of creating a standing repo facility, which would allow banks to borrow cash as needed at a fixed rate.

(Reporting by Lindsay Dunsmuir in Washington; Additional reporting by Jonnelle Marte in New York; Editing by Andrea Ricci and Matthew Lewis)

Coronavirus poses risks to fragile recovery in global economy: IMF

By Andrea Shalal

WASHINGTON (Reuters) – The coronavirus epidemic has already disrupted economic growth in China and a further spread to other countries could derail a “highly fragile” projected recovery in the global economy in 2020, the International Monetary Fund warned on Wednesday.

In a note prepared for G20 finance ministers and central bankers, the global lender mapped out a plethora of risks facing the global economy, including the fast-spreading coronavirus and a renewed spike in U.S.-China trade tensions, as well as climate-related natural disasters.

Finance ministers and central bankers from the top 20 advanced industrialized economies will gather in Riyadh, Saudi Arabia, later this week amid continued uncertainty about the impact of the coronavirus, known as COVID-19.

The IMF said it was sticking to its January forecast for 3.3% growth in the global economy this year, up from 2.9% in 2019, already a downward revision of 0.1 percentage points from its forecast in October.

But it said the recovery would be shallow and risks remained skewed to the downside. “The recovery could be derailed by a sharp rise in risk premia, triggered for example by a re-escalation of trade tensions, or a further spread of the coronavirus,” the Fund said.

Chinese state television quoted President Xi Jinping as saying China could still meet its economic growth target for 2020 despite the epidemic. But the IMF note cast doubt on that.

“The coronavirus, a human tragedy, is disrupting economic activity in China as production has been halted and mobility around affected regions limited,” the Fund wrote in the note. “Spillovers to other countries are likely — for example through tourism, supply chain linkages, and commodity price effects.

It said the impact of the virus was still unfolding, and while the current scenario assumed a quick containment of the virus and a bounce-back later in the year, the impact of the epidemic could be larger and longer-lasting.

“A wider and more protracted outbreak or lingering uncertainty about contagion could intensify supply chain disruptions and depress confidence more persistently, making the global impact more severe,” the Fund said in the note.

Cyber attacks, an escalation of geopolitical tensions in the Middle East or a breakdown in trade negotiations between China and the United States could also impede the short-term global recovery, it said. And climate-related disasters, rising protectionism and social and political unrest triggered by persistent inequality posed further economic risks.

The Fund urged policymakers to maintain fiscal and monetary policy support. Low inflation required monetary policy to stay accommodative in most economies, it said.

(Reporting by Andrea Shalal; Editing by Tom Brown)