© Reuters. FILE PHOTO: A woman wearing a mask to prevent coronavirus infection responds when a disinfection service provider cleans up a traditional market in Seoul
By Michelle Price
WASHINGTON (Reuters) – Senior officials from President Donald Trump's government attempted to calm the market panic on Sunday that the corona virus could trigger a global recession. The US public overreacted and the stocks would recover due to the strength of the American economy.
The decline fell 11.5% last week as the virus accelerated beyond China's borders. This was the worst weekly decline since the 2008 global financial crisis. Around $ 4 trillion was wiped off the value of US stocks.
Selling continued when trading resumed on Sunday evening and fell more than 1%. However, they later made up for the initial losses as the US Federal Reserve and other global central banks will soon take action to mitigate the economic consequences of the epidemic. (MKTS / GLOB)
Futures for the 10-year US Treasury Treasury Note rose and pushed implied returns for this instrument below 1% for the first time.
"We need to experience more panic before investors are convinced that it's time to get in," said Quincy Krosby, chief market strategist at Prudential Financial Inc (NYSE :), on Sunday, adding that the 10-year period is up -Returned yield would be a measure of mood stabilization.
Economists have started to worry that the losses could soon weigh on consumer spending before the virus spreads to the United States.
The U.S. financial regulators, which will gather on Wednesday, are facing their most difficult week in ten years. An official told Reuters that the coming days will decide whether the federal government needs to take any action to increase market confidence.
Speaking to NBC's "Meet the Press" on Sunday, Vice President Mike Pence, who heads the government's response to the virus, said the market "will come back".
"The fundamentals of this economy are strong. We have just seen some new numbers in housing and consumer confidence and business optimism. Unemployment is at a 50-year low. More Americans are working than ever," said Pence.
On Friday afternoon, Fed chairman Jay Powell also attempted to alleviate fears fueled by the horrific economic data from China, noting that the central bank would take measures to support the economy if necessary, which he believed continue to be strong.
Trump, who is seeking re-election on November 3, has expressed his view that the risk to the American people from the virus remains "very low" despite being exposed to democratic criticism that his government is responding to the outbreak botched.
When asked in the Fox News Sunday program whether the American people were overreacting to the current threat, US Secretary of Health Alex Azar replied, "Absolutely."
The Director General of the World Health Organization, Tedros Adhanom Ghebreyesus, also told CNBC on Sunday that the market panic was inappropriate, even after the organization upgraded its virus threat assessment on Friday.
"Global markets … should calm down and try to see reality," he said.
The rapidly spreading virus infected around 85,000 people in 53 countries. China, the second largest economy in the world and epicenter of the outbreak, is home to the vast majority of cases. About 70 were diagnosed in the United States.
A Washington, DC man in his fifties with underlying health problems was the first American to die from the virus, officials said on Saturday.
Mohamed El-Erian, economic advisor to Allianz (DE :), wrote on Twitter late Saturday that calming words may not be enough to stem the flight, given the negative news.
"Without anything else, I'm worried that this will still be negative," he wrote on Monday.
The rapid spread of the virus has caused companies worldwide to restrict travel, send workers home and cancel conferences, and hit stocks in the aviation, gambling, tourism, and luxury goods sectors. This disruption to global supply chains and productivity has darkened the prospects for a global economy that is already struggling with the aftermath of the US-China trade war.
So far, the biggest measurable effect of the outbreak has been in China. However, a survey of purchasing managers last month found that U.S. companies were beginning to be affected. Another set of US economic indicators due to be released earlier this week is being closely monitored for signs of growing impact.
Investors now fully expect the Fed to respond this month with rate cuts. The question remains as to how far the Fed would cut and what more officials there and other central banks can do than have lowed borrowing costs for more than a decade.
In a blog post on Sunday, Washington's Bank Policy Institute trading group said the Fed could consider additional measures to stimulate credit, including cutting deposits that banks must keep in reserve with the Fed and increasing the availability of liquidity through its discount window ,
For a chart about US stocks, the following fell sharply:
Pence said the US government is doing "everything" to prevent the virus from spreading and is "confident" that the US is ready.
Azar said during a meeting of the White House Coronavirus Task Force on Saturday, Treasury Secretary Steven Mnuchin discussed the negative reaction of stock markets and said that much of it was due to uncertainty. Azar said the government tried to remove this uncertainty by being as transparent as possible about the latest developments.
"So we try to give the American people all the information we have when we have it so that they don't believe that there is secret information that they don't get," said Azar.