Top German economists press Merkel to drop budget commitment
Guy Chazan, Berlin bureau chief, reports:
A group of prominent German economists have called on Angela Merkel’s government to abandon its commitment to a balanced budget in the face of the coronavirus epidemic and consider an extensive package of measures to help companies affected.
The economists said the government should consider wide-ranging tax holidays and bring forward by six months the planned abolition of the “solidarity surcharge” for 90 per cent of taxpayers. The surcharge on income, capital gains and corporate tax was first introduced in 1991 to help pay for German reunification.
The economists warned that Germany faced a recession in the first half year of 2020, largely as a result of trade fairs, travel plans and large events being cancelled and of production stoppages in industry.
The measures go further than the more modest measures announced by the government on Sunday to help the economy as it grapples with a virus that has thrown supply chains into disarray.
The centrepiece of the package was a push to expand access to Kurzarbeit, a government-subsidised scheme used to great effect during the 2008-9 financial crisis that enables companies to reduce staff working hours during an economic slowdown without having to lay them off.
The government announced it would help companies in a liquidity crunch with export credit guarantees and loans from KfW, the country’s state investment bank.
The experts welcomed these measures but said Berlin might have to go much further, stepping in to save firms threatened with insolvency.
“If we don’t succeed in containing the spread of the economic shockwaves and we start seeing a big wave of insolvencies, the state should consider as a last resort taking equity in companies,” they said, citing the example of the bank bailouts after the 2008-9 financial crisis.
The economists noted that the German state had the necessary fiscal scope to implement the measures they proposed. The country’s debt-to-gross domestic product ratio has dropped below 60 per cent – much lower than most of its EU neighbours – and Germany’s total budget surplus stood at €50bn last year.
The economists include Peter Bofinger, a former economic adviser to Ms Merkel’s government: Gabriel Felbermayr, head of the Kiel Institute for the World Economy, Clemens Fuest, head of the ifo economic think tank, and Michael Hüther, director of the German Economic Institute.
France’s BioMérieux to launch tests as part of effort to ease bottleneck
Clive Cookson, science editor, reports:
BioMérieux has joined the commercial race to produce diagnostic tests for the Covid-19 infection, which would help to address a testing bottleneck in public laboratories.
The French diagnostics company said on Wednesday it would launch three different tests.
The first, called SARS-COV-2 R-GENE, will be produced available at the end of March. It is similar to the standard PCR tests already used to test respiratory samples for the virus. Results are delivered in four to five hours, bioMérieux said, and a large number of patient samples may be processed simultaneously. Regulators are expected to give it rapid approval.
In parallel, bioMérieux is developing two automated tests with the support of the US Department of Defense.
One will specifically detect SARS-CoV-2, the virus responsible for the current epidemics, and the other will also diagnose 21 other common respiratory pathogens, delivering results in approximately 45 minutes. They will be submitted for regulatory approval in the second and third quarters of 2020.
“In the face of the urgency of the Covid-19 epidemic, bioMérieux is committed to provide a comprehensive diagnostic approach that meets the highest performance and quality standards to help physicians mount an effective response to the outbreak,” said Mark Miller, chief medical officer.
BoE: More stimulus available if needed
A Bank of England press conference outlining measures to support the economy through the coronavirus outbreak has been running for nearly one hour.
Delphine Strauss has more details:
“This is a big package,” Mark Carney, the outgoing governor, told reporters. He argued that while the focus was often on interest rates, the decision to let banks draw on the countercyclical buffer would allow them to lend an additional £200bn in corporate credit, “exactly the kind of drawdowns that would be required in this kind of situation.”
In addition, he said, the BoE had given the financial sector certainty over its funding, and “on top of it there are fiscal measures that are coming”.
Andrew Bailey, who is about to take over from Mr Carney at the BoE’s helm, said the measures announced had probably used up just over half the stimulus available to the central bank, adding: “That means more is available”.
Asked whether the economic fallout from the coronavirus outbreak could prove as damaging as the 2008 global financial crisis, Mr Carney said: “There is no reason for this shock to turn into the equivalent of 2008… if we handle it well.”
Muted response from bond markets to BoE rate cut
Tommy Stubbington in London reports:
The Bank of England’s interest rate cut was met with a muted reaction in bond markets.
Two-year gilts have rallied slightly, while longer-dated bonds are weaker, pushing the 10-year yield up a touch to 0.28 per cent. Cuts had already been partly priced in by markets, and investors are not betting on further rate reductions from here.
“While the suddenness of the move is a surprise, the size of the rate cut itself isn’t, considering that markets had already fully priced UK base rates moving to 0.25 per cent in the next few months,” said Mike Riddell, head of UK fixed income at Allianz Global Investors.
The BoE has told us that 0.1 per cent is as low as rates could go, so there’s only one more that they can do.
However, what the moves today mean is that if the economic downturn worsens in coming months, as we expect, then we will probably see quantitative easing in the UK again far sooner than markets had previously anticipated.
Investors may be reluctant to pile into gilts as they expect the BoE move to be accompanied by a big increase in borrowing later on Wednesday.
Mr Riddell said:
It’s surely no coincidence that the timing of the large emergency rate cut is the day of the Budget, which will be fiscally expansionary as has been well telegraphed.
ECB’s Lagarde calls for more urgent co-ordinated EU action
Martin Arnold in Frankfurt reports:
Christine Lagarde, president of the European Central Bank, has called for more urgent action by EU leaders to avoid the spread of coronavirus causing a serious economic collapse in the region reminiscent of the 2008 financial crisis.
Speaking on a video call with EU leaders on Tuesday night, Ms Lagarde’s warning was designed to shake them out of their complacent attitude to the threat of the epidemic causing economic havoc across Europe, according to a person briefed on her comments.
The call for action came as the ECB was preparing for the announcement on Thursday of its monetary policy response to the impact of coronavirus, as Italy imposed a quarantine on its entire population and forecasters warned the crisis could drive the bloc into a recession.
Financial markets are betting that the ECB will announce a further cut in its deposit rate to minus 0.6 per cent – following similar cuts by the US Federal Reserve and the Bank of England – as well as increased bond purchases and cheap loans to banks.
Ms Lagarde told EU leaders that without coordinated action Europe “will see a scenario that will remind many of us of the 2008 great financial crisis”, one person involved in the call told Bloomberg. The ECB declined to comment on Ms Lagarde’s contribution to the call.
The ECB president said that a further loosening of monetary policy would only be fully effective if combined with a sufficient fiscal stimulus from EU leaders, according to one person briefed on the call. In that scenario, she said the shock of coronavirus would be shortlived.
After the call, the European Commission vowed to help member states ramp up their response to the coronavirus outbreak by permitting aid for struggling businesses and deploying flexibility in its budget rules to allow a surge in public spending.
Ursula von der Leyen, the commission president, announced the creation of an investment fund worth up to €25bn to fight the crisis drawn from existing EU resources, as she declared “we will use all the tools at our disposal to make sure the European economy weathers this storm”.
However leaders did not unite behind a coordinated EU-wide fiscal stimulus package — despite calls from France and other states for a “massive” response.
Sterling hits session highs as Carney and Bailey hold press conference
The pound has rallied to the highs of the day as Mark Carney and Andrew Bailey promised the Bank of England was ready to take further action to bolster the UK economy.
Sterling was recently up nearly 0.5%, reaching a high of $1.2972. It has risen by more than one cent from the lows of Wednesday as investors assess the unscheduled BoE and brace for the Budget later on Wednesday.
Carney says ‘powerful measures’ will bolster government virus response
Chris Giles, economics editor, reports:
Mark Carney, Bank of England governor until the end of the week, said the “timely and powerful” measures were announced on Budget day to reinforce the measures chancellor Rishi Sunak would take later on Wednesday to have “maximum impact”.
He vowed the central bank would “take all necessary further steps to support the UK economy and financial system.” Mr Carney said that while some will recall comparisons to the 2008-09 financial crisis, “then the financial system was the core of the problem. Now it can be part of the solution”.
Andrew Bailey, the central bank governor from next week, was present at all the bank’s meetings and engaged in a joint news conference with Mr Carney.
Mr Carney said the measures were designed to “keep firms in business and people in jobs” over a period Mr Bailey said would be “temporary” disruption. The incoming governor said that banks had sufficient funds and buffers to be able to lend through the crisis.
He said the BoE was seeing “anecdotal evidence where we have seen a sharp fall in trading conditions particularly in retail”.
Mr Bailey said that “banks should not increase dividends or other distributions such as bonuses” as a result of looser rules on bank capital buffers.
Global case numbers push towards 120,000
Coronavirus infections rose overnight with more than 119,000 global cases and more than 4,000 deaths.
Italy, which is in lockdown, has more than 10,000 cases.
Steve Bernard, senior visual journalist, has mapped the numbers in Europe and globally.
Cathay Pacific seeks to preserve cash, chairman says
Primrose Riordan and Nicolle Liu:
The chairman of Cathay Pacific called the coronavirus outbreak an “unprecedented” time of “great anxiety” and added that the airline is focusing on preserving cash.
The airline is working with business partners to “demand more relief”, Patrick Healy said on Wednesday. About 80 per cent of Cathay’s staff has taken up three weeks of unpaid leave.
Mr Healy said reports that the company was seeking a new chief financial officer was “speculation” but said the company cannot rule out any further staff cuts.
Cathay Pacific has suffered a “severe” drop in the number of passengers in early March, the airline’s customer and commercial officer Ronald Lam said.
“The average booking per day has dropped to around 15,000-16,000 compared to our normal passenger boardings of around 90,000 per day,” Mr Lam said.
On some days I think the drop of bookings is more severe, it can be down to 11,000-12,000.
The airline, which was expecting new planes from Airbus for its Hong Kong Express business, said they are in discussions about delaying aircraft deliveries.
Mr Healy said their forecasts “assumed” a recovery in the second half of the year but there was “no way of knowing” with certainty that would come about.
Relief measures offered by Hong Kong airport authorities were not sufficient, the airline said, and did not “reflect the scale of challenge” the local aviation industry was facing.
Sterling recovers from fall in immediate wake of BoE decision
Eva Szalay reports:
Sterling has recovered the losses it had notched up in the immediate wake of the rate cut from the Bank of England and it was trading slightly up on the day.
The pound was up 0.22 per cent at $1.2934 as Mark Carney and Andrew Bailey, the outgoing and incoming BoE heads respectively, held a press conference. It had dropped as low as $1.2843 following the announcement of the rate cut.
Analysts expect the UK Chancellor to announce a package to boost the economy at 12:30, which has helped sterling recover its poise after the unscheduled move from the BoE.
Carney: BoE acted in concert with government
Mark Carney said the Bank of England acted in co-ordination with the government as it cut interest rates and announced plans to keep credit flowing through the economy to help support the UK economy through the virus outbreak.
“Maximising the effectiveness of our response requires working in concert with the Treasury, and that’s why we are acting on Budget day,” the outgoing governor of the Bank of England said in a London press conference.
Mr Carney said Rishi Sunak, the chancellor, will use the Budget to announce “a series of government initiatives” to support UK households and businesses.
Fiat Chrysler warns Italian car plants face possible closure
Peter Campbell, Motor Industry Correspondent, reports:
Fiat Chrysler warned it may shut some of its Italian car factories as it implements a set of extraordinary measures to try and prevent the spread of coronavirus in its home market.
The group will cut production levels so it can move factory staff further apart from one another, while all areas of the plants including rest areas and bathrooms will receive “intensive sanitisation”.
“As a result of taking these actions the company will, where necessary, make temporary closures of its plants across Italy,” the carmaker said on Wednesday.
“To enable greater spacing of employees at their workstations, daily production rates will be lowered to accommodate the adapted manufacturing processes.”
Last month the company started asking office staff to work from home, while also telling those in work to keep their distance from each other, as well as “controlling employee numbers at company cafeterias”.
Italy has been the worst affected Western nation, with around 10,000 reported cases and over 600 deaths.
The hardest hit northern part of the country includes several of FCA’s plants, as well as Ferrari’s Maranello facility. On Monday the supercar brand said it was working to keep the facility operational.
Short-term UK debt rallies after BoE cut
UK sovereign debt with shorter maturities climbed in price after the Bank of England announced its decision to cut rates, while Gilts at the longer end of the spectrum came under modest pressure.
The benchmark two-year yield, a tenor that is considered to be sensitive to fluctuations in monetary policy, was recently down 4.5 basis points (0.045 percentage points) at 0.10 per cent. The decline in yield points to an increase in the price of the debt.
On the longer end of the curve, the 10-year Gilt yield rose 3.2 bps to 0.274 per cent. Debt set to mature further in the future is typically considered to be more sensitive to medium-term expectations for the economy, with lower yields pointing to more modest inflation and growth, and the opposite for higher yields.
Sovereign debt has rallied sharply in particularly volatile action over the past few weeks as investors have dashed into the shelter of perceived havens, like Gilts, US Treasuries and German Bunds amid deepening concerns over the coronavirus outbreak and the crash in oil prices.
Quick stats on BoE rate cut
The Bank of England on Wednesday followed the US Federal Reserve by cutting its main interest rate by half a percentage point.
Here are some quick statistics about today’s cut:
-It is the biggest since March 2009, which marked the end of a series of sharp rate reductions prompted by the global financial crisis.
-It brings the main rate to 0.25 per cent, the lowest level since August 2016. Rates were cut that month by a quarter of a percentage point to a record low in the wake of the Brexit referendum that took place in June of that year. They had then been raised first to 0.5 per cent in 2017, and then to 0.75 per cent the following year.
-Cuts of this scale are not all that uncommon in the BoE’s long history. In late 2008, at the depths of the financial crisis, the BoE cut rates by 1.5 percentage points and 1 percentage point in the course of two months.
Euromoney calls off dozens of events up to July
Patricia Nilsson in London:
Euromoney has postponed or cancelled 80 events due to the coronavirus outbreak, estimating it will take a £6m hit on revenues this year.
The publisher, which in 2019 made £124m — roughly a third of revenues — from events, said affected trade shows included Capacity Middle East, Bauxite and Alumina Miami and the WAN Summit New York. It estimated that operating profit would be hit by £5m in 2020.
“In common with other events operators, Euromoney has experienced disruption across much of the world as a result of Covid-19 and the restrictions that organisations and governments have placed on travel or attending large gatherings,” the company said.
Euromoney said no changes had been made to events scheduled to be held after July.
As well as its eponymous monthly magazine, Euromoney runs financial conferences and a range of specialist titles such as Global Capital and International Financial Law Review. Its data services cover markets including paper and metals.
DMGT, the parent company behind the Daily Mail newspaper, last year announced plans to hand over its entire £900m holding in Euromoney to some shareholders at a discount.
Adidas March sales show some recovery in China
Olaf Storbeck in Frankfurt writes:
Adidas’s sales in China started to recover in March as the world’s second-largest sportswear maker re-opens stores and warehouses after the outbreak of coronavirus brought activities close to a standstill in late January and February.
The German group, which published full-year results on Wednesday, expects first-quarter revenue in China to fall by up to €1bn euros to between €400m and €600m euros. China has become one of Adidas’ fastest growing markets and in 2019 accounted for around 25 per cent of overall sales.
In the first quarter, Adidas expects that its operating profit in China will decline by up to €500m as it cancelled all shipments to Chinese wholesalers in February and expects to take back many unsold shoes and apparel from retailers.
While activities in China have started to improve in March, the Herzogenaurach-based group warned that sales in Japan and South Korea have started to slow.
“The further recovery in Greater China, the extent of spillover into other countries as well as the availability of raw materials remain largely uncertain,” the company said, adding that was too early to estimate the outbreak’s overall fallout in 2020.
Adidas said that most of the factories in China have re-opened.
Former Osborne aide welcomes joined-up approach
Rupert Harrison, a portfolio manager at BlackRock and former chief of staff to ex-chancellor George Osborne, welcomed the Bank of England’s decision to announce its rate cut on the same day as the UK Budget.
European markets open higher
Stock markets across Europe opened higher in the wake of decisive action from the Bank of England, which has cut its main interest rate by half a percentage point.
London’s FTSE 100 rose 1.7 per cent at the open, and the Stoxx 600 index tracking the continent’s largest companies rose 1.3 per cent.
Shares on Wall Street ripped higher on Tuesday as investors banked on a significant policy response to contain the worst impact of the virus outbreak, although futures trade pointed to opening losses when the S&P 500 begins trading later in the day in New York.
Saudi Arabia to boost maximum production capacity
Anjli Raval reports from London:
Saudi Arabia sought to put fresh pressure on the oil price by instructing the state oil company Saudi Aramco to increase its maximum production capacity to 13m barrels a day.
Saudi Aramco oversees 12m of the kingdom’s 12.5m total production capacity – the amount Opec’s largest producer is able to pump each day.
The statement to the Tadawul stock exchange comes a day after the kingdom said it would supply the market with 12.3m b/d escalating a price war.
Saudi Arabia on Saturday slashed its export prices after Russia said it would not agree to deepen and prolong joint supply curbs with Opec, believing the cuts only subsidised the US shale industry.
The failure to agree on a production deal in response to the demand sapping coronavirus outbreak has led to the effective collapse of an oil alliance that has been in place for the last three years.
Russia in response said on Tuesday it too could increase its production, with the new announcement from Saudi Arabia marking the latest salvo in a tit-for-tat battle.
Germany blocks medical shipments into Switzerland
Sam Jones in Zurich reports:
Germany has blocked the import of several shipments of urgent medical supplies into Switzerland, causing significant consternation in Bern, which imports almost its basic preventative medical supplies, such as face masks and gloves.
Swiss media reported on Wednesday that the issue has become the subject of a developing diplomatic row: on Monday, Switzerland’s governing cabinet, the Federal Council, raised the issue with Berlin. Guy Parmelin, the minister for the economy, did so with his counterpart in Berlin Peter Altmaier. Germany’s ambassador to Bern was formally summoned for a complaint on Friday.
Swiss newspaper NZZ reported on Sunday that a truckload of 240,000 hygiene masks had been impounded by German customs authorities at the border.
Germany has enforced a ban on the export of medical supplies including masks, body suits and safety glasses since March 4.
On Wednesday, Switzerland’s Tages Anzeiger newspaper reported on another case in which supplies bought by the Swiss government from a third country had been impounded by Germany authorities in Hamburg, as they tried to transit through the port on their way to Switzerland.
Switzerland’s department of economic affairs told the newspaper it was aware of “several” cases of shipments blocked by Germany and was working urgently to get them into the country.
The wealthy alpine state is one of the worst hit in Europe by the outbreak: 485 cases were confirmed as of Tuesday afternoon.
A ‘highly unusual move’ from the BoE
The Bank of England’s emergency interest rate cut was a “highly unusual” move without parallel even during the financial crisis, said David Owen, chief European financial economist at investment bank Jefferies.
The Budget today should contain a relatively large and targeted fiscal response. Immediately after the financial crisis, the fiscal easing was equivalent to just over 2 per cent of GDP – hoping to see something similar today.
Karen Ward, chief European market strategist at JPMorgan Asset Management, said the key questions is whether rate cuts will work.
We wouldn’t dismiss entirely the role monetary policy can play. Rate cuts and new asset purchase schemes could provide some support to asset prices, as investors are forced to search for yield, and encourage governments to spend given they can finance larger deficits at cheap interest rates. Liquidity provisions might also help the banks and prevent a tightening in financial conditions.
The former economic adviser to Philip Hammond, ex-chancellor, added she thought “targeted fiscal measures would prove more effective” and said “all eyes are now on the Chancellor to see if he announces a big increase in spending in his Budget today”.
BoE moves to support UK economy through virus outbreak
The Bank of England announced extra measures to help credit flow through the UK economy as it detailed an unscheduled cut to interest rates.
• The Monetary Policy Committee outlined a new funding scheme to incentivise banks to lend to businesses and households. It said this would support lending to businesses “that typically bear the brunt of contractions in the supply of credit” during periods of risk aversion.
• The bank has also lowered capital requirements for banks, by slashing the size of the “countercyclical buffer” or rainy-day fund, to 0 per cent of risk-weighted assets. It said this should support up to £190bn of bank lending to businesses.
The bank’s actions come just hours before Rishi Sunak outlines the government’s economic response to the virus in the annual Budget statement. The chancellor is preparing to unleash a sharp rise in public borrowing and to increase short-term spending to help support the NHS, businesses and households through the outbreak.
Sterling slips and FTSE 100 futures push higher after BoE rate cut
The pound edged lower on Wednesday while FTSE 100 futures advanced after the Bank of England announced its biggest rate cut since 2009.
Sterling was recently down 0.1 per cent at $1.2892, having trimmed earlier losses of as much as 0.5 per cent. FTSE 100 futures were up 0.5 per cent, having pushed higher in the moments following Wednesday’s decision.
The BoE on Wednesday reduced its main borrowing rate by half a percentage point to 0.25 per cent as it responded to the “economic shock” sparked by the coronavirus outbreak.
English Premier League match postponed on coronavirus fears
Murad Ahmed reports from London
A match between Arsenal and Manchester City due to be played at the Etihad Stadium in Manchester on Wednesday has become the first English Premier League match to be postponed due to concerns about coronovirus, with players forced into self-isolation after being in contact with a man who had contracted the virus.
In the early hours of Wednesday, the Premier League announced the match had been suspended as a “precautionary measure” as an unspecified number of Arsenal players met Evangelos Marinakis, the owner of Greece’s Olympiakos, during a recent European match between the teams. Mr Marianakis announced earlier this week that he has tested posted for Covid-19.
The Premier League said in a statement: “Thirteen days ago, Olympiakos played at the Emirates Stadium in the Europa League and Mr Marinakis, the Greek club’s owner, met with several Arsenal squad members and staff.
“Following medical advice, Arsenal FC and Manchester City FC consider it is necessary to postpone their fixture due to be played this evening to give time to fully assess the situation. The Premier League has therefore agreed that tonight’s game will be rearranged.”
Arsenal said a number of players and officials who came into contact with Mr Mariankis are in self-isolation at their homes for the recommended period of 14 days.
The match between Arsenal and Manchester City is the first sign of disruption to football fixtures in England. Sporting fixtures in the UK, such as the Cheltenham horse racing festival this week, are ongoing following official advice that there is “no reason” to stop the events to combat the spread of Coronavirus.
Across Europe and Asia, other countries have required tougher measures. All sporting fixtures have been postponed in Italy, while many other European matches includes tonight’s Champions League tie between Paris Saint-Germain and Borussia Dortmund, are due to be played without fans present. This Saturday’s Six Nations rugby match between France and Ireland has also been postponed.
Bank of England cuts interest rates
The Bank of England has announced an unexpected cut to interest rates in response to the “economic shock” of the coronavirus.
The Monetary Policy Committee unanimously agreed at a special meeting to reduce the main bank rate by half a percentage point to 0.25 per cent, its lowest level since the 2016 Brexit vote.
The central bank follows the US Federal Reserve in taking unscheduled action to combat the expected economic disruption from the virus. The bank said it has seen a “marked deterioration” in risk appetite and in the outlook for UK growth, and said indicators of financial market uncertainty have reached “extreme levels”.
The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance.
The bank said that while the “magnitude of the economic shock” is still highly uncertain, “activity is likely to weaken materially in the United Kingdom over the coming months”.
Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies. Such issues are likely to be most acute for smaller businesses. This economic shock will affect both demand and supply in the economy.
Europe: what you might have missed
Thailand’s cabinet has approved $12.7bn of stimulus measures to protect its economy, which relies heavily on tourism and exports, in the face of the coronavirus outbreak.
Crude oil rose even as haven assets rallied on Wednesday, with US Treasuries and the Japanese yen gaining ground as investors remained on high alert in choppy markets.
Work is beginning to resume in Hubei, the Chinese province at the heart of the coronavirus outbreak, its government announced on Wednesday.
Australia’s economy will go into recession by June, according to S&P.
Cathay Pacific, which has grounded planes and placed staff on leave due to low traveler demand, has said it has started re-purposing passenger aircraft to carry freight to mainland China.
Province at centre of China outbreak begins gradual return to work
Christian Shepherd reports from Beijing
The central Chinese province of Hubei, where the coronavirus now spreading across the globe was first discovered, has begun a staggered return to work, its government announced on Wednesday.
Businesses in the provincial capital of Wuhan, ground zero of the outbreak, can only return to work if they are important to national or global supply chains and gain government approval, the Hubei government said on its website. Other businesses cannot begin work until March 21.
Official Chinese data has in recent days suggested the outbreak, which has infected over 80,000 people across the country, is under control in most areas of Hubei, even as new cases continue to be discovered in the Wuhan on a daily basis.
In other high-risk areas outside Wuhan, major infrastructure projects can restart. In medium-risk areas law, accounting and software companies as well as construction companies that “mostly work outside” can return to work.
Cities, towns and counties considered low-risk will draw up lists of approved companies, but cinemas, internet cafes, karaoke parlours and other consumer-facing businesses cannot open until the epidemic has been eliminated.
Worker at Norwegian oil field tests positive for virus
A worker at an oil field owned by Equinor, the Norwegian energy company, has tested positive for the coronavirus.
The company said on Wednesday that it is “in dialogue with the Norwegian health authorities about further measures”:
The infected person has been in isolation in his cabin since 9 March. Measures to prevent further contamination for offshore installations has been introduced. It has not been decided when the person will be brought ashore.
The person had recently visited Austria, the company added.
The Martin Linge oil field is currently under construction, and is expected to start production at the end of the year.
Oil and coronavirus jitters leave markets shaky
By Hudson Lockett in Hong Kong and Leo Lewis in Tokyo
Crude oil rose even as haven assets rallied on Wednesday, with US Treasuries and the Japanese yen gaining ground as investors remained on high alert in choppy markets.
Brent crude, the international benchmark, rose 4 per cent in Asia trading to $38.71 a barrel, while US marker West Texas Intermediate gained 3.2 per cent to $35.45. Brent is up about 12 per cent from its closing level on Monday, when prices crashed by more than a quarter after Saudi Arabia launched an oil price war.
Traders said doubts were rising over whether policymakers in the US and elsewhere could restore investor confidence with stimulus to offset the economic blow from the coronavirus.
Remaining unease was evident in futures markets, which were tipping a 2.5 per cent fall for the S&P 500 when Wall Street opens. Overnight, the S&P 500 climbed 4.8 per cent. The yield on 10-year US Treasuries dropped 12 basis points to 0.68 per cent, though was still comfortably above recent lows. Yields fall when prices rise.
In Asia, the Topix index was down 0.6 per cent in afternoon trading while Hong Kong’s Hang Seng was flat and the CSI 300 in China nudged down 0.1 per cent.
Cathay Pacific expects ‘substantial’ loss in first half
Alice Woodhouse, Primrose Riordan and Nicolle Liu report from Hong Kong
Cathay Pacific said it expects a “substantial” loss in the first half of 2020, citing a fall in travel demand as coronavirus hits the airline industry.
The Hong Kong-based airline, which had already been knocked by falling traffic to the city following months of anti-government protests, said it was difficult to predict when conditions would improve.
“Travel demand has dropped substantially and we have taken a series of short term measures in response,” said chairman Patrick Healy. “These have included a sharp reduction of capacity in our passenger network. Despite these measures we expect to incur a substantial loss for the first half of 2020.”
Cathay was forced to cut the number of flights to mainland China after the virus broke out in Hubei province.
Available seat kilometres, which measures passenger carrying capacity, was reduced by 30 per cent in February and 65 per cent in March and April. The airline expects capacity and the number of flights to be reduced in May.
The comments came as the airline released its results for 2019. Net profit fell 28 per cent in 2019 to HK$1.69bn ($217.7m), from HK$2.34bn a year earlier. That was above a Bloomberg forecast of a HK$1.59bn profit. Just HK$344 million of this was made in the second half of 2019, down from HK$2.6bn for the same period in 2018, as Hong Kong was hit with a serious political crisis and ongoing protests.
The airline reported revenue of HK$106.97bn, down 3.7 per cent on a year earlier, but coming in just above a Bloomberg estimate of HK$106bn.
Australian economy on verge of recession – S&P
Jamie Smyth reports from Sydney
Australia’s economy will go into recession by June and grow just 1.2 per cent in 2020 due to the coronavirus, according to S&P, in an economic shock that stands to surpass the fallout of the 2008 financial crisis in the country.
However, the rating agency said on Wednesday the nation’s coveted AAA rating was not under immediate threat due to its strong fiscal position, which meant Australia could weather a temporary economic shock and had the firepower to deliver a stimulus package to counter the virus.
“Rating stability is anchored in our expectation that the global outbreak will subside during the second quarter of 2020 and that the economy will bounce back shortly after. Further, the country’s strong fiscal position has provided it with some room to manoeuvre at the current rating,” said S&P in a report.
S&P warned the AAA rating could come under pressure if weak economic conditions are more prolonged than it expects.
Canberra is due to unveil an economic stimulus package reportedly worth up to A$10bn on Thursday in a bid to prevent the economy falling into recession due to the coronavirus outbreak, which has led to travel bans, steep declines in tourism numbers and falls in consumer confidence.
Australia has not experienced a recession for 29 years but the dramatic impact of the virus on China, its largest trading partner, has promoted some economic forecasters to predict two consecutive quarters of contraction in the first half of 2020.
This week Westpac forecast Australia would go into recession in the first half of 2020 and on Wednesday Citi downgraded its forecasts, predicting the economy would contract by 0.25 per cent in the first quarter and flatline in the second quarter.
Chinese economy to return to normal by mid-April: ANZ
Economic activity in China will likely return to normal by the second week of April as strict measures to stem the spread of coronavirus are eased, according to economists with ANZ.
Raymond Yeung, chief economist for greater China at the Australian banking group, said the fall in new cases suggests the coronavirus has come under control in the country.
“President Xi Jinping’s visit to Wuhan likely signals the government’s confidence that the outbreak is now under control,” he said. “Thus, we believe the government will soon relax the lockdown measures to some degree.”
China locked down Wuhan, the centre of the outbreak, and surrounding cities in January and restricted movement of people in other parts of the country, limiting the ability of migrant workers to return to factories after the lunar new year.
White-collar workers have all returned to work this week in major cities and blue-collar workers are expected to return to their places of work and complete quarantine requirements by the first week of April, ANZ said.
“Assuming that one week is required for supply chain adjustments across the country, including the shipping of materials and parts, China’s manufacturing sector will likely return to normal by the second week of April,” he said.
The recovery in the services industry might be slower given safety measures to contain the spread of the virus. “Since the government will still be wary of another contagion, retails, restaurants and event-related activities will still be subdued in the near term.”
Cathay repurposes passenger aircraft for China freight
Primrose Riordan and Nicolle Liu report from Hong Kong
Cathay Pacific, which has grounded planes and placed staff on leave due to low traveler demand, has said it has started re-purposing passenger aircraft to carry freight to mainland China.
The company said while it has suspended a number of passenger flights, it has started using some of these planes to “meet customer demand” in Beijing, Shanghai and Chengdu.
Cathay has also been suspending more traveler flights to Japan, but said it was looking at how to maintain its air cargo flights.
“Although we do expect our passenger belly cargo operations to be impacted, we are currently evaluating how to continue serving our cargo customers to and from Japan. This includes the retention of certain passenger services for cargo carriage only,” the company said in an email to its customers on Monday.
Airbnb to incentivise host refunds amid travel disruption
Dave Lee reports from San Francisco
Short-term rental company Airbnb is trying to encourage more hosts to offer refunds to guests facing last-minute travel disruption due to the coronavirus.
Airbnb’s policy allows any booking to be cancelled, with a full refund, within 48 hours of being placed. But after that point, refunds vary depending on which option the host chooses.
Airbnb is hoping to encourage more of its hosts to choose the most generous option – which offers a refund of the nightly rate until 24 hours before check in – by promoting their listings more prominently if they select it. For these hosts, Airbnb says it will also waive the 3 per cent fee for new bookings, up until 1 June.
Airbnb had already put in place an “extenuating circumstances” policy that meant customers received a full refund, regardless of the host’s policy choice, if they had booked a trip in a severely affected area – China, South Korea and Italy – or were travelling from those locations. Likewise, hosts could cancel those guests without penalty.
The additional measures underline Airbnb’s difficulty in keeping both sides of its business – guests and hosts – feeling as though they are being fairly treated.
“Hosts lose earnings that they rely on to make ends meet,” the company said. “Guests are losing hard earned vacation savings. We strive to support both sides.”
Airbnb, which has said it plans to go public this year, has not yet provided any information on just how damaging the coronavirus has been to the company.
“While it is clear that the Coronavirus will have an impact on the entire travel and tourism industry, we believe travel will recover in the long run,” it said. “It is one of the largest and most resilient industries in the world.”
South Korea reports 242 new coronavirus cases
By Edward White
South Korea on Wednesday reported 242 additional coronavirus cases, almost double the number of new cases reported on Tuesday, as the emergence of a new outbreak in Seoul worries officials.
The latest increase, which took the total caseload to 7,755, came after the identification of a new cluster of infections at a call centre in Seoul and marked a reversal following four-straight days of declining new infections.
Park Won-soon, Seoul mayor, told a local radio station that 90 new coronavirus cases had been confirmed, all linked to a call centre in the city’s south-west. More than 500 workers at the centre were being screened.
The case has raised concerns that optimism which had been building in recent days over successful efforts to control the outbreak might be premature.
South Korea has for weeks rolled out a programme of mass public testing centred on Daegu, the country’s worst affected area. More than 200,000 tests have been run and the death rate from the virus has remained below 1 per cent despite one of the world’s highest infection tallies outside of China.
Thailand approves $12.7bn of stimulus measures
John Reed reports from Bangkok
Thailand’s cabinet has approved $12.7bn of stimulus measures to protect its economy, which relies heavily on tourism and exports, in the face of the coronavirus outbreak.
The package, announced by the government late on Tuesday, includes low-interest loans, a fund, and tax breaks for those affected by the outbreak. “We are ready to introduce more if necessary,” Lavaron Sangsnit, a senior finance ministry official, told reporters in remarks quoted by Reuters.
Thailand’s economy, the second-largest in south-east Asia after Indonesia’s, was already slowing before the virus hit. Yutthasak Supasorn, the governor of the Tourism Authority of Thailand, said this week that the country, which hosted 38m tourists last year, could lose almost 10m in a worst-case scenario if the virus is not contained.
Tourism contributes more than 10 per cent of Thailand’s GDP, and passenger traffic at Bangkok’s two main airports is down by more than half compared to 2019 levels.
The government last year introduced smaller-scale stimulus measures targeting Thai consumers aimed at promoting domestic tourism and shopping.
China reports 22 new coronavirus deaths
Health authorities in China reported 22 new deaths from coronavirus to the end of Tuesday, up from 17 a day earlier and taking the total number of fatalities to 3,158.
There were 24 new cases of the virus in the mainland, up from 19 a day earlier. Wuhan, the centre of the outbreak, accounted for 13 new cases, while 10 were recorded among people who had returned to China from overseas.
The total number of people who have been treated and discharged from hospital rose to 61,475.
Asia: what you might have missed
● Google has asked all of its staff based in North America to work from home, the biggest of the tech companies to do so.
● Nadine Dorries, UK junior health minister, has tested positive for coronavirus. Ms Dorries met hundreds of people in Westminster last week and attended a reception at Downing Street with prime minister Boris Johnson.
● Walmart has temporarily adjusted its sick leave policy after an employee tested positive for the virus.
● A series of events in the US, including the Coachella Valley Music and Arts Festival, have been postponed because of coronavirus. Joe Biden and Bernie Sanders have also cancelled political rallies in Ohio.
● Moscow has banned most public events for a month in response to the coronavirus, a measure critics say is an attempt to stop protests against president Vladimir Putin’s move to possibly extend his rule until 2036.
● Luigi Di Maio, Italy’s foreign minister, has said the country is turning to China to obtain urgent medical supplies to help its health service cope with the coronavirus outbreak
Congressman to self-quarantine after friend tests positive for coronavirus
Demetri Sevastopulo reports from Washington
Don Beyer, a Virginia Democratic lawmaker, on Tuesday became the latest member of Congress to announce they would self-quarantine after interacting with someone who had contracted the virus.
Mr Beyer said he had dined with a friend who later tested positive for coronavirus. On Monday, Matt Gaetz, a Florida Republican also decided to put himself in isolation, just hours after he had flown on Air Force One with President Donald Trump. The White House has said that the US president has not been tested for the virus.
Mr Gaetz, a Trump supporter who wore a gas mask this week to play down the coronavirus, was isolated in a room on Air Force One after learning just before boarding that he had interacted with a victim. After arriving in Washington, he drove back to Florida and slept in his car in a parking lot because he could not stay in a hotel. “He wasn’t joking – he slept in a Walmart parking lot,” his office told the Financial Times.
The House and Senate are due go on recess next week, but members are debating whether to extend the recess, as some companies across the US urge workers to telecommute if possible. One Republican lawmaker said there was much discussion about whether they should extend the recess, particularly as Mr Trump and his economic team work with Congress to pass a stimulus package to help the economy weather the impact of the outbreak.
Australia to set up pop-up coronavirus testing clinics
Jamie Smyth reports from Sydney
Australia is spending an extra A$2.4bn ($1.6bn) on health services, including setting up 100 ‘pop-up’ testing clinics and a new telephone health advice service, in response to the spread of the coronavirus.
It is also introducing a travel ban on all non residents seeking to travel to Australia from Italy, as the rate of infections continues to increase in the European nation, Scott Morrison, Australia’s prime minister said on Wednesday.
Canberra has already banned non residents who have travelled through China, South Korea and Iran in the last 14 days from entering Australia.
The 100 “pop-up” respiratory clinics are designed to take the pressure off hospitals, which have been inundated by people seeking tests for the coronavirus.
Australian authorities have appealed to people to only seek testing if they have travelled overseas or come into contact with someone who has been diagnosed with the virus.
Australian states have already begun establishing pop up clinics, including a drive-through testing clinic in Adelaide that can receive a patient every 20 minutes.
A telehealth system is being established to provide people in home isolation or quarantine with advice via telephone or video streaming services such as Skype or Facetime.
Seoul mayor raises concern over new virus cluster
By Edward White
South Korea has reported 90 new coronavirus cases linked to a call centre in Seoul, the city’s mayor said Wednesday, potentially reversing the country’s falling rate of new infections seen over the past week.
South Korea on Tuesday reported its fourth consecutive day of declining new coronavirus cases in the latest sign health officials are bringing one of the world’s worst outbreaks under control after weeks of mass testing.
Daegu, South Korea’s fourth-biggest city has been at the heart of the country’s outbreak with the vast majority of the country’s cases to date.
But the comments from Seoul mayor Park Won-soon in a radio interview on Wednesday morning, raised concerns of a fresh outbreak hitting the sprawling capital’s 25m residents, nearly half the South Korean population.
The Korea Centres for Disease Control on Tuesday morning reported 131 new cases, the lowest since February 25.
The total number of infections is now above 7,500, with more than 50 deaths. Officials have run more than 210,000 tests with around 10,000 tests carried out each day.
Australian central bank chief warns of hit from China disruption
Jamie Smyth reports from Sydney
Australia’s central bank has warned a delayed return to work in China due to the coronavirus would dent the local economy but said a combination of monetary and fiscal stimulus should enable it to bounce back once the virus is contained.
Guy Debelle, Reserve Bank of Australia deputy governor, said on Wednesday there is still significant disruption to the Chinese economy following the prolonged shut down over its lunar new year holiday. It is very uncertain how long it will take to repair severe disruption to supply chains, he said.
“The straight arithmetic of losing a substantial amount of output over a period of several weeks implies a significant hit to economic activity,” Mr Debelle said in a speech.
China is Australia’s largest trading partner and a collapse in student numbers and tourists from the country, with inbound airline capacity slumping 90 per cent from China, is forecast to subtract 0.5 per cent of growth from gross domestic product in the March quarter.
Mr Debelle said it was too uncertain to assess the impact of the virus beyond the March quarter. But he said there was no indication of disruption to exports of iron ore or coal at this stage and prices remained resilient- a factor that should support exports.
Mr Debelle said a government stimulus package, which is due to be announced this week, and record low interest rates would support the economy.
“The combined effect of fiscal and monetary policy will help us navigate a difficult period for the Australian economy. They will also help ensure the Australian economy is well placed to bounce back quickly once the virus is contained,” said Mr Debelle.
