Coronavirus spread sparks “bloodbath” on Wall Street
By
Nick Beams
28 February 2020
Global share markets again dropped sharply yesterday as coronavirus outbreaks spread around the world. Wall Street’s S&P 500 index has had its worst week since the depths of the financial crisis in October 2008.
Selling on Wall Street was across the board, hitting China-exposed and non-exposed companies alike. The Dow Jones index finished almost 1,200 points down, its second 1,000-point fall for the week, and has now lost more than 3,200 points in the past four days.
Traders work on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)
The fall in the Dow of 4.4 percent was matched by other indexes, with the S&P 500 down 4.4 percent and Nasdaq off by 4.5 percent as high-tech stocks, including Apple, took a large hit.
Wall Street is down more than 10 percent from the record highs of last week and is now officially in what is known as “correction” territory. The S&P has experienced its sharpest ever fall from an all-time record. The technology sector, which was leading the surge on the S&P 500, is down 12 percent so far this week.
All 11 sectors of the index are in negative territory for the year. The rush out of the equities market is indicated by the fall in the yield on 10-year Treasury bonds, which yesterday slumped to a record low of 1.29 percent.
Another factor in the market fall was the warning issued by Goldman Sachs that “US companies would generate no earnings growth in 2020” and that it had upgraded its forecasts to “incorporate the likelihood that the virus becomes widespread.”
An indicator of the intensity of the market storm is the rise in the Cboe Volatility Index, known as VIX, and sometimes called the “fear” index. It jumped to 33.27, its highest level since the market sell-off in December 2018. A rise in the VIX can have a cascading effect because it leads to investors selling out of riskier stocks and moving to safer havens—a process that can accelerate a market plunge.
Significantly, the last hour of trading was marked by a wave of selling, indicating that the fall could have further to go.
In a comment to the Financial Times, Jim Paulsen, chief investment strategist of the Leuthold Group, said: “We’re in panic mode. This isn’t just a temporary pullback where people are wondering whether to buy the dip, this is people not wanting to touch this.”
“Obviously it’s a bloodbath,” David Bahnsen, the chief investment officer of a wealth management firm told the Wall Street Journal.
The Wall Street plunge was preceded by further falls in Asian markets and a sharp drop in Europe.
The Stoxx 600 index of European shares fell by 3.8 percent with markets set for their worst week since the eurozone sovereign debt crisis in 2011 that was only halted when European Central Bank president Mario Draghi committed to do “whatever it takes” to meet it.
The market sell-off has been sparked by the rapid spread of the virus. More cases are being reported in South Korea, one of the world’s leading manufacturing centres.
At least 10 towns in northern Italy, the centre of the country’s manufacturing economy, are in lockdown, with supplies to auto companies already being affected. Electronics manufacturer MTA said this week that if its 600 employees in the town of Codogno did not return to work within days, production lines at Fiat Chrysler would be halted.
In Japan, Prime Minister Shinzo Abe has issued a directive for all schools in the country to close down until the end of their spring holidays, effectively a month-long shutdown. Abe has also called for all major sporting and cultural events to be cancelled, postponed or scaled down over the next two weeks,
Following a contraction of 6.1 percent in the country’s economy in the last quarter of 2019, largely as the result of a consumption tax increase, Japan could move into recession for the first quarter of this year.
In France, following the death of a 60-year-old man from the virus, President Marcon said: “We have a crisis before us. An epidemic is on its way.”
In Iran, where there has been a significant outbreak under conditions in which its health services have been severely undermined by US-imposed sanctions, the country’s vice-president for women’s affairs has tested positive for the virus, together with another member of parliament.
The Center for Disease Control and Prevention (CDC) has issued a statement that it is a question of when, not if, there will be community spread of the virus in the US.
In California, health authorities have said 33 people have tested positive for the coronavirus and they have a further 8,400 under observation. The state recorded the first case of possible community virus spread when a woman, without a relevant travel history and without contact with someone with the virus, tested positive.
One of the problems facing health authorities is the lack of testing kits. California Governor Gavin Newsom said authorities had only a few hundred and it was “simply inadequate to do justice to the kind of testing that is required to address this issue head on.”
When the coronavirus outbreak in China began, global stock markets continued to climb, with Wall Street reaching a series of all-time highs, the latest recorded on Wednesday of last week.
This was based on expectations that there would be a V-shaped recovery in China in the second quarter, as production made up for losses in the first, and that the Federal Reserve and other central banks would continue to pump money into the financial system, ensuring the continued rise in share markets.
Both assumptions have been shattered. Paul O’Connor, an executive at Janus Henderson Investors told the Wall Street Journal: “The globalization of the virus extinguishes confidence in the V-shaped recovery that was the view last week.”
Forecasts of global growth are now being revised sharply down. The Bank of America has predicted that growth in the world economy will slow to 2.8 percent in 2020, the first sub-3 percent level since the Great Recession produced by the financial crisis ended in 2009.
In a comment published in the Financial Times earlier this week, before the latest plunge, Nouriel Roubini, professor of economics at the Stern School of Business at New York University and one of the few to warn of a crisis in 2008, said the idea of a V-shaped recovery was “nonsensical.”
An annual growth rate of 2.5 to 4 percent in China, which now comprises about 20 percent of global GDP, he noted, would be a “major shock” to the world economy, “let alone the impact of the pandemic spreading to other big economies.”
Financial analyst Mohamed El-Erian, who has warned that markets were underestimating the effects on the real economy, wrote in a Bloomberg comment this week that it could not be predicted how and when demand would recover and supply chains were restored.
El-Erian also pointed to another factor. “I am also concerned about the financial outlook of highly-leveraged companies and countries, as well as the big overhang of triple-B rated companies over the high-yield market,” he wrote.
Bonds rated BBB are only one notch above junk bond status. If their ratings are reduced, then investors that are mandated to hold only investment-grade stock will be forced to sell, potentially setting off a plunge in this area of the financial markets.
The notion that the Fed and other central banks will be able to ride to the rescue with the injection of still more cash is becoming ever more threadbare.
In the first place, however much money is injected into the markets it cannot bring about the resumption of transport or restart production lines. Moreover, having reduced interest rates to historic lows in the decade since the 2008 crisis—in some cases to negative levels—the central banks have little capacity to provide still more stimulus.
The coronavirus is a natural disaster. But like all such events it has exposed the advanced level of decay in the social and economic relations of the global capitalist system.
Firstly, it is revealing the inadequacies of health care systems around the world, which have been eviscerated by years of austerity cuts. Secondly, the virus outbreak is again demonstrating the inherent fragility of a financial and economic system geared entirely to the amassing of wealth for the upper echelons of society.
<!–
var content = document.getElementById(‘content’);
var paragraphs = content.getElementsByTagName(‘p’);
var campaign = content.getElementsByClassName(‘campaign’);
var position = 3 * Math.floor(paragraphs.length / 5);
var intermission = document.createElement(‘aside’);
intermission.setAttribute(‘style’, ‘clear:both; margin:20px 0;’);
var formholder = document.createElement(‘div’);
formholder.id = ‘formholder’;
formholder.setAttribute(‘data-track-content’, ”);
formholder.setAttribute(‘data-content-name’, ‘Newsletter Form’);
formholder.setAttribute(‘style’, ‘background:#eee; padding:0 20px; margin-top: -15px;’);
var beforeForm = document.createElement(‘div’);
beforeForm.setAttribute(‘style’, ‘position:relative; z-index:10; font-size:14px; line-height:1em; font-weight:bold; color:#474747; text-align:center; background:#f4f4f4; padding:12px 20px;’);
beforeForm.textContent = ‘Article continues below the form’;
intermission.appendChild(beforeForm);
intermission.appendChild(formholder);
var previousElement = paragraphs[position].previousElementSibling
// if (paragraphs.length < 6)
beforeForm.textContent = '';
content.insertBefore(intermission, campaign[0]);
// else
/*
var previousElement = paragraphs[position].previousElementSibling
if (previousElement.tagName == 'H4'
var ss_form = ‘account’: ‘MzawMDE3MDA3BgA’, ‘formID’: ‘BcGJEQAgDAKwibiz9oGBpPuPYNKVtF8idhYlXcgbiKGKPmrzAw’;
ss_form.width = ‘100%’;
ss_form.height = ‘1000’;
ss_form.domain = ‘app-3QNFSIOXWE.marketingautomation.services’;
// ss_form.hidden = ‘field_id’: ‘value’; // Modify this for sending hidden variables, or overriding values
ss_form.target_id = ‘formholder’; // Optional parameter: forms will be placed inside the element with the specified id
// ss_form.polling = true; // Optional parameter: set to true ONLY if your page loads dynamically and the id needs to be polled continually.
–>
Contribute to the fight for socialism in 2020
2019 has been a year of mass social upheaval. We need you to help the WSWS and ICFI make 2020 the year of international socialist revival. We must expand our work and our influence in the international working class. If you agree, donate today. Thank you.
Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.
I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.
Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.
Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.
NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.
Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.
The air transportation increase, it further states, will be implemented over a longer period.
It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.
Gasoline and heating fuel prices approached $5 a litre at the start of this month.
Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.
“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.
The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.
“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.
Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.
Additionally, she said the government has donated $150,000 to the Norman Wells food bank.
In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.
It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.
This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.
The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs
It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.
The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.
Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.
Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.
This report by The Canadian Press was first published Oct. 22, 2024.
