Kuala Lumpur, Malaysia – The approval of a $2 trillion coronavirus rescue bill in the United States Senate failed to provide much cheer for investors on Thursday, driving many of Asia’s largest stock markets lower.
Oil prices and European share markets also resumed their downward slide.
The proposed measures by the US are unprecedented and will help cushion the world’s largest economy from a severe downturn caused by disruptions caused by measures to contain the spread of the virus, analysts said.
But the spending package is not expected to offer a significant lift to faltering demand for Asian exports as the world economy seems poised to contract sharply.
Many Asian economies are projecting a recession this year, defined as two consecutive quarters of negative growth.
“We think global financial markets are inching closer towards a stabilisation phase but the real economy could take more time to heal,” Freddy Lim, cofounder and chief investment officer of StashAway, a digital wealth management platform, told Al Jazeera.
“The honest truth is no one knows the path towards an eventual recovery but the final destination is clear.”
In Japan, the benchmark Nikkei 225 fell 4.51 percent, leading losses in Asia on Thursday. Local authorities in several Japanese cities and regions have urged their residents to stay indoors this weekend amid a spike in coronavirus cases, with a nationwide lockdown remaining a possibility.
The Nikkei, along with most other major share indices around the world, rebounded this week from multi-year lows reached on Friday as investors bought shares in anticipation of massive stimulus measures by governments, especially in the US.
Shares, oil under pressure
Tokyo also announced this week a postponement of the 2020 Summer Olympic Games, an event that was supposed to spur the Japanese economy.
South Korea’s KOSPI Index ended 1.09 percent lower on Thursday, while China’s Shanghai Composite dropped 0.60 percent. Hong Kong’s Hang Seng Index fell 0.74 percent, and Singapore’s Straits Times Index shed 0.96 percent.
Oil prices also fell, with Brent crude declining 1.75 percent to $25.91 a barrel. US West Texas Intermediate slumped 2.45 percent to $23.89 a barrel.
Energy prices have been roughly halved in recent weeks as a glut of supply from large producers like Saudi Arabia and Russia coincides with a slump in demand due to measures to halt transport and industrial activity to stop the coronavirus from spreading.
Bucking the region’s losses was Australia’s main stock gauge, S&P ASX 200 Index, which climbed 2.3 percent, and New Zealand’s 4 percent gain in the S&P NZX 50 Index.
Share markets in London, Paris and Frankfurt were down between 2.5 percent and 3 percent in early trading.
Help for US families, businesses
After days of intense negotiations, the US Senate approved a sweeping stimulus package late on Wednesday following a political agreement between policymakers from Democratic and Republican parties, and the White House.
The bill, set to be the largest rescue spending package ever approved by Congress, still needs to be passed by the US House of Representatives.
The targeted spending includes a $500bn fund to help industries hit hard by the escalating pandemic, such as airlines, and allocations for small businesses, state and local governments, cash handouts to Americans, federal unemployment benefits, as well as money for hospital and medical personnel to fight the outbreak.
Despite the enormous US fiscal stimulus measures, the effect of the pandemic and current lockdowns in the US is expected to lead to a severe negative shock to the US economy in the second quarter of this year, said Rajiv Biswas, chief economist for Asia Pacific at IHS Markit.
“With the Asia-Pacific region already being hit hard by the large number of travel bans and lockdowns across the region, the US stimulus is not expected to significantly mitigate the negative impact on the export sectors of Asian nations from recessionary conditions expected in 2020 in the US, Eurozone, UK and Japan,” Rajiv told Al Jazeera.
The expected global recession this year, coupled with the severe lockdowns across many Asian countries, is expected to reduce Asian economic growth and exports sharply this year, he said, adding that a gradual recovery is expected in late 2020 and during 2021 as the effect of the pandemic recedes.
More than 472,000 people worldwide have been sickened by COVID-19, which has killed more than 21,000 people, according to data by the Johns Hopkins University. More than 114,000 patients have since recovered.
Countries from China and India to Italy and the US have imposed drastic measures to halt the spread of coronavirus as cities are sealed, planes are grounded and most retail activities and factory productions are cut to the minimal.
Although some restrictions in China, where the virus originated, are being slowly lifted.
Canary in the coal mine?
Latest growth data released this week offer an early glimpse into the economic damage.
Singapore said on Thursday its economy shrank by 2.2 percent in the first quarter from a year earlier, its biggest contraction in a decade. Compared with the previous quarter, Singapore’s economy contracted by 10.6 percent in the first three months of 2020.
The grim numbers prompted the Southeast Asian nation to downgrade this year’s growth forecast to a contraction of between 4 percent and 1 percent to take into account disruptions caused by the pandemic. Singapore had previously projected for the economy to shrink as much as 0.5 percent.
In the US, investors will be bracing for initial weekly jobless claims data that are scheduled to be released later on Thursday. Analysts are expecting millions of Americans to have filed for unemployment insurance last week after massive layoffs were triggered by the pandemic, which forced businesses to shut as part of containment measures.
With more economic pain to come, financial markets may stay volatile for a while longer, analysts said.
“With the global COVID-19 pandemic still escalating, financial markets still face considerable turbulence in the months ahead until the pandemic starts to be contained globally,” IHS Markit’s Rajiv said.
“Asian equity markets remain vulnerable to further turbulence as investors continue to shift into safe-haven assets,” he added.
“With the world expected to be in recession and many Asia-Pacific economies in lockdown, financial markets are likely to face significant further turbulence until the pandemic shows signs of being contained worldwide.”
We're at war and need wartime institutions to keep our economy producing what's necessary | TheHill – The Hill
There can be no question about the nation’s current predicament. We are at war. We are faced with a public health crisis, yes, but the virus now ravaging our communities is a lethal invader taking American lives, threatening our way of life and destroying our productive capacity and economic health.
We’re waging battle on the public health front with thousands of the most heroic and able health professionals on the planet, yet at the same time, it appears that despite Congress’ record $2 trillion relief bill we have no wartime strategy to get needed equipment where it is needed or to save our economy. We have no coordinated plan to mobilize workers, produce needed medical supplies, and distribute these to the facilities that need them.
We’ve faced down war on our people on our own shores before, so why not look to those occasions for clues as to how it is done? Many of the answers we’re looking for to respond to our current crisis and associated production shortfalls can be found in the measures taken by wartime presidents Franklin Roosevelt and, before him, Woodrow Wilson.
The key to keeping wartime production humming has always been public collaboration, with the public firmly in the driver’s seat, with private producers.
The U.S. took such measures when Pearl Harbor was bombed. President Roosevelt established a War Production Board (WPB) to coordinate the repurposing and expansion of factories; the re-routing of existing and opening of new distribution channels, and countless other tasks entailed by the productive and distributive ramp-up necessitated by the war. Before that, President Wilson established a War Industries Board (WIB) to achieve the same ends during the First World War mobilization.
Roosevelt’s WPB worked in tandem with Herbert Hoover’s and his Reconstruction Finance Corporation (RFC), the already-existent financing arm of the New Deal. The RFC had been patterned after Wilson’s War Finance Corporation (WFC) of the preceding era, established to work with the WIB in overseeing and funding U.S. mobilization for the First World War.
The WFC and the RFC directly financed mobilization, using a broad array of financing tools. They made direct grants, provided inexpensive credit or loan guarantees, and in many cases took equity stakes in individual businesses, thereby both recapitalizing them and taking internal governance rights to help guide production flexibly from the inside.
Given the success of this model in our most “existentially” threatening earlier wars, why not update it now as we grapple with another lethal invader?
I have been advocating, in some cases on my own and in some cases with others, a number of possible models for a contemporary RFC for some years now. The idea must be not just to address crises ad hoc after they have emerged, but to treat healthy and ongoing ‘reconstruction’ and national development proactively as an always-necessary, continuous process in need of an effective and democratically accountable coordinator. Think of it as a smart industrial policy tool for managing a permanent policy need in any world, such as ours, in which technical needs and technologies themselves constantly evolving.
A National Investment Authority (NIA), for example, which I first floated with my colleague Professor Omarova early in 2015, would develop, coordinate, and oversee the financing and execution of a coherent strategy of perpetual, across-the-board national development, in collaboration with private sector agents whose industries are implicated by particular projects.
My National Investment Council (NIC), introduced more recently, would collaborate more with already-existing federal agencies whose mandates are implicated by specific industrial and infrastructural projects, bringing them together as the Financial Stability Oversight Council (FSOC) does our multiple financial regulators. It would accordingly resemble not only the RFC but also the Board for National Investments (BNI) advocated by J.M. Keynes in the 1920s.
Either model would include a direct investment arm, which would act both in primary and in secondary to ensure both public and private sector provision of critical public goods. What makes these models especially relevant today is that they are designed to be platforms of precisely the kind that we need to survive our pandemic.
Right now, they would mobilize a coherent productive response to the COVID crisis. They would inject capital into businesses that need it, take direct equity stakes in them as necessary, and direct resources coherently toward the production of what must be produced both to keep our people healthy and our economy humming.
In recent weeks, my friends James Galbraith and Michael Lind have proposed an ad hoc Health Finance Corporation (HFC) to address the COVID crisis. Like the NIA and NIC, it is inspired by and patterned in part after the RFC. I find much to admire in this proposal, as does presidential candidate Bernie SandersBernie SandersOvernight Energy: Oil giants meet with Trump at White House | Interior extends tenure of controversial land management chief | Oil prices tick up on hopes of Russia-Saudi deal Oil giants meet at White House amid talk of buying strategic reserves The Hill’s Campaign Report: Biden struggles to stay in the spotlight MORE (I-Vt.), who has proposed his own variant of it. I think we’ll do even better, however, to institute something more permanent.
Unless we’re all killed by the present pandemic, there will be others. And just as importantly, reconstruction and development — national self-renewal — are forever.
Robert Hockett is the Edward Cornell professor of law at Cornell University, Visiting Professor of finance at Georgetown’s McDonough School of Business, and consulting counsel at Westwood Capital in New York City. Formerly with the Federal Reserve Bank of New York and the International Monetary Fund, he is a frequent advisor to legislators and regulators in Washington and New York.
Opinion: Reality check: The economic crash is significant but it's not the apocalypse – Calgary Herald
Stock markets have entered bear market territory meaning that they have lost 20 per cent of their value and in short order. Is the stock market’s reaction overstated? From an economic perspective, coronavirus is big. It started with an interruption in China’s output and if that wasn’t mainstream enough, now global travel is being interrupted, events are being cancelled and large social events are being prohibited. Meetings are being moved to virtual ones and extended breaks are being imposed on schools. This is disrupting our lives.
When the sub-prime mortgage fiasco resulted in the global financial crisis, the U.S. stock market collapsed as the Dow Jones Industrial Average index fell from a high of over 14,000 to a low of around 7,000 over a period of 18 months. There was a fear that the globe was entering a period of a global depression much like what had happened in the 1930s. That fear proved unwarranted as the global economy rebounded and the stock market resumed its upward trend. There are many reasons that the global economy was more resilient this century versus in the 1930s and the banking rules have been largely pointed to. I would posit that the degree of globalization, trade, availability of food, preservatives and energy, along with the portion of the population that is not living in abject poverty are all in the mix as to why the 2008 recession did not become a depression.
"Sledgehammer" policies will destroy us; we need open economy says Johns Hopkins professor | – Kitco NEWS
Government-mandated policies of self-isolation will cripple the American economy, and the draconian measures taken to contain the pandemic are not necessary, this according to Steve Hanke, professor of applied economics at Johns Hopkins University.
“With the economy shutting down, the cost is going to be absolutely phenomenal,” Hanke told Kitco News.
Hanke likened the response to the virus from the U.S. and many Western European nations to a “sledgehammer.”
“The sledgehammer approach being used in most European countries and the United States is turning out into a very costly mistake. And what I mean by sledgehammer is they haven’t planned anything, they just have a blanket program where we’re all locked in our condos or houses and can’t move, and the economy shuts down,” he said.
Instead, governments should take the model that Sweden has set, Hanke said.
“If you look at some place like Sweden, Sweden has a very laissez-faire, very targeted approach, and they’re doing very well. The kindergartens are still open, the grade schools are still open, most factories are still open in Sweden. They are not imposing this sledgehammer and essentially wiping out the economy,” he said.
“The places that have done well in controlling and counting properly the victims of this pandemic are countries that have small, efficient governments, and free market economies. You look at Singapore, Hong Kong, they’re right up there,” he said.
Additionally, these nations have all practiced the “five P’s”: prior preparation prevents poor performance, Hanke said.
The U.S. is now the country with the highest number of COVID-19 cases in the world, and the majority of the country has not yet been tested.
“Wherever the five P’s have not been applied, you have a disaster,” he said.
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