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Don’t Look Down
Fear of the coronavirus, rather than the virus itself, is hitting the world’s economies. Based on health impacts alone, the outbreak shouldn’t be that big a deal for the global economy. But as with terrorist attacks and financial crises, epidemics generate widespread uncertainty and sometimes panic. Government authorities and private individuals often respond by drastically reducing exposure to the shock, amplifying its global economic impact, Greg Ip writes.
Estimates of the disease’s economic impact are largely educated guesses. Goldman Sachs projects a 0.8 percentage point hit to U.S. annualized growth in the current quarter from reduced tourism, exports and supply chain disruptions, with most of that reversed by year-end. But “risks…are skewed towards a larger hit because a change in the news flow could lead to increased risk aversion—less travel, commuting or shopping.”
WHAT TO WATCH TODAY
President Trump is in India. Follow our coverage here.
The S&P/Case-Shiller home price index for December is out at 9 a.m. ET.
The Conference Board’s consumer confidence index for February is expected to rise to 132.6 from 131.6 a month earlier. (10 a.m. ET)
Federal Reserve speakers: Dallas’s Robert Kaplan speaks at the University of Missouri at 8:45 a.m. ET and Vice Chairman Richard Clarida speaks on the economy and monetary policy at 3 p.m. ET.
TOP STORIES
Virus Spreads, Markets React
The World Health Organization said it isn’t yet clear whether the coronavirus can be stopped from spreading further globally, as growing outbreaks in Italy, South Korea and Iran heightened concerns. Possible scenarios: The virus could be contained, develop a regular pattern of continual or seasonal transmission, or become a pandemic, said Michael Ryan, the WHO’s chief of health emergencies. The global health organization said Monday, before South Korea updated its numbers, that there are 79,331 confirmed cases in 28 countries of Covid-19, including 2,618 deaths, Betsy McKay, Margherita Stancati and Dasl Yoon report.
Global stocks were mixed Tuesday while bond markets flagged continued fears among investors about the economic impact of the coronavirus outbreak, Caitlin Ostroff reports. On Monday, the Dow Jones Industrial Average dropped more than 1,000 points—its biggest point decline in more than two years.
The yield on the benchmark 10-year Treasury note approached a record low. The drop pushed the 10-year yield further below that of the three-month bill, a phenomenon known as an inverted yield curve. Investors closely watch the dispersion of Treasury yields because recessions have often followed such inversions.
Gold prices climbed for the eighth straight session to a seven-year high on Monday. Treasurys and gold are widely viewed as haven assets.
The Federal Reserve is still in wait-and-see mode. Officials said it was too soon to know how the fallout from the coronavirus would ripple through the U.S. economy and whether it would force a return to interest-rate cuts later this year. Cleveland Fed President Loretta Mester said she was comfortable with the central bank’s current interest-rate posture and was closely watching the impact of the coronavirus outbreak on global growth, Nick Timiraos reports. “We don’t want to overreact to the volatility in the markets,” Ms. Mester said.
Minneapolis Fed President Neel Kashkari: “We’re in a good place right now, even with these market developments.”
The Trump administration is asking Congress to approve roughly $1.8 billion to fight the novel coronavirus as the disease spreads across the globe and seeking the flexibility to spend as much as $2.5 billion. The requested money would go toward developing a vaccine and stockpiling protective gear, among other efforts, with the option of the administration using the money in 2021, Andrew Duehren reports.
Well, I Wished I Was in Austin, In the Chili Parlor Bar
The two hottest U.S. job markets in 2019 were growing Southern state capitals with vibrant music scenes and an influx of technology jobs. Austin, Texas, topped the list for the second consecutive year, according to a Wall Street Journal ranking of new data collected by Moody’s Analytics. Nashville, Tenn., jumped to the No. 2 spot from seventh. Both cities anchor metropolitan areas of around two million people. Austin—a tech hub and college town—remains attractive to workers thanks to low unemployment and high wage growth. Nashville has low unemployment and high labor-force growth, Soo Oh reports. How does your metro area stack up? Click here to find out.
We Bring Good Things to Life
General Electric last year shed roughly 78,000 employees, or more than a quarter of its workforce, as divestitures left the company with the same number of employees as it had in 1951. The company ended 2019 with about 205,000 global workers, according to GE’s annual report filed on Monday. In the U.S., its workforce dropped to 70,000. It is the lowest number of employees at GE since the post World War II boom, Thomas Gryta reports.
WHAT ELSE WE’RE READING
Global supply chains were already under pressure from President Trump’s trade war. Then coronavirus hit. “So far the best bet is that current international supply chains will hold, for the most part, and deliver the goods. But the chance that they will not is rising sharply, as both the trade war and the coronavirus strengthen the hand of those who advocate for more dismantling of international trade networks. And if that dismantling does occur, it is likely to snap into place suddenly—with neither market prices nor advance warning offering much protection. The more people start to believe that long, complex cross-national supply chains are risky, the more fragile they will turn out to be,” George Mason University’s Tyler Cowen writes at Bloomberg Opinion.
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