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U.S. equity futures and global stocks tumbled after the Federal Reserve cut interest rates, a sign that investors remain worried that the new coronavirus will fuel a recession even with borrowing costs dropping. Good morning. Jeff Sparshott here from lockdown in Madrid with the latest on the global economy.
Shock Treatment
The Federal Reserve slashed its benchmark interest rate to near zero and said it would buy $700 billion in Treasury and mortgage-backed securities, part of an urgent response aimed at stabilizing markets as the new coronavirus pushes the U.S. economy toward a recession. The moves came as the coronavirus crisis has escalated sharply in recent days, with business closures and event cancellations cascading across the country. Companies sent workers home, and smaller businesses grappled with how to survive. Consumers, meanwhile, stocked up for an uncertain period where they are being asked to stay at home to combat the virus’s spread, Nick Timiraos, Harriet Torry and Josh Mitchell report.
WHAT TO WATCH TODAY
The New York Fed’s Empire State survey for March is expected to fall to 3.5 from 12.9 a month earlier. (8:30 a.m. ET)
President Trump joins a video conference with Group of Seven leaders to discuss a coordinated response to the novel coronavirus at 10 a.m. ET, Mr. Trump holds a video conference with U.S. governors at 11:30 a.m. ET, and the White House coronavirus task force holds a briefing at 10:30 a.m. ET.
Follow the WSJ’s live coronavirus coverage here.
TOP STORIES
Nasty, Brutish but Short?
Many Wall Street forecasters now expect the economy will fall into recession during the first half of the year. The severity and duration of a downturn would depend on several factors, including testing availability, central banks’ response to keep liquidity flowing, and fiscal stimulus to boost demand. “The thing that fiscal policy—and, really, only fiscal policy—can do is reach out to affected industries and affected workers,” Fed Chairman Jerome Powell said.
Case study: Business activity in China turned broadly negative for the first time on record as home sales, construction activity, retail sales and factory output plunged, pushing unemployment to a record high. The data, from the first two months of the year, paint a bleak picture of the impact that China’s government lockdowns on the movement of people and goods have had since late January. The impact on China’s economy gives an indication to policy makers around the world of what’s at stake as they weigh measures to curtail consumer and business activity to lessen the coronavirus fallout on their communities, James T. Areddy reports.
Learning Curve
Coronavirus deaths outside China surpassed those inside for the first time, and people around the world were adjusting to a new reality of life during the pandemic, as entire nations, some states and local governments, and businesses restricted travel, closed shops and postponed religious services and other events.
Europe’s biggest economies are clamping down on their populations in an effort to control the outbreak. Over the weekend Spain ordered an Italy-like lockdown that bars people from leaving their homes without a valid excuse. France closed down restaurants, bars and all nonessential shops. Faced with an influx of French shoppers, Germany closed its borders with France and a host of other countries. The health crisis in Europe has become so dire that officials at the World Health Organization now view the continent as the new epicenter of the pandemic, Stacy Meichtry and Giovanni Legorano report.
Fiat Chrysler Automobiles is stopping almost all production in Europe for the next two weeks and Volkswagen has shut factories in Italy and Spain, as global manufacturers try to protect workers and as supply lines start to break down.
Some European carriers early Monday grounded almost all flights. Airlines around the globe are now fighting for survival.
The Bank of Japan said it would double stock purchases and help companies get loans in response to the pandemic.
Las Vegas casinos owned by Wynn Resorts and MGM Resorts International will temporarily close, shuttering much of the famed Strip.
Mayor Bill de Blasio said he would limit New York City restaurants, bars and cafes to providing takeout and delivery and close nightclubs and movie theaters to contain the spread of the virus.
The U.S. domestic box office posted its worst weekend in nearly two decades amid calls to practice social distancing, though the public has yet to abandon going to the movies altogether.
The biggest U.S. banks put share buybacks on hold Sunday and pledged to put their capital to use helping consumers and businesses struggling with the rapid economic slowdown.
U.S. small-business confidence plunged in March to near its lowest levels in the past seven years, as business owners grappled with the effects of the virus on their companies and the broader economy.
One big challenge during the pandemic: tracking economic fallout. Most of the high-profile data out this week is especially backward looking amid rapid responses from policy makers and households. We can get some hints of what’s happening from near real-time private data. OpenTable posted a detailed look at the number of diners heading to about 60,000 restaurants that use the booking platform. Even before mandatory shutdowns, online reservations, phone reservations and walk-ins were falling sharply. Seattle, Boston, San Francisco and New York are among the hardest hit.
U.S. consumer spending at restaurants and bars accounts for almost 4% of gross domestic product.
There’s an obvious flip-side: Demand for food-delivery service has picked up. And households have raced to stock up on essentials. That is having a ripple effect on other areas of the economy. Digital freight network Convoy, for example, has noted a surge in requests for trucks to haul consumer and packaged goods into Seattle this month. Markets including Indianapolis, Cincinnati, Philadelphia, Portland, Charlotte and Washington, D.C., also have seen an uptick in activity, said Aaron Terrazas, director of economic research at Convoy.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]QUOTE OF THE DAY
“For a while, life is not going to be the way it used to be in the U.S.” —Dr. Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases
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