This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
Markets are in turmoil and the broader economic outlook is getting darker as the novel coronavirus spreads. Jeff Sparshott here to take you through the latest.
Yikes
Oil prices plunged, 10-year Treasury yields dipped below 0.5%, stocks dropped, and currencies swung as the prospect of an energy glut ratcheted up turmoil across markets world-wide.
Saudi Arabia’s decision to instigate a price war as it escalates a clash with Russia sent oil prices to their lowest levels since 2016 and raised fresh concerns about the risks tied to heavily indebted energy companies. The kingdom cut most of its oil prices and plans to boost output, despite existing threats to demand from the coronavirus epidemic.
Investors have grown increasingly concerned about economic growth stalling as public-health authorities escalate efforts to contain the coronavirus outbreak, leading to a drop in business activity and curtailing global trade, David Winning, Avantika Chilkoti and Xie Yu report.
WHAT TO WATCH TODAY
China’s consumer price index for February is out at 8:30 p.m. ET.
Follow the WSJ’s live coronavirus coverage here.
TOP STORIES
The Glut
Why did the Saudis start a price war? It’s part of an aggressive campaign to snatch some of Moscow’s market share, according to delegates from the Organization of the Petroleum Exporting Countries and Saudi officials. It comes after a longstanding partnership between some of the world’s largest oil producers, including Saudi Arabia and Russia, splintered on Friday. The sides failed to reach an agreement on production cuts to support the price of oil in the face of the coronavirus-related economic slowdown, Benoit Faucon and Summer Said report.
Russia says it can withstand oil prices of $25 to $30 a barrel for six to 10 years.
That’s not the only commodity glut. China is the world’s top producer and consumer of steel and aluminum. Because of the new coronavirus, China’s demand for those metals has plummeted. But many of the country’s steel mills and aluminum smelters have continued to operate because stopping and starting equipment handling molten metal is expensive and risky. The global stockpile of steel and aluminum threatens to push down prices and put new pressure on producers in the U.S., Western Europe and elsewhere. Many of those companies were already struggling to earn a profit, Bob Tita reports.
Companies that got out of China before coronavirus are still tangled in its supply chains. Case study: A year and a half ago, a lingerie manufacturer set up a factory in eastern Bangladesh as part of a push to move production away from China. At the plant, 16 experienced Chinese supervisors usually oversee 500 Bangladeshi workers. But half the Chinese staff has been quarantined back home for weeks, slowing production. Shipments of bra cups and straps are delayed, and the factory is stocking up on knitting needles, anticipating shortages. They all depend on suppliers in China, Jon Emont and Chuin-Wei Yap report.
A persistent epidemic would compound price pressures and weigh on corporate profit as manufacturers refocus their resources on searching for substitutes in the supply chain.
Political leaders in the democratic world are grappling with a difficult balancing act in a bid to contain the coronavirus: when to pull the trigger on measures like closing schools and canceling public gatherings without risking social and economic backlash? Global health experts say China’s steps to quarantine cities and shut down schools and workplaces slowed the global spread of the coronavirus. But they also came at a significant economic cost. Democracies from Japan to France could struggle to follow China’s suit. Instead, Western governments are debating more delicate trade-offs that could curb the virus’s transmission with fewer costs, Denise Roland and Drew Hinshaw report.
Italy’s effort to fight the worst coronavirus epidemic outside China by quarantining 17 million people began in confusion, as transport services continued, enforcement wasn’t yet evident and Italians wondered how it was meant to work, Margherita Stancati reports.
Employers are implementing contingency plans, from dividing teams across locations to limiting visitors, as the spread of the novel coronavirus is starting to upend basic expectations about the safety and sustainability of office work. The moves, designed to minimize disruption to businesses while protecting workers, range from advising colleagues to stand at least 6 feet apart, to requiring that people register their personal travel plans with their employers. Millions of workers have been asked to test their ability to work from home. But that doesn’t work for swaths of the employee universe, from food-service and hotel staffers to nurses, Chip Cutter and Rachel Feintzeig report.
Federal agencies are preparing to deploy emergency plans to maintain essential services—from directing air traffic to delivering mail and making Social Security payments—as the novel coronavirus epidemic widened and the nation’s capital diagnosed its first case. So-called continuity of operations plans have been in place since Cold War-era preparations for a nuclear attack or other emergency. They now extend across the federal government, with its 2.1 million civilian workers, Kate Davidson reports.
The New Luxury Good: Marriage
Middle-class Americans are forsaking marriage amid financial insecurity, effectively making the institution more of a luxury good enjoyed by prosperous Americans. The middle three-fifths of U.S. earners have experienced the sharpest declines in marriage rates over the past four decades compared with people at the bottom of the income ladder and those at the top, according to a Wall Street Journal analysis. These households earned from $25,000 to $125,000 in 2018. Affluent Americans who marry are more likely to pool six-figure incomes, buy homes and watch their assets grow. Among people ages 25 to 34, the median wealth of married couples is four times that of couples who live together but aren’t married, according to research by the Federal Reserve Bank of St. Louis. The divide reflects another facet of the nation’s income gap, Janet Adamy and Paul Overberg report.
WHAT ELSE WE’RE READING
The coronavirus outbreak and the Federal Reserve’s response are affecting consumer expectations. “Most consumers were somewhat or very concerned about effects of coronavirus on the U.S. economy, their health, and their personal finances; 28% had cancelled or postponed travel and 40% purchased food or supplies in response to these concerns. About 38% were aware that the Fed had cut interest rates. … Greater concern about coronavirus is associated with higher inflation expectations and more pessimistic unemployment expectations. Provision of information about the Fed announcement leads some consumers to become more optimistic about unemployment and revise inflation expectations downward, consistent with recent research showing that many consumers associate bad times with high inflation,” Haverford College’s Carola Binder writes in a new working paper.
SIGN UP FOR OUR CALENDAR
Real Time Economics has launched a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.
from Real Time Economics https://ift.tt/2wFdbR6
No comments:
Post a Comment