G7 leaders (leaders of what were the seven biggest economies before China marched past most of them) have agreed to do, wait for it, “whatever it takes” to fight the coronavirus. To be fair to them, they did adjust that over-used phrase slightly by saying “whatever is necessary” in their joint statement.
Two of those seven countries are feeling the pressure. Both of those countries have been slow to react. Both of those countries are closing in on the next general election. Those two are Germany and the good old US of A.
The US government finally appears to be creaking into action after lots of hollow, and sometime ridiculous, claims. $50 billion has been pledged for the country’s airlines to help them overcome a chronic loss of business as folk are barred from travelling into various countries.
That forms part of a financial assistance package that the White House is “urgently drafting” according to Reuters.
It comes after yet another brutal day for stock prices. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each plunged by around 12% on the day as folk reacted with some shock at the drastic action being deemed necessary by the Federal Reserve (the central bank), and doubts over the administration’s ability to cope. That’s the biggest US stock price fall in one day since 1987.
Weird stuff is going on in the fixed income markets. While folk are piling into lower-risk rated investments such as Treasuries (US government bonds), the drop in interest rates by the Fed has muddied the trading waters. It is set to buy lots of bonds (which should push prices up and yields down), but it’s also lowered borrowing costs which is making alternative forms of borrowing cheaper and, unusually, denting the demand for Treasuries.
The falls might slow tomorrow, but we’re faced with a situation in which the worst for the US and Europe appears to be ahead of us. So keep calm and carry on.
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