Governments pledge aid as global commerce seizes up
Governments and central banks are scrambling to find ways to keep businesses from going bankrupt as the virus outbreak grinds the world economy to a halt.
A day after Wall Street endured its worst daily drop since the crash of 1987, European markets wavered, as did U.S futures markets. There is tremendous volatility, with the extent of economic damage from the pandemic still anyone’s guess. Factories are closed, retail stores are closed, travel has ground almost to a halt and billions of people are sheltering at home, going outside only to find essential supplies.
Below is a look at how the outbreak is reshaping the global economy and how individuals, businesses and governments are responding.
GOVERNMENT AND CENTRAL BANKS: France’s government is pledging 45 billion euros ($50 billion) in aid for small businesses. That’s in addition to tens of billions already promised for French workers forced to stop working because of store and restaurant closures and strict new confinement measures. French Finance Minister Bruno Le Maire announced the new aid will include tax breaks and a "solidarity fund" for struggling small businesses. "This epidemic will be a catastrophe for all countries of the world," he said. "The shock will be violent."
The White House is proposing a roughly $850 billion emergency economic rescue package for businesses and taxpayers. Treasury Secretary Steven Mnuchin will outline the package to Senate Republicans at a private lunch, with officials aiming to have Congress approve it this week. It provide relief for small businesses and the airline industry and include a massive tax cut for wage-earners.
Two people familiar with the request described it to The Associated Press on the condition of anonymity because they weren’t authorized to speak publicly.
Where to begin is an enormously complex question. Big industry and small business are looking at a complete, or nearly complete halt to operations. Restaurants that have been shuttered employ hundreds of thousands of people. Airlines are grounding flights, meaning no crews are needed. The dilemma afflicts every sector of the national and global economy. The risk of frozen economic activity will ripple outward, from the banking and mortgage industry, to services ranging from dog walking to doctors visits.
Sweden’s central bank will buy securities for up to an additional 300 billion kronor ($31 billion) and offer more loans to banks on favourable terms
The U.S. Federal reserve on Sunday made an emergency cut to its key interest rate. U.S. airlines are asking the government for grants, loans and tax relief that could easily top $50 billion. Other European governments have pledged tens of billions of euros (dollars) in aid and relief, as well as hundreds of billions in guaranteed loans.
New Zealand vowed Tuesday to spend billions of dollars supporting distressed companies with its economy headed for recession. The stimulus package is equivalent to 4% of GDP. A large chunk of the new spending will go to businesses that have lost more than 30% of their income as a result of the downturn. Other money will go toward health costs, income support, and the airline industry.
BIG TECH: The biggest tech companies in the world are banding together to combat misinformation about the pandemic and also fraud. Facebook, Google, Microsoft, Twitter, Linkedin, Reddit and YouTube said in a joint statement that they will also attempt to disseminate across their platforms essential updates from government health organizations. Misinformation and confusion in social media posts have been problematic for years. The spread of the coronavirus has exacerbated the problems for which Facebook and others were lambasted during the 2016 U.S. presidential election.
HEAVY INDUSTRY: Volkswagen said it will close most of its European plants for two weeks due to uncertainty about demand for cars and supplies of parts. Chief Financial Officer Frank Witter said Tuesday that uncertainty about the severity and duration of the virus outbreak made it impossible to give a reliable outlook for sales.
Airbus will suspend production at its French and Spanish facilities for the next four days to implement tougher health and safety protocols, including more rigorous sanitation and enforced distancing between workers.
TRAVEL: Qantas, Australia’s largest airline, and Hong Kong’s Cathay Pacific Airways both cut international passenger capacity by 90%. Qantas’s cuts will last until the end of May, Cathay Pacific’s apply in April.
Canada’s second largest airline is suspending all commercial international and transborder flights for a 30-day period as it helps operate rescue and repatriation flights in partnership with the Canadian government. Westjet says it will suspend normal service on Sunday, March 22. Prime Minister Justin Trudeau says now is the time for Canadians to come home. The government has mandated the screening of passengers by airlines before boarding.
Hong Kong’s Cathay Pacific Airways cut its flight schedule by 90% in April after passenger traffic in February fell by more than half from a year ago. Hong Kong’s airlines were already under pressure because of political unrest which has hurt tourism.
American Airlines on Monday suspended about 75% of its long-haul international flights and began grounding about 135 planes. It will cut passenger-carrying capacity in the U.S. by 20% in April and 30% in May. Airlines are talking to unions about taking cuts in pay or hours, and some are cutting executive and management salaries.
MARKETS: U.S. stocks jittered higher at the start of trading Tuesday, a day after plunging to their worst loss in more than three decades, as uncertainty about how badly the coronavirus will hit the economy continues to dominate markets.
Trading is unsettled around the world beyond the S&P 500, where an initial gain of 3.2% trimmed to 1% within 10 minutes. European stocks swung from gains to losses. South Korean stocks fell to their fifth straight loss of 2.5%, but Japanese stocks shook off an early loss to edge higher.
The 12% plunge on the S&P 500 Monday took place amid a growing consensus, from Wall Street to the White House, that a global recession may be imminent. Entire sectors of national economies are at risk. The Philippine stock market shut down Tuesday after the government imposed restrictions on movement in the capital.
The investor-oriented ZEW index of German business confidence recorded its sharpest decline ever as Europe’s economy faces an almost certain recession whose depth could exceed the one that followed the global financial crisis. The index fell to minus 49.5 points in March from plus 8.7 points in February, a fall of 58.2 points and the biggest drop since the survey began in 1991, the institute said Tuesday. Germany and other countries are restricting entry at the border and ordering many businesses to close, leading to a massive drop in sales and activity across Europe.
STORES, RESTAURANTS AND OTHER PUBLIC PLACES: With hopes of a rescue fading in a pandemic, the London fashion and furniture retailer Laura Ashley said Tuesday that it will appoint administrators to devise its direction going forward. The company’s main shareholder MUI Asia said it will not be able to step in with the money that is needed. The company, which was an iconic presence on the U.K. high street during the 1980s, said in a prepared statement that the outbreak has had "an immediate and significant impact," and that "ongoing developments indicate that this will be a sustained national situation."
Dollar Tree says it is temporarily suspending online ordering so that it can keep supplies in its stores amid the virus outbreak. Like Amazon, Target and Walmart, Dollar Tree has experienced a sharp spike in online orders as consumers scramble to secure staples while avoiding public places. Dollar Tree said most of the items on its website are still available in stores.
The number of retailers closing their stores also continues to grow, with Ralph Lauren and Foot Locker now added to the list. Other companies that have said they are closing stores include Patagonia, Under Armour, Urban Outfitters, REI and American Girl.
McDonald’s says most of its restaurants in the U.S. have closed their dining rooms and are operating drive-thru, takeout or delivery only due to the new coronavirus. Other major chains, like Starbucks are limiting capacity switching to carry-out only. McDonald’s said in a regulatory filing Tuesday that restaurants in France and Canada have also closed their dining rooms, while those in Spain and Italy are completely closed. The Chicago fast food giant said 95% of its 3,300 restaurants in China are now open. McDonald’s has 14,000 U.S. restaurants and around 37,000 worldwide.
U.S. movie theaters have closed nationwide due to the coronavirus pandemic, turning dark nearly all of the country’s 40,000-plus screens in an unprecedented shutdown. The largest chains had tried to remain open even as Hollywood postponed its upcoming release plans and guidelines for social distancing steadily diminished the recommended size of crowds. But after President Donald Trump on Monday urged against gatherings of more than 10 people, AMC Theaters, the nation’s largest chain, said Tuesday its theaters would close altogether.