Stocks fluctuate while bond yields reach a new low.
Stocks rose on Wall Street in early trading on Monday as investors bet that the world’s governments and central banks would step in to help a global economy slammed by the coronavirus outbreak.
The S&P 500 climbed in early trading, and shares in Europe fluctuated between gains and losses. Most indexes in Asia had ended higher.
Oil prices rose on Monday, reversing last week’s slide, as confidence grew that the Organization of the Petroleum Exporting Countries and Russia would agree to a cut in production this week.
Investors were heartened by separate statements from the Bank of Japan and Bank of England, both pledging to monitor markets closely and protect monetary stability.
But signs of caution about the economic outlook remained. Yields on the 10-year U.S. Treasury bond fell to 1.08 percent. The drop, driven by rising bond prices, suggests that investors are still looking for safe places to park their money, as well as growing expectation that the Federal Reserve will cut interest rates to support the economy.
The virus, now detected in at least 61 countries, has shuttered factories and squeezed businesses across the globe. Companies are also readjusting their annual profit expectations, economists are lowering their forecasts for global growth, and policymakers have signaled that they are ready, if needed, to act to stabilize the economy.
The volatile opening for stocks followed one of the worst weeks for global markets since the 2008 financial crisis, with several major indexes around the world falling more than 10 percent in a few days — a stunning decline that came as investors grappled with the potential economic toll that the outbreak could take.
Experts warn of significantly slower global growth.
A major multinational economic group cut its outlook for 2020 as coronavirus cases show up around the globe, suggesting that global growth could be cut in half if infections spread more widely outside China.
The Organization for Economic Cooperation and Development said that if the outbreak swept widely through the Asia-Pacific region, Europe and North America, global growth could fall to 1.5 percent this year, far less than the 3 percent it had projected before the virus surfaced.
Even if the outbreak is mild and mostly contained outside China — the O.E.C.D.’s expected scenario — global growth could be lowered about half a percentage point relative to previous forecasts, according to an update the group released on Monday ominously titled “Coronavirus: The World Economy at Risk.”
In France, Finance Minister Bruno LeMaire said the virus outbreak would probably have “a much more significant” impact on the French economy than first estimated. The government last week lowered its growth forecast to 1.2 percent for this year, down from 1.3 percent, but the figure is likely to be more, he said, without giving a number.
Supplies of face masks are threatened.
For weeks, global supplies of medical masks have been tight as governments, medical facilities and consumers rush to stockpile protective gear against the spread of the coronavirus.
But much of the world’s supply is already under lockdown.
Hubei and its provincial capital, Wuhan, the now-quarantined ground zero for the coronavirus, is a major producer of surgical masks, gowns, face shields, bandages and other protective gear for the health care industry. Several manufacturers are based in Xiantao, China, about 100 kilometers west of Wuhan.
The Chinese government is pushing medical equipment manufacturers around the country back to work and offering generous subsidies to boost their production of products like masks. China’s Ministry of Industry and Information Technology said last week that its daily production capacity for masks had reached 70 million, up from 20 million at the beginning of February.
But few of those products may make their way to the United States. The face masks that are available appear to have been commandeered by Chinese local governments before they can be exported, which some health experts say is understandable since China remains the center of the outbreak.
American officials have not looked kindly on the restrictions. In an interview with Fox Business Network on Feb. 24, White House economic adviser Peter Navarro accused China of putting up barriers to prevent medical products from coming to the United States.
Companies like 3M, Honeywell and Alpha Pro Tech have said they are ramping up mask production globally to help meet spikes in demand.
The U.S. Centers for Disease Control and Prevention say that masks most effectively stop the spread of disease when worn by people who are already sick, not those that are healthy. They have urged the public to leave masks for medical workers and the patients who need them most.
India’s carmakers are facing parts shortages.
India’s carmakers have been hit by shortages in parts, as the impact of China’s efforts to control the coronavirus outbreak ripple through supply chains.
Mumbai-based Tata Motors said on Sunday that the outbreak affected vehicle production, blaming the disruptions for a one-third drop in sales last month. Other carmakers, like Mahindra and Mahindra, have also said that their supply of parts from China had been crimped.
China accounts for roughly one quarter of India’s imports of automotive components, according to ICRA, an Indian credit rating firm.
Hyundai, the South Korean automaker, temporarily closed plants last month for a similar reason. So far, North American automakers haven’t been affected.
Supply chain disruptions and a manufacturing downturn could add to the economic problems already facing India, which is in its biggest slump in more than a decade.
Analysts at Fitch Ratings, a credit rating firm, on Monday lowered its estimate of India’s economic growth to a rate of 4.9 percent for the current year from its previous outlook of 5.1 percent.
Oil prices rise, as hopes brighten for production cuts.
Rising expectations that some of the world’s major oil producers will agree to production cuts appeared to steady oil prices on Monday.
Officials from the Organization of the Petroleum Exporting Countries and Russia are expected to meet in Vienna this week to try to halt plunging oil prices, which sank about 14 percent last week alone. While the spreading coronavirus epidemic is cutting into demand for oil and weakening OPEC’s clout, the meeting will still be watched closely by market participants because countries representing roughly 40 percent of world oil supplies will be present.
Hopes that the gathering will lead to new and deeper production cuts helped spark sharp price rises on Monday, ending last week’s slide. Brent crude, the international benchmark, rose to more than $51 a barrel.
President Vladimir V. Putin of Russia bolstered those hopes by suggesting on Sunday that his country was willing to work with OPEC to try to stabilize prices. The markets have been unsettled in recent weeks by Russia’s reluctance to join OPEC in an emergency meeting to discuss output trims to offset the effects of the coronavirus on demand.
Russian officials have argued that it was too early to understand the full impact of the coronavirus and that a shortfall of about 1 million barrels a day, caused by political turmoil in Libya, was helping to offset reduced demand from the virus outbreak.
Investors hope central banks will step in.
Rumors swirled on Friday that the biggest central banks might make take coordinated action over the weekend to soothe tumultuous markets, though several economists said chances had dimmed after Federal Reserve Chair Jerome H. Powell released a statement late Friday afternoon pledging to act as needed.
No such coordinated intervention took place on Monday, but the Bank of England and Bank of Japan both said they were monitoring the situation closely.
Bank of Japan said in a statement that it would “strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.” It did not announce any significant actions.
The Bank of England pledged to “ensure all necessary steps are taken to protect financial and monetary stability.” The bank said in a statement that it was working closely with the Treasury, international partners and the Financial Conduct Authority.
Central bank coordination is rare and reserved for moments of major concern. The major central banks cut interest rates simultaneously as markets collapsed in October 2008. Even if the world’s major central banks do take action, lowering borrowing costs will get the global economy only so far.
Rates are historically low across advanced economies. They are negative across Europe, where infections are rapidly mounting, and in Japan. Officials in those economies had been trying to coax households and businesses to spend amid lackluster growth by buying huge quantities of bonds.
Rate cuts, or even hints that they are coming, can help calm markets and keep credit flowing. But a rate cut can do little to restart production lines hobbled by workers placed in quarantine or told to stay home. Nor can central banks do much to lure tourists back to back to Venice or encourage people to fly again.
Retailers are hit.
As retailers started to report fourth quarter earnings in the past week, coronavirus has become a major topic for executives and analysts.
The shoe company Steve Madden said that it expected lower sales and earnings for the year, in part because of the virus, noting that 88 percent of its products were made in China in 2019. Ed Rosenfeld, Steve Madden’s chief executive, said on a Thursday earnings call that the brand was mainly seeing an impact on its supply chain, which was leading to production delays.
“We’re looking at, on average, production delays of about three weeks,” Mr. Rosenfeld said. While the company will fly more goods, it can’t transport everything via airfreight, which will delay shipments and affect sales, he added.
Several chains, like Big Lots and Foot Locker, emphasized that their forecasts for the year did not yet include potential effects from the outbreak and that they were monitoring the crisis closely.
Others, like J.C. Penney, said that any potential challenges could be mitigated by moves away from China after last year, when concern mounted around new potential tariffs on Chinese imports.
Spotting scams and online snake oil.
Fear of the coronavirus has presented a business opportunity for people promoting dubious products and bogus cures.
LinkedIn, the professional networking website, began looking into a company called “coronavirus masks” that created an employer post on its platform. The post directed traffic to a website where orders could be placed for masks and other preventive gear.
But the contact email for the company did not work, and the mailing address listed on the page was an apartment complex in Washington, D.C.
By day’s end, the LinkedIn posting was disabled. Fred Han, a LinkedIn spokesman, said the page had been removed for violating its policy against inappropriately promotional content. “We appreciate you flagging it to us so our teams could investigate,” he wrote in an email.
Amazon said on Thursday that it had barred more than 1 million products from being sold on its platform because the sellers had made inaccurate claims about the product being able to cure or protect against the coronavirus. And Tuesday, the Securities and Exchange Commission suspended trading in shares of a company called Eastgate Biotech, which claimed to have the “international marketing rights to an approved coronavirus treatment.”
Here’s what else happened over the weekend:
Two Amazon employees in Milan have contracted the coronavirus, the company said. Amazon has indefinitely halted all travel, including trips within the United States.
A major energy conference in Houston was canceled. CERAWeek, run by IHS Markit, had been scheduled for the week of March 9, with executives and experts from over 80 countries attending.
Facebook said in an internal memo that it would no longer allow social visits from non-employees at any of the company’s global offices. And Twitter said in a blog post on Sunday that it would restrict all nonessential business travel.
Reporting was contributed by Stanley Reed, Jeanna Smialek, Liz Alderman, Alan Rappeport, Ana Swanson, Matt Phillips, Matt Goldstein, Jack Ewing, Karen Weise, Kevin Granville, Mike Isaac, Michael Corkery, Alexandra Stevenson, Sapna Maheshwari, Carlos Tejada, Vindu Goel and Karen Singh.