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Stocks, Oil and Bonds Drop in Sync as Economic Fears Deepen

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

 

US FINANCIAL MARKET

Stocks, Oil and Bonds Drop in Sync as Economic Fears Deepen

  • Stocks, bonds and commodities fell Wednesday in a simultaneous selloff that suggests investors and companies are trying to raise cash as rapidly as possible to cope with the economic disruption sparked by the coronavirus pandemic.
  • The declines follow sharp tumbles in Europe where equity indexes in London, Frankfurt and Paris plunged around 5% and Milan slipping around 2%. MSCI’s global stocks index dropped nearly 4%.
  • In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 4% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei dipped 1.7%.
  • The volatility of recent days in the U.S. government bond market continued, with yields on the 10-year U.S. Treasury notes ticking up to 1.073%, from 0.994% Tuesday.
  • Investors snapped up short-term government bonds that are the closest equivalent to cash: the yield on 1-month Treasury bills fell to 0.01% from 0.08% Tuesday, according to FactSet.
  • Oil, meanwhile, plunged to its lowest level in more than 17 years on concerns about the economic impact of the outbreak.
  • In a note published Tuesday, Morgan Stanley economists said they now expect world growth in 2020 to fall to 0.9%, the lowest since the global financial crisis.

FedEx suspends 2020 profit outlook; coronavirus and turnaround pressure weigh

  • U.S. package delivery company FedEx suspended its 2020 profit outlook on Tuesday, citing the “significant impact” of the coronavirus, and said it would cut costs due to the uncertainty wrought by the pandemic.
  • Revenue rose about 3% to $17.5 billion. Analysts on average expected revenue of $16.89 billion.
  • The package delivery company’s adjusted net income dropped 53.5% year-over-year to $371 million for the fiscal third quarter.
  • FedEx, which benefited from President Donald Trump’s corporate tax cut, submitted a request to the U.S. government for “liquidity support,” Chief Financial Officer Alan Graf said on a conference call with analysts.

General Mills raises adjusted profit outlook on virus-driven demand

  • Cheerios maker General Mills on Wednesday raised its adjusted profit growth forecast for 2020, boosted by higher demand for its packaged products as people stockpile essential food supplies in the midst of the coronavirus outbreak.
  • However, net sales slipped to $4.18 billion from $4.20 billion, missing the average analyst estimate of $4.21 billion.
  • Sales to retailers in the U.S. and Canada totaled $2.5 billion in the company’s latest quarter, down 1% from the year earlier.
  • The company reported a profit of $454.1 million, compared with $446.8 million a year ago.
  • The company now expects constant-currency adjusted profit per share in 2020 to rise 6% to 8%, compared with an earlier projection of an increase of 3% to 5%.

Boeing Asks for $60 Billion in Aid for U.S. Aerospace Industry

  • Boeing said it was seeking at least $60 billion to aid the U.S. aerospace industry as the plane maker, its suppliers and airline customers face fallout from the growing coronavirus crisis.
  • Boeing’s push for aerospace industry support surpasses the $36 billion in government backing granted to auto makers and suppliers during the financial crisis in 2008 and 2009.
  • Boeing has spent more than $40 billion over the past seven years on stock buybacks, which helped drive its market value to $250 billion before the grounding of the 737 MAX last year and the evolving coronavirus crisis caused the stock to collapse.
  • U.S. airlines are separately seeking about $50 billion in government aid as air-travel plummets and carriers slash schedules.

Marriott Begins Furloughing Tens of Thousands of Employees

  • Marriott International said it is starting to furlough what it expects will be tens of thousands of employees as it ramps up hotel closings across the globe.
  • Marriott said it expected to bring back as many of the furloughed employees as possible when the novel coronavirus is contained and business returns. In the U.S., about 130,000 employees are on the Marriott payroll, the company said.
  • The furloughs come as top hotel executives from Marriott, Hilton and other lodging companies met with President Trump at the White House on Tuesday.
  • Representatives of the hotel industry asked for $150 billion in financial assistance to help them through this difficult period, trade group officials said.

Coronavirus Quiets Car Dealerships Across the U.S.

  • The worsening coronavirus outbreak is bringing the U.S. auto industry’s near decade-long run of robust sales and steady profits to a jarring halt.
  • Analysts are warning of the first significant drop in U.S. vehicle sales since 2009, potentially spelling an end to an unprecedented streak of good times for an industry accustomed to boom-and-bust cycles.
  • While U.S. car factories for the most part continue to run, auto makers could be forced to cut production if sales continue to fall or the virus spreads to workers in the plants, they say.
  • RBC Capital Markets this week said auto sales could fall to 13.5 million vehicles this year, which would mark a 20% decline from last year and the lowest level since 2010.

UAW, Auto Makers Agree to Partial Plant Shutdowns to Curtail Coronavirus

  • The United Auto Workers and Detroit car companies reached agreements on coronavirus-mitigation efforts that for now will avoid a two-week shutdown of U.S. factories.
  • The UAW had been pressing General Motor, Fordand Fiat Chrysler to idle their plants to protect workers from the virus.
  • The union said late Tuesday that company executives had agreed to partial shutdowns of plants to allow for cleaning between shifts and longer periods for shift changeovers, along with other measures to minimize worker contact.
  • Meanwhile, Ford confirmed Tuesday evening it temporarily closed the company’s Chicago assembly plant because of a parts shortage.

U.S. Spending on Ride-Hailing with Uber, Lyft Falls as Coronavirus Spreads

  • Nationwide spending on ride-hailing services Uber and Lyft plunged in the U.S. in the past two weeks as large numbers of Americans started working from home, avoided travel, and curtailed social gatherings in an effort to contain the spread of the novel coronavirus.
  • U.S. consumers spent 21% less on Uber rides in the seven days through March 16 compared with the seven days prior, according to data from market research-firm Edison Trends.
  • Spending on Lyft rides declined 19% over the same period, the data showed.

Amazon Prioritizes Medical Supplies, Household Staples from Merchants Amid Coronavirus

  • Amazon.com said it is taking steps to prioritize shipments of medical supplies, household staples and other high-demand products in the wake of surging demand due to the coronavirus pandemic.
  • Independent sellers on Amazon’s site will be unable to ship products other than such high-demand items to company warehouses until April 5.
  • Amazon is taking similar steps with vendors who supply items for it to resell directly.
  • Some third-party sellers said this would hurt their business, as they would not be able to rely on Amazon’s logistics network to store new batches of goods and ship to customers for three weeks.

Sheriff Quashes Elon Musk’s Aim to Keep Tesla Production Humming

  • Tesla shares fell sharply Wednesday after the sheriff’s office in the county home to the company’s California car factory said it must halt production, putting a break plans to work in spite of statewide efforts to mitigate the effects of the pandemic.
  • The Silicon Valley auto maker had continued to make vehicles at its Fremont factory a day after counties in the San Francisco area issued an order to shut down nonessential business to get people to shelter at their homes.
  • Instead of continuing production, the auto maker must conduct “minimum basic operation only,” Alameda County Sheriff spokesman Raymond Kelly said in an email sent to The Wall Street Journal on Tuesday.

Apple Updates iPad, MacBook Air with New Keyboard

  • Apple on Wednesday introduced a new keyboard for an upgraded MacBook Air, another sign that it is abandoning the problematic butterfly keyboard it introduced in 2015 that required extended repair programs.
  • The company also unveiled an updated iPad Pro with an ultrawide camera, high-quality microphones, motion sensors and a scanner.
  • The new iPad’s wider array of features suggests that the device is now a full-fledged competitor to the MacBook line, while its new scanner may be a sign of more advanced augmented-reality capabilities to come to new iPhone models this fall and ultimately AR glasses.

 

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US ECONOMY & POLITICS

State Unemployment Sites See Surge in Jobless Claims

  • Several state unemployment-benefits sites are malfunctioning amid a rise in claims from Americans who are out of work because of the novel coronavirus.
  • New York, Oregon and Kentucky are among the states whose websites to register for unemployment benefits have experienced problems this week tied to unusually high traffic.
  • Kentucky normally processes 2,000 jobless claims a week but received more than 9,000 claims on Tuesday alone.
  • Unemployment-benefits applications filed this week won’t show up in the Labor Department’s weekly jobless claims report until next Thursday.

Fed to Relaunch Primary Dealer Credit Facility

  • The Federal Reserve said Tuesday it would relaunch a crisis-era facility that allows large financial institutions access to short-term loans.
  • The Primary Dealer Credit Facility, originally established in 2008, will seek to tamp down strains in funding markets by expanding loans to the 24 large financial institutions.
  • The program will essentially function as an overnight loan facility for primary dealers, similar to how the Fed’s discount window provides a round-the-clock backup source of funding to banks.

Senate Expected to Pass Bill Offering Free Virus Testing, Paid Leave

  • The Senate is expected to vote on Wednesday on a second coronavirus response bill, aiming to support the workers whose livelihoods are at risk and the safety net that may soon be protecting more Americans as U.S. businesses shut down.
  • The interim measure, which would be followed by a third package potentially costing $1 trillion, would ensure free testing for the Covid-19 disease caused by the virus and ensure at least two weeks of paid emergency leave for a wide swath of people dealing with its effects.
  • The new votes show how quickly things have evolved for Congress, which earlier this month passed an $8.3 billion measure to fund the development of a vaccine, help states respond and send dollars overseas to assist in the response.

U.S. Seeks to Send Checks to Americans as Part of Stimulus Package

  • The Trump administration backed a plan to send checks directly to Americans as part of a $1 trillion stimulus package to help households and businesses, a dramatic step designed to cushion the impact of the sudden economic slowdown triggered by the coronavirus pandemic.
  • The details of the administration’s $1 trillion proposal are still being finalized and the top-line figure could change.
  • The administration anticipates spending as much as $500 billion on direct cash payments across two $250 billion tranches, the first of which officials hope to deliver quickly.
  • The package also includes roughly $50 billion in assistance for the airline industry, which has been hit hard by the outbreak, and up to $500 billion to boost small businesses and for other needs.

Biden Sweeps Tuesday’s Primaries as Voters Confront Coronavirus Fears

  • Joe Biden won all three primaries held Tuesday on a day filled with anxious voting, building a lead in the Democratic presidential nomination race that appears increasingly difficult for Bernie Sanders to overcome.
  • The two-man race lurched forward against major disruptions triggered by the coronavirus pandemic as the first balloting was held—in Florida, Illinois and Arizona—since the crisis engulfed the nation.
  • As of Wednesday morning, the former vice president had 52.8% of the delegates allocated so far and 57.6% of the number needed to win the nomination.

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EUROPE & WORLD

Coronavirus Infections Pass 200,000 Globally

  • The number of confirmed coronavirus infections topped 200,000, more than doubling in two weeks, as countries escalated their response to the spread with travel restrictions, home quarantines and other limits on movement.
  • There were 203,529 confirmed cases of the disease known as Covid-19 early Wednesday, with infections outside of mainland China—where the epidemic began—now above 122,000, according to data compiled by Johns Hopkins University.
  • Italy, the second worst-hit country, has seen infections top 31,500 and deaths reach 2,503. Scientists expect the number of fatalities in Italy to overtake those in China within days.
  • In Iran, with 17,361 people infected, according to government figures, state media showed busy traffic on the highways leading out of Tehran ahead of the Persian New Year despite the government urging people to stay at home.
  • The U.S. has 6,496 confirmed cases in all 50 states and Washington, D.C., including 114 deaths.
  • In Germany, with just under 10,000 cases, the national agency for disease control warned that failure to follow social-distancing rules could result in 10 million people becoming infected in two to three months.

Japan’s exports fall, imports from China slump as virus impact widens

  • Japan’s exports slipped for a 15th straight month in February as U.S. and China-bound shipments declined, suggesting a cooling of business activity in the world’s third-largest economy due to the coronavirus outbreak.
  • Ministry of Finance (MOF) data out on Wednesday showed Japan’s exports fell 1.0% from a year earlier in February, dragged by U.S.-bound shipments of cars and metal processing machinery to China.
  • Reflecting weak domestic demand, Japan’s total imports shed 14.0%, in line with the median estimate for a 14.4% decrease, dragged down by the sharp drop in imports from China.
  • Imports from China slumped 47.1% from the previous year, seeing their biggest drop since August 1986, ministry officials said, as the country went into lockdown due to the spreading coronavirus epidemic.

Coronavirus outbreak seen hitting European first-quarter earnings further

  • Expectations for first-quarter corporate profits in Europe continued to worsen as countries such as Italy, France and Spain went into lockdown to fight the coronavirus outbreak, Refinitiv’s latest data showed on Tuesday.
  • Companies listed on the pan-European STOXX 600 are now expected to post a 4.1% decline in earnings between January and March, down from a 3.1% drop forecast last week.
  • It’s a sharp deterioration from the 5% jump seen in early February, according to I/B/E/S Refinitiv data.

China’s Tencent sees WeChat usage surge on virus

  • China’s gaming and social media group Tencent said on Wednesday the coronavirus outbreak has driven up traffic to its WeChat platform and other services, though it has not yet seen any significant financial benefit.
  • Revenue rose 25% to 105.8 billion yuan, versus the 102.9 billion yuan average estimate of 17 analysts.
  • Tencent missed expectations with a 21.58 billion yuan ($3.07 billion) profit, compared with a 22.85 billion yuan average estimate.
  • Overall, downloads of all Tencent apps for this February are estimated to have grown 32.3% month-on-month and 42.9% year-on-year.

BMW says pretax profit to be significantly lower in 2020

  • BMW said its pretax profit and vehicle deliveries will drop significantly this year as coronavirus spreads, and combined with higher research and development spending this will lower the profit margin in its automotive segment.
  • The Munich-based carmaker said it is preparing to suspend production at its plants in Rosslyn, South Africa and in Europe until April 19, responding to lower demand and as a way to help reduce risk of contagion.
  • BMW said the current uncertainty regarding the global spread and effects of coronavirus makes it difficult to provide an accurate forecast for 2020 but it expected lower delivery volumes in all major markets in 2020.

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TODAY in HISTORY

  • After months of American protests, Britain repealed the Stamp Act. (1766)

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