Wall Street opened Monday, March 9, plummeting 7%. And after a few minutes, transactions were interrupted for a quarter of an hour to limit the damage. The next “circuit breaker” will trip if the recoil reaches 13%. At around 12 p.m. New York time, the main indices (Dow Jones, S&P 500 and Nasdaq) were down about 4.8%, while the United States is badly affected by the coronavirus epidemic.
The trigger is, of course, the oil crash caused by a double shock: the drop in Chinese and world demand due to the coronavirus epidemic and a mild winter, and the increase in supply due to the refusal Saudi Arabia to come to an agreement with Russia on Friday March 6 to control crude oil production.
But add the blockade of Lombardy in Italy, confirming that the epidemic will have a massive shock on the European economy, and the multiplication of cases in the United States, which suggest that the American economy could follow the same destiny than the rest of the world. All against a backdrop of controversy over how the Trump administration is handling the epidemic.
The President of the United States got angry on Twitter Monday morning March 9. " (In 2019), 37,000 Americans died from the flu. Nothing is closed, and the economy continues to turn. Currently, there are 546 confirmed cases of coronavirus, with 22 deaths. Think about it », said Monday morning, Donald Trump blamed the fall in the markets on the Russo-Saudi oil disagreement and false information. "It’s good for the consumer, gas prices will go down. " In reality, it's panic, and the president, who spent the weekend of March 7 and 8 in his golf course in Mar-a-Lago, Florida, was to have a meeting on Monday at the White House, to examine the economic response to the crisis.
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Widespread risk aversion
This Monday is the day when the latter became complete, threatening to plunge the American economy into recession, in the middle of the election year. Ten-year risk-free interest rates plummeted to a low of 0.38%, before rising to around 0.59%. Investors are panicked and seek security by buying risk-free assets, US treasury bonds, even if it means giving up a good remuneration.
In this context of generalized risk aversion, the Federal Reserve (Fed, American central bank) decided to ensure the liquidity of the system and to increase the amount of short-term funds which it offers to the banks to finance itself. overnight (the "Repo"): the amounts proposed were increased Monday, from 100 billion to 150 billion dollars (from 87 billion euros to 131 billion euros).
On Tuesday March 3, the Fed had surprised its key rates, which now range from 1% to 1.25%, by surprise by half a point, without being able to stem the monetary crisis. Operators are worried about the highly indebted companies, financed by the "junk bonds", these risky high-yield bonds, which it is not known if they will pass the course of the crisis.
Politically, the business turns to the rat race. Donald Trump had decided, on February 2, to close the doors of the United States to foreigners from China, but he is accused of having acted too late, while the virus was there on American soil. The president kept saying soothing words.
"Mitigation Measures"
According to the press, the White House would have opposed recommendations urging the elderly, particularly sensitive to the virus, not to travel by plane. Leading expert Anthony Fauci, director of the National Institute of Allergies and Infectious Diseases, is much more pessimistic, and has not ruled out that the United States must resort to local blockades modestly renamed "measures of mitigation ". "I don't think it would be as draconian as: “nobody comes in, nobody goes out”", Fauci said on Sunday March 8 on Fox News.
In New York State, visitors from Italy, South Korea and Japan are asked to self-impose a 14-day quarantine. Classes are suspended for at least two days at Columbia University after a faculty member has been exposed to the virus.
New York State Governor Andrew Cuomo has accused the Centers for Disease Control and Prevention (CDC) of delaying giving the green light for private laboratories to conduct prevention tests, arousing the ire of Donald Trump. "There is no ambiguous message, just an instrumentalization for political purposes of people like you and your brother Fred". The allusion is aimed at the brother of Mr. Cuomo, a journalist on CNN, a violently anti-Trump channel, decked out with the first name of one of the mafiosi of the Godfather, of Coppola, analyze the New york times.
New York Zero Rate Loans
In fact, Mr. Cuomo multiplies educational press conferences, urges his constituents not to give in to hysteria and recalls that the coronavirus is essentially dangerous for the elderly or those with a medical history. New York City will provide zero-rate loans to businesses with fewer than 100 workers who will experience a quarter of their sales decline.
In Washington, the Democratic President of the House of Representatives, Nancy Pelosi, and the Leader of the Democrats in the Senate, Chuck Schumer, asked, Sunday, the Trump administration to give sick leave – almost nonexistent in the United States – confined employees, to decide on free screening tests and to extend health coverage when it proves insufficient. The administrations – post office, air traffic controllers, tax services – are preparing to operate despite the contamination. Congress voted an additional $ 8.3 billion to counter the epidemic.
The Trump administration, for now, did not seem to be considering general support for the economy, but targeted measures in the hardest hit sectors, such as tourism and transportation.
