Federal Reserve calls coronavirus 'very serious issue' as it holds US interest rates - as it happened

Graeme Wearden

from on 2020-01-29 20:27 (#4YM3A)

Rolling coverage of the latest economic and financial news

Earlier:

8.27pm GMT

After a small pause (the intrepid reporter had the microphone upside down, but we'll preserve his blushes) we have the final question:

Q: Do you have sympathy with savers who have suffered from low interest rates?

8.20pm GMT

Here's a clip of America's top central banker talking about the coronavirus:

It's too soon to know what coronavirus could do to China's economy, but the Fed is monitoring it closely and implications for global growth, says Chair Jerome Powell https://t.co/HItuzIw5dT pic.twitter.com/7MSD2BX0OC

8.20pm GMT

Q: US stock market levels are very high - are you concerned?

Jay Powell says the Fed looks at a range of financial conditions, including leverage in the financial and non-financial sectors, debt levels, and asset price levels.

8.16pm GMT

Powell on China's Financial Sector
China has had a problem...with debt, with high levels of debt...debt of business and state owned enterprises. China's authorities have tried to get that under control. That is one of the reasons the Chinese and global economies have slowed.

8.14pm GMT

Q: How might the coronavirus outbreak affect China's ability to deal with its bad debts?

Jay Powell says China had a significant problem with debts. It decided to tackle those high debt levels a few years ago - which was one of the causes of the global slowdown.

8.10pm GMT

There may not be an immediate bounce from the US trade deal with Mexico and Canada, Powell cautions.

He sees a 'wait and see' attitude among American businesses, so there's no "decisive" recovery in manufacturing.

8.04pm GMT

Q: Does climate change pose a system-wide risk to financial stability?

It's certainly possible over the long-term, Powell replies, but ultimately the issue must fall to elected officials.

7.59pm GMT

Q: Various US companies are closing factories, bringing staff home or seeing supply chain disruption due to the coronavirus. So what impact could it have on US growth, and is it a significant risk to the global economy?

Federal Reserve chair Jerome Powell says the coronavirus is a very serious issue, which has already caused significant human suffering.

Of course we are very carefully monitoring the situation.

7.48pm GMT

On the US economy, Powell says the labour market is still performing well.... and it's a "bit surprising" that wages haven't risen faster.

7.47pm GMT

Hmmm....

*POWELL: WANT AROUND $1.5T TO BE BOTTOM OF RESERVES LEVEL - already above here, and starting to plateau #fomc pic.twitter.com/9w9c8nkhFi

7.46pm GMT

Powell is giving (well, reading out) a long answer on the Fed's repo operation (buying short-term treasury bills with new money).

Powell answering repo question by reading lengthy repo script. https://t.co/NxOUVYvVO0 pic.twitter.com/qRxBQFJGPA

desired level of reserves..no lower than where they were in september...
not below 1.5 trillion...$usd #powell

7.40pm GMT

Onto questions, and Powell confirms that the Fed has tweaked its language on the inflation target.

It now states clearly that it wants to see inflation at 2%, not merely near it.

7.38pm GMT

Jay Powell (who may have a touch of the sniffles) says US inflation should move closer to the 2% target in coming months.

We are determined to avoid inflation running persistently below 2%, he insists.

$USD #FOMC | Fed's Powell: Current MonPol Stance Is Appropriate As Data Is Consistent With Outlook
- Fed Sees Inflation Moving Closer To Target Over Next Few Months
- Fed Is Determined To Avoid Inflation Persistently Running Below 2%
- Material Reassessment Would Spur Response

7.35pm GMT

Federal Reserve Chairman Jerome Powell opens his news conference acknowledging "risks to the outlook remain, including those posed by the new coronavirus." pic.twitter.com/rfaVvzDyqa

7.34pm GMT

Federal Reserve chair Jerome Powell is giving a press conference now.

He confirms that the Fed has left interest rates on hold today, adding that monetary policy is well purposed to serve the US economy, create jobs and get inflation on target (it's currently 1.5%, below the 2% target).

7.25pm GMT

Another small change -- the Fed has decided to keep lubricating the plumbing of the US financial system for a few more months.

This repo scheme, in which the Fed buys hundreds of billions of dollars of short-term bonds, was meant to expire in January - but will now run until April.

*FED EXTENDS REPO OPERATIONS AT LEAST THROUGH APRIL

*FED REPEATS WILL CONTINUE TO BUY U.S. TREASURY BILLS AT LEAST INTO SECOND QUARTER

Looks like the Fed's "Not QE" program is on autopilot until further notice....$SPX 3,500 by April. pic.twitter.com/D1cNokDqpc

7.18pm GMT

The Fed has made a small technical tweak - raising the interest rate it pays banks on their excess reserves. That's meant to keep interest rates within the Fed'a 1.5%-1.75% target.

Fed hikes the interest rate on excess reserves by 5bps to 1.6% from 1.55% - a strong signal with respect to the rate-liquidity policy mix that challenges directly the market's "QE+" mentality and the entrenched expectation that rates are on a preset course lower in 2020. #FOMC

7.14pm GMT

There's no mention of the coronavirus in the Fed statement.

That suggests the central bank isn't too worrked about the epidemic, says Naeem Aslam, chief market analyst at Avatrade:

The FOMC decision failed to turbocharge market reaction and the fact the Fed didn't mention anything Coronavirus made it clear for investors that the Fed isn't worried.

Gold traders were hoping that perhaps the Fed will mention the economic impact of this virus but the absence of these comments kept bulls out of this trade.

7.12pm GMT

Understandably, there's not much market reaction to the Fed's decision (which Bloomberg's Mike McKee has astutely dubbed a 'nothing-burger').

The Dow Jones industrial average is up 166 points, or over 0.5%, at 28,889, having been 133 points higher just before the decision was announced.

U.S. STOCK INDEXES MAINTAIN GAINS AFTER FED RATE DECISION

- DOW UP 0.5%, NASDAQ UP 0.5%, S&P 500 UP 0.4% AFTER FED RATE DECISION

7.08pm GMT

The Fed also sounds upbeat about the state of the US economy, saying:

Information received since the Federal Open Market Committee met in December indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low....

Federal Open Market Committee statement: https://t.co/E5kkLMjJAU #FOMC

7.05pm GMT

Today's decision is unanimous -- every Federal reserve policymaker decided to do nothing this month.

And the FOMC's accompanying statement looks nearly identical to December's offering.

Fed worried about the consumer? That may be a stretch. But FWIW, Fed described pace of household spending rising at "moderate" pace today compared to "strong" in December.

7.00pm GMT

NEWSFLASH: The Fed has left US interest rates unchanged, at 1.5%-1.75%.

6.52pm GMT

Melissa Davies, Economist at Redburn, agrees that the Fed will be cautious today, partly due to the health crisis in China:

"Tonight's FOMC meeting should not bring any headline changes to interest rates.

Indeed, with coronavirus having taken the wind out of the sails of hopes for a sustained bounce in global commercial activity in early 2020, and some particularly poor US manufacturing surveys of late, the FOMC has plenty of reason to strike a dovish tone.

6.46pm GMT

It's nearly time for the first US interest rate decision of 2020 - but don't expect many fireworks.

The Federal Reserve is widely expected to keep its benchmark Fed Funds rate unchanged, at 1.5% to 1.75%.

$USD #FOMC | Following three consecutive "insurance" rate cuts in 2019, the US Federal Reserve is widely expected to unanimously remain on hold at its first monetary policy meeting of the year - @dev_peter https://t.co/qimGsBqtt9 pic.twitter.com/17kT7wG54n

4.37pm GMT

Coronavirus worries have kept a lid on the London stock market today.

The FTSE 100 index has closed just 2 points higher at 7,483 - still 100 points down this week after Monday's troubles.

The market rebound petered out on Wednesday afternoon, investors struggling to justify the gains in the face of the latest coronavirus news.

Probably the most relevant headline came from Chinese government economist Zhang Ming, who warned that the country's first quarter growth may fall under 5% as the virus spreads, with the forecast based on a mid-February peak for the outbreak. Given investors freaked out as China's GDP dropped to 6.0%, a reading more than 1% under that is a potential nightmare.

3.08pm GMT

Time for a quick recap, as investors await the Federal Reserve interest rate decision in four hours time.

Concerns over the coronavirus continue to weigh on market today. A top Chinese economists has warned that the outbreak could cause more economic damage than Sars in 2003.

3.00pm GMT

There are reports that American Airlines and Lufthansa are now cancelling their services to China, following British Airways' lead this morning.

American Airlines cancels some #China service for more than a month as coronavirus spreads - CNBChttps://t.co/ionSLdEN3N

Lufthansa Cancels All Flights to #China: Bildhttps://t.co/Kn9a3oHrFn

2.48pm GMT

Apple's stock surge means the company is worth over $1.4tn -- more than every company on Germany's DAX index combined (as flagged earlier).

Amanda Lyons, investment manager, GAM, has delved into last night's numbers -- and concluded that not everything is as rosy as you'd think.

With iPhone still accounting for over 60% of total revenue it shows how much the company still relies on this product for growth and that outperformance elsewhere is not enough to fuel future growth.

Although Services revenue is impressive, it is intricately liked to Product sales. In the earnings release (and again on the call), Apple highlighted that the installed base has reached 1.5bn devices. It is hard to see that this segment can grow to become the driver of the company and overtake the iPhone.

"Almost no colour was given regarding the Apple TV+ launch; in its current form, it does not feel that TV+ will be the new Netflix. Its content offering is significantly lighter than competitors and is relying on gaining subscribers through the service being bundled for free for a year with the purchase of any Apple hardware. Without significant investments in content, it is hard to see many of those 'free' subscribers converting to paid subs at the end of the year.

2.38pm GMT

Boom! Apple's share price has hit a new record high, at the start of trading in New York.

Apple has gained more than 2% to above $326 per share, which means it has more than doubled in the last year.

Apple's valuation when the iPhone was unveiled in 2007:

$75 billion

Apple's valuation today:

$1.4 trillion pic.twitter.com/2Cg4Rn9tus

2.35pm GMT

Boeing has taken another big hit from the 737 Max crisis.

The US aircraft maker has doubled the likely cost of fixing the problem, to over $18bn, in its new financial results today. This has dragged Boeing into its first annual loss since 1997.

2.19pm GMT

Oil has now unrallied -- as traders take claims of an attack on Saudi facilities in their stride.

And...down it goes...never a dull day... pic.twitter.com/2VNNFSpWCq

2.01pm GMT

Back in the markets, the oil price is rallying following reports of an attack on Saudi Arabia's oil facilities.

Not much detail yet, but Brent crude rallied by over 1.2% to $60.25 per barrel.

Crude futures surged as much as 1.7% in New York on reports of the attack https://t.co/p5DtzftuuR #OOTT pic.twitter.com/0UU9N6ivMQ

1.31pm GMT

Back in the UK, another rail operator has been taken out of private hands into the tender care of the government.

Northern Rail, which operates services (badly) in the North of England will be nationalised on the first of March. The government has run out of patience over the litany of problems - from cancelled trains and carriage shortages to faulty ticket machines and a lack of drivers.

Transport Secretary, @grantshapps has announced that @northernassist will now be operated by the government from 1 March 2020. Passenger journeys will not be affected.

For more information https://t.co/9dxAoYHqeE pic.twitter.com/fwWav2TL3U

51% of Britons - including 65% of Northerners - support the decision for Northern rail to be put into public ownership. Only 12% oppose it https://t.co/2dYLp4vMJz pic.twitter.com/KYDKFbyF5X

12.53pm GMT

Newsflash: A Chinese government economist has warned that the Wuhan coronavirus may cause more economic damage than the SARS epidemic.

Reuters: CHINA Q1 GROWTH MAY DIP BELOW 5% AS VIRUS SPREADS - GOVT ECONOMIST

Reuters: CHINA GOVT ECONOMIST SAYS FORECAST BASED ON ASSUMPTION THAT VIRUS OUTBREAK WILL PEAK BY MID-FEBRUARY AND END BY END OF MARCH

Reuters: CHINA GOVT ECONOMIST ESTIMATES THAT IMPACT OF CORONAVIRUS ON CHINA'S ECONOMY COULD BE SIGNIFICANTLY BIGGER THAN THAT OF SARS OUTBREAK

Reuters: CHINA GOVT ECONOMIST SAYS BEIJING LIKELY TO STEP UP POLICY SUPPORT FOR ECONOMY, WHICH COULD BOOST BUDGET DEFICIT TO OVER 3% OF GDP IN 2020

Reuters: CHINA GOVT ECONOMIST SAYS PEOPLE'S BANK OF CHINA COULD FURTHER CUT BANKS' RESERVE REQUIREMENT RATIOS AND INTEREST RATES

12.38pm GMT

Just in: Fast food giant McDonalds has beaten Wall Street forecasts, achieving more than 100 billion dollars of annual sales for the first time.

"2019 marked a year of significant milestones for McDonald's - including surpassing $100 billion in Systemwide sales and achieving our highest global comparable sales growth in over a decade."

McDonald's Q4 earnings topped analysts' expectations, reporting $1.97 EPS vs. the estimated $1.96. https://t.co/r4IKyGRbB9 pic.twitter.com/WNdZvGzY1E

12.05pm GMT

The long grind of job cuts at banking group Lloyds continues today.

Banking union Accord has announced that Lloyds is cutting almost 80 jobs, as part of a drive to close 56 branches this year.

Lloyds Banking Group is planning to close a further 56 branches this year, according to the financial services union Accord. The planned closures include 31 Lloyds, 10 Halifax and 15 Bank of Scotland branded branches, the union said. They will be shut between April and October.

11.33am GMT

Ovo Energy, which recently joined the ranks of Britain's biggest energy firms, has now also joined the ranks of firms fined by the regulator.

Ovo's sin was to send inaccurate bills, or no statement at all, to over 500,000 customers over several years.

11.30am GMT

Readers with long memories may be surprised to hear that Greece can now borrow at an interest rate just below zero.

Yes, investors are prepared to pay Athens for the privilege of buying its debt -- at least the short-term bonds, repayable in six months.

Greece just issued a487 mio of a 6 months t-bill.

The yield is NEGATIVE (-0.05%).

Greece.

Not even the first time - Greece had three negative yield T-bill auctions last year! https://t.co/a1etxJ6qTZ pic.twitter.com/sjfUdE7Aq5

10.59am GMT

Financial analysts have been hiking their price targets for Apple, after it beat expectations yesterday with its strong profit and revenue growth.

Fair enough. Except...shouldn't Wall Street's finest minds have expected such a good performance, given they've been watching Apple so closely?

Apple is probably the most researched stock on the planet and the analyst community has been chasing it all year.

The latest moves... Cowen raising its PT to $370 from $350. Piper Sandler to $343 from $305. RBC to $358 from $330. pic.twitter.com/EJ63BCyT67

10.50am GMT

Here's a great chart showing how Apple's share price has rocketed since Steve Jobs was lured back to run the company 23 years ago.

When Steve Jobs returned to Apple in 1997, it was valued at $3bn, less than one-tenth of Siemens, Europe's largest industrial group then and now. Today, Apple is worth more than Germany's 30 leading companies https://t.co/fITxtoz2Fu pic.twitter.com/aa9WJ3sJsx

10.30am GMT

Back in the UK, house prices have risen as the market shakes off some of its recent lethargy.

Average house prices rose by 0.5% during January, Nationwide reports. This lifts the annual rate of housing inflation to 1.9%.

"Sparks were flying after the election but this month the housing market has ignited, with the Boris Bounce providing the match.

"A year ago the annual growth rate was just 0.1%. This step change in house price growth is being driven by a resurgence of demand and, with it coming before we've even left the EU, is clearly significant.

"January saw a further modest pick-up in annual UK house price growth to 1.9%, from 1.4% in December. This follows twelve 12 successive months in which annual price growth had been below 1%.

"Indicators of UK economic activity were fairly volatile for much of 2019, but the underlying pace of growth slowed through the year as a result of weaker global growth and an intensification of Brexit uncertainty.

10.11am GMT

Over at the Hong Kong harbour, Bloomberg's Alex Longley reports that things are unusually quiet - a bad sign for the economy as it tries to clamber out of recession.

1/ Currently at the harbour front in Hong Kong, where there are precious few people despite it being the end of the lunar new year holiday. Many locals working from home rather than getting on public transport #OOTT

2/ Very few boats on the harbour, am getting seats on trains etc. Aside from the fact it's all a bit eerie, seems kind of clear that the virus is going to dent oil demand, with locals often told not to go into offices.

3/ In short, this'll hit consumption, question is by how much. I'll also be doing my bit to curb consumption by staying at home for 2 weeks when I get back. Happy year of the rat.

10.07am GMT

More reaction to the slowdown in eurozone money supply:

Ouch! #ECB's M3 growth rate sharply decreased to 5% in Dec from 5.6% in Nov. Credit growth to firms slowed to 3.2% from 3.4%, the slowest growth since 2017 and way short of the 4.5% target necessary for decent Eurozone GDP growth. pic.twitter.com/1FDTRQaxZ0

9.57am GMT

Apple's shares have jumped 2% in after-market trading, following its record-break profits and revenues last night.

That lifts its market capitalisation to over $1.4 trillion, tightening its place as the world's most valuable tech company (only Saudi Aramco is worth more).

The fact that Germany's 30 largest companies have been overtaken by one single American giant is more than just a statistical quirk - it is a striking example of how Europe's largest economy risks being left behind by the 21st century tech boom.https://t.co/VmpkhREzwo

9.36am GMT

In a worrying sign, money supply growth in the eurozone has slowed.

The European Central Bank reports that growth in broad money slowed to 5% last month, from 5.6% in November.

The annual growth rate of broad money (M3) in the euro area decreased to 5.0% in December 2019 from 5.6% in November. Full press release https://t.co/ouaY9KOEbt pic.twitter.com/GYRVzqf2Rk

Second consecutive month of weaker bank credit flows to the corporate sector, to be monitored. https://t.co/tqJfjjtlKn

A bit of a dip in narrow money growth ( M1) has been announced by the ECB as 8% in December replaces 8.3% in November. Not good for short-term Euro area prospects.

9.23am GMT

European stock markets have just opened a little higher, as investors resist hitting the panic button (yet, anyway).

The Stoxx 600 index of Europe's top companies has risen by 0.5%, with gains in Spain, Italy, France and Germany.

The virus outbreak marches on but markets are trying hard not to over-react. Treasury yields are back up a bit, most Asian equity indices are back up a bit, though the Hang Seng is playing catch-down as it re-opens.

9.17am GMT

Commodity prices are rising slightly today, as traders try to calculate the impact of the virus outbreak on the global economy.

Copper, nickel and zinc all rose, recovering some of their recent losses. Yesterday, a basket of metal prices hit its lowest level since early 2017:

9.13am GMT

After a rough day, the Hang Seng index closed 2.8% lower. That's a bad start to the new year, but frankly the rout could have been worse, given anxiety over the coronavirus.

Hong Kong stock market has tumbled as expected on the first working day after Chinese New Year holiday as fears of the #WuhanCoronovirus prevails throughout SE Asia. Benchmark Hang Seng Index has fallen 2.8% on Wednesday, worst opening since 2016, so as other real estate stocks. pic.twitter.com/mV5Jy595bJ

8.45am GMT

Here's a nice summary of the economic impact of the coronavirus, from the BBC's Victoria Fritz:

@British_Airways becomes the 1st airline to halt all flights to&from China because of #coronavirus. Sales blocked til Monday - for now... @cathaypacific has reduced flights to & from mainland China by 50%. @United has suspended some flights from the US to China from Feb.

Not just the travel industry affected. Lots of global companies are worried by anything that affects the functioning of the world's 2nd biggest economy. @Apple switching to alternative sources of components for phones. #starbucks has closed 2,000 stores. @McDonalds too.

Luxury brands are particularly exposed to a drop-off in Chinese demand for products. Leisure's been hit hard. Disneyland's closed in Shanghai & Hong Kong. So are sections of the great wall of China. Banks & car makers have restricted the movement of workers.

8.32am GMT

Here's our main liveblog on the coronavirus outbreak - which has now claimed at least 132 lives:

Coronavirus live updates: British Airways suspends mainland China flights - latest news https://t.co/x1Tt4xCfko

8.13am GMT

Japanese car maker Toyota has announced it will leave its Chinese factories closed until February 9th, extending the usual New Year shutdown.

Reuters has the details:

Toyota, which runs plants in regions such as the northern city of Tianjin and the southern province of Guangdong, said the closures after the Lunar New Year holidays were in line with transport lockdowns in some places, and as it assesses its parts supply situation.

8.02am GMT

British Airways has just suspended all its flights to mainland China, underlining how the virus crisis will hit businesses around the globe.

It says:

"We apologise to customers for the inconvenience, but the safety of our customers and crew is always our priority.

Customers due to travel to or from China in the coming days can find more information on BA.com."

So @British_Airways suspending all flights to and from mainland China with 'immediate effect' due to #Coronavirus.

BA: "We apologise to customers for the inconvenience, but the safety of our customers and crew is always our priority."

7.54am GMT

While Hong Kong stocks slumped, other Asian markets had a better day.

Australia, South Korea and Japan all gained around 0.5%, as traders grasped onto hopes that the outbreak will be contained.

The #Coronavirus fear index: Shares of Kawamoto, a Japanese manufacturer of face masks, have gained another 23.9%. pic.twitter.com/XUZE1eyY0x

7.52am GMT

The biggest fallers on the Hang Seng today were two Hong Kong real estate firms, Hang Lung Properties (-6.3%) and Country Garden Holdings (-5.7%).Demand for their properties will surely be knocked by the coronavirus outbreak.

They were followed by two Macao casino operators Sands China (-5.3%) and Galaxy Entertainment Group (-5.2%). Their betting operations will suffer from the clampdown on travel between the City and mainland China (Macau is an autonomous region, across the Pearl River Delta from Hong Kong).

7.40am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Hong Kong's Hang Seng dropped about 2.5% as markets reopened Wednesday, with the city's stocks catching up to the global slide since last week. https://t.co/DkzxIYA3bx pic.twitter.com/Vo2Jw94NXI

There are seriously more people wearing masks in Hong Kong than at any point during the recent protests

"The Wuhan coronavirus has been spreading around the world. It will affect market sentiment in the near term, as the disease will hit the tourism and retail industries of Hong Kong,"

"These sectors have already been hit hard by the eight-month-long anti-government protests."

Chinese experts say Wuhan virus outbreak will not last as long as Sars epidemic.Zhong Nanshan leading medical figures to tell that wave of infections will abate quickly, but public health expert in Hong Kong disagrees.
Dean of HKU medical school expects outbreak peak in April/May pic.twitter.com/2mOo98v7IF

Sales of the iPhone 11 propelled Apple to all-time record revenues and profits for the final three months of 2019, a strong performance that comes amid concerns over the impact of the coronavirus on the Chinese economy.

Apple's $91.8bn in quarterly revenue topped analyst expectations thanks to $56bn in iPhone sales. The strong performance marks a rebound for the company, which suffered a rare setback in holiday sales one year ago.

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/