IMF slashes growth forecasts and offers $50bn coronavirus help - as it happened

Graeme Wearden

from on 2020-03-04 17:39 (#507C9)

The IMF has torn up its growth forecasts as the Covid-19 outbreak hits the world economy, as the Bank of England's next governor faces MPs

6.39pm GMT

One more thing.... the IMF has also announced it will offer up to $50bn in emerging financing for countries stricken by the coronavirus outbreak.

The proposal could sugar today's bitter news that economic growth forecast this year will fall below 2019's 2.9% due to the virus.

The IMF is making available about $50 billion through its rapid-disbursing emergeincy financing facilities for low income and emerging market countries that could potentially seek support.

Of this, $10 billion is available at zero interest for the poorest members through the Rapid Credit Facility.

5.39pm GMT

Time for a quick recap

Concern is growing over the economic damage caused by the coronavirus, as more cases are recorded outside China - including in the UK.

The @bankofcanada followed the @federalreserve lead in providing monetary accommodation for their economies ahead of supply shock induced slowdown. Rate cuts are not a panacea and fiscal firepower will need to be brought to bear to address coming shocks. pic.twitter.com/g9XMLrr6TZ

5.11pm GMT

Just in: The coronavirus has forced the next James Bond film to be delayed until November.

No Time To Die was scheduled for April. However, fans had already lobbied for a postponement, saying it wasn't the right time to see Daniel Craig's last outing as 007.

MGM, Universal and Bond producers, Michael G. Wilson and Barbara Broccoli, announced today that after careful consideration and thorough evaluation of the global theatrical marketplace, the release of NO TIME TO DIE will be postponed until November 2020. pic.twitter.com/a9h1RP5OKd

5.00pm GMT

Tesco has told more than 5,000 office-based staff to prepare to work from home, in the latest sign of Britain's biggest companies bracing for the coronavirus outbreak to worsen.

Staff at its Welwyn Garden City headquarters and other offices were told on Wednesday to take everything they needed to work from home with them, such as laptops and work mobile phones, sources said.

4.58pm GMT

Back in Westminster, Andrew Bailey is fairly scathing about Facebook's Libra digital currency project, telling MPs:

"It's been handled pretty poorly."

"It was frankly not a very well done and very well developed initiative.

"I remain pretty suspicious."

4.57pm GMT

All the main European stock markets closed higher tonight, despite the IMF's gloomy warnings that the coronavirus is hurting global growth.

The EU-wide Stoxx 600 index ended 1.2% higher, with gains in London, Paris, Frankfurt and Milan.

4.44pm GMT

Britain's FTSE 100 index has continued its recovery, and just closed 97 points higher at 6815 points (up 1.45%).

That's above last Thursday's close (6796 points), meaning we've shaken off Friday's slump.

4.31pm GMT

Andrew Bailey has hinted the Bank of England is not close to an emergency rate cut amid the coronavirus outbreak, telling MPs:

"What we need is frankly more evidence than we have at the moment as to how this is feeding through"

"We are still looking at the evidence and the precise sort of balance of what the shock is likely to be".

4.08pm GMT

Bloomberg is reporting that EU finance ministers have been warned to expect recessions in Italy and France, if the coronavirus outbreak worsens.

They say:

The coronavirus outbreak threatens to plunge both France and Italy into recession, and the ripples from a prolonged outbreak could incite a "vicious" spiral of declining markets, European finance ministers have been warned.

"A longer and more widespread epidemic could have a disproportionate negative impact through uncertainty and financial-market channels," according to a European Commission briefing note on the economic impact, seen by Bloomberg.

SCOOP The coronavirus threatens to plunge both France and #Italy into recession, and a prolonged epidemic could ripple through the region's economy and financial markets and cause a "vicious sovereign-bank loop," the EU warns https://t.co/PdtmSHShlO @v_dendrinou @craigstirling

4.00pm GMT

Lloyd's of London, the insurance market has announced "emergency trading protocols" that it can wheel out if the coronavirus situation escalates.

3.53pm GMT

Asked about the government's levelling-up agenda, Andrew Bailey drops a hint that the Bank could move some staff out of London!

Saying that there are good reasons why the central bank is based in the capital, he admits:

The time has now come to say 'what's the right distribution of the Bank of England?'.

3.45pm GMT

Andrew Bailey then tells MPs that as governor of the Bank of England he wouldn't hold back from telling the government that a free trade deal with the EU is vital.

"My strong view is we should do all we can to get a free trade agreement with the EU and not fall back on the WTO.

"You should be assured that none of the momentum behind this is going to decline"

3.39pm GMT

Labour MP Rushanara Ali is now tearing strips out of Andrew Bailey at the Treasury committee, saying:

"To what extent do you take personal responsibility for not being feared by these people [bankers and finance industry execs]. And they quite frankly took the biscuit?"

"The way they were treating constituents across the country was unacceptable".

3.38pm GMT

Back in parliament, Andrew Bailey is being pummelled by MPs over his running of the Financial Conduct Authority.

Asked on the FCA's, um, shameful toilet hygiene, Bailey says the leaked staff memo showed the FCA needs to lead by example. After the inevitable stinking headlines, "other organisations" got in touch to say they had the same problems.... (Good grief - Ed).

"It was a difficult moment. [But] I'm afraid to say as a public body we can't break the law. We had to stand our ground at that point and I would have to again. We can't as a public regulator break the law."

"It's hellishly tough at times. But that's the nature of it. I don't regret it [taking the job] for a moment."

3.24pm GMT

The Bank of Canada justifies its rate cut by pointing to the damage caused to the global economy by the spread of coronavirus:

Before the outbreak, the global economy was showing signs of stabilizing...

However, COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply and supply chains have been disrupted. This has pulled down commodity prices and the Canadian dollar has depreciated.

3.17pm GMT

NEWSFLASH: The Bank of Canada has aggressively slashed interest rates, in an attempt to protect its economy from the impact of coronavirus.

The BoC has cut its benchmark rate by 50 basis points, from 1.75% to 1.25%, at its scheduled meeting today.

"While Canada's economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding,"

.@bankofcanada on 50 bp rate cut:

"Before the outbreak, the global economy was showing signs of stabilizing... However, COVID-19 represents a significant health threat in a growing number of countries

The outlook is clearly weaker now than it was in January."#cdnecon #cdnpoli

3.06pm GMT

The incoming governor of the Bank of England Andrew Bailey has called on the government to launch emergency financial support to aid smaller firms through the worst of the coronavirus outbreak.

"It's quite reasonable to expect that we are collectively going to have to provide some form of supply chain finance in the not too distant future now."

"We're going to have to do that very quickly."

"It's quite clear in a situation like this that we must act in a coordinated fashion."

3.05pm GMT

The IMF had previously expected China's economy would grow by 5.6% this year -- which is now Not Going To Happen.

Last year China grew by 6.1%, which was the weakest in three decades.

2.58pm GMT

On China, the IMF says that its previous growth forecasts are "no longer valid".

Covid-19 will have a more significant impact on the Chinese economy than previously thought, MD Georgiava warns.

IMF's Georgieva Q&A: Re China, growth scenario had been based on containment which is "no longer valid." Impact on China growth "will be more significant." Very unfortunate that baseline scenario "no longer holds." #coronavirus #IMF @anthonymace #Georgieva

* IMF'S GEORGIEVA SAYS CHINA PRODUCTION RESTORED TO 60%, HOPES TO MOVE TO 90% IN COMING WEEKS

(via @reuters)

2.56pm GMT

David Malpass, head of the World Bank, is appearing alongside Kristalina Georgieva.

He warns that the coronavirus will hurt poorer countries harder, which is why the World Bank announced a $12bn package of loans yesterday to help them fund healthcare and other measures to combat Covid-19.

2.55pm GMT

IMF's Georgieva Q&A: IMF-World Bank spring meeting will be "virtual" and today's test run showed everything can be accomplished. Plus carbon footprint will be less. #coronavirus #IMF @anthonymace #Georgieva

2.40pm GMT

Q: How much growth is the IMF now forecasting for 2020?

Kristalina Georgieva says the IMF is still working on its new projections, and will release them in the coming weeks (they were due in April at the Spring Meetings, which are now being held virtually).

As long as we do not know the duration of this outbreak, we will be in a higher uncertainty place.

#BREAKING IMF chief @KGeorgieva sounds alarm bell on impact of #COVID2019 on world economy: "What we can say with certainty is we have moved into the territory of more dire scenarios...as long as we don't know the duration of this outbreak we'll be in a higher uncertainty space" pic.twitter.com/Vx41XblKhM

2.31pm GMT

What caused policymakers to suddenly galvanise themselves into action against the coronavirus?

It is the sheer geographic spread of the disease around the world, Kristalina Georgieva replies.

2.28pm GMT

The coronavirus crisis calls for a "co-ordinated response mechanism", IMF chief Kristalina Georgieva continues.

The top priority for governments is to ensure that front-line health-related spending is strong enough to handle the coronavirus impact, she adds. And the IMF is "fully committed" to supporting its members, particularly the low-income countries at the greatest risk.

2.18pm GMT

Newsflash: The International Monetary Fund has warned that global growth this year will fall BELOW last year's levels due to the coronavirus crisis.

Previously, the IMF had predicted that global growth would rise to 3.3% this year, up from 2.9% in 2019. But that forecast has been torn up, due to the damage being caused by Covid-19 -- both to supply and demand across the world economy.

Global growth in 2020 will dip below last year's levels

But how far it falls, and how long the impact will be, is difficult to predict.

We are determined to act to reduce the risk and impact on people.

This is no longer a regional issue, it is a global problem calling for a global response.

IMFC on #coronavirus: The 189 member countries stand united to address the challenges related to the epidemic. We extend our sympathies to those affected. The economic and financial impact has been felt globally, creating uncertainty and damaging near-term prospects. pic.twitter.com/9xW0LFskL0

We are determined to provide the necessary support to mitigate the impact, especially on the most vulnerable people and countries. We have called upon the IMF to use all its available financing instruments to help member countries in need. #coronavirus

We are confident that, working together, we will overcome the challenge facing us and restore growth and prosperity for all. #coronavirus

Read the full IMFC statement: https://t.co/4lhMZrgHgv

1.59pm GMT

Crumbs! German airline Lufthansa is grounding 150 of its aircraft, Reuters reports.

It's another clear sign that the travel industry is experiencing weak demand, as consumers shun flights for fear of catching Covid-19.

"We are dynamically adjusting our plans to reflect extraordinary circumstances,"

1.50pm GMT

Storm clouds are gathering over troubled UK regional airline Flybe.

The FT is reporting that the government has rejected Flybe's request for a 100m loan to keep itself in the air.

Breaking: Flybe has told the government that it is running out of cash and will not survive until the end of the month. Airline has been hit by slump in bookings since COVID-19 outbreak. FlyBe says it needs a decision on its request for taxpayer loan of 100m "in the coming days"

1.41pm GMT

1.39pm GMT

The latest US jobs data is a little mixed.

The good news is that American companies hired 183,000 new staff in February, according to payroll operator ADP. That's more than expected.

Feb @ADP payrolls rose 183k vs. 170k est., but Jan revised down from 291k to 209k; large firms drove gains at 133k, while midsized up 26k & small firms up 24k ... very likely to weaken going forward given weather payback & #coronavirus

Solid ADP jobs growth in February but data is before coronavirus fears have risen in the rest of the world

Makes sense for the #Fed to ease in the current environment despite strong labour market, as it may not continue without monetary policy support pic.twitter.com/EcuZDJU06w

1.32pm GMT

Last week's market sell-off in the wake of the coronavirus epidemic has hit Legal & General's solvency position, a key measure of its capital strength.

The insurer said today its solvency ratio had fallen by 10 percentage points since the start of this year to 174% on 28 February. A level above 100% indicates insurers have enough capital, although regulators usually want to see a higher number.

"We prepare and plan for a whole range of different scenarios both in terms of mortality and the market, the market is the big focus."

"Of course we will pay"

Very clear & instant response from Legal & General (@landg_uk) boss Nigel Wilson when asked:

Will you pay people who self-isolate even if rules say you don't have to?#r4today #Coronavirus

1.25pm GMT

Even before the coronavirus arrived, poor employee health has become the most frequent cause of disruption to businesses.

That's according to the latest annual Horizon Scan Report, conducted by the Business Continuity Institute and the British Standards Institution and published today.

The Coronavirus outbreak is the kind of event that is both predictable and extremely disruptive - but its infrequency means it is considered unlikely to occur and so is often overlooked until its effects are all too apparent. This reality shows the importance and great value of taking time to scan the horizon and prepare for the unexpected."

1.04pm GMT

Hundreds of billions of dollars could be wiped back onto America's largest companies today:

Since S&P 500's all-time high on Feb 19, it has shed $3.3 trillion in value:

Mar 3: -$745 billion
Mar 2: +$1.16 trillion
Feb 28: -$212 billion
Feb 27: -$1.18 trillion
Feb 26: -$112 billion
Feb 25: -$841 billion
Feb 24: -$971 billion
Feb 21: -$314 billion
Feb 20: -$120 billion

1.02pm GMT

Wall Street is on track to recover almost all yesterday's slump when trading begins in 90 minutes....and Joe Biden can take the credit.

The Dow Is set to jump 700 points after Biden scores big wins on Super Tuesday. https://t.co/wySUQ1HSjK

1.00pm GMT

Italy's stock market is also rallying today, as its government announces plans to shut schools and universities until mid-March.

The FTSE MIB is up almost 1.5%.

Italian Government to close all schools and universities in the wake of Coronavirus outbreak #MIB 22055.02 +1.41%#EURUSD 1.1111 -0.56%#EURGBP 0.8683 -0.42%#coronavirus

12.55pm GMT

Supermarkets, pharmaceuticals companies and cleaning product makers are driving the FTSE 100 higher.

Morrisons (+4.5%) and Sainsbury's (+3.8%) are the top risers as City traders grab a lunchtime sandwich. They should be benefitting from panicky stockpiling as Britons prepare for quarantine measure to be imposed.

12.43pm GMT

On the global economic front, growth in Brazil has slowed.

Brazilian GDP only expanded by 0.5% in October-December, down from 0.6% in the previous quarter.

Brazil Q4 GDP +0.5%, in line with forecasts but down from 0.6% in Q3. This pulled growth in 2019 down to just 1.1% from 1.3% in each of the preceding two years. With weak 'carry over' into this year and now coronavirus, 2020 growth looks like being even weaker.

12.24pm GMT

Britain's financial services regulator has said it has "no objection" in principle to City staff working remotely due to coronavirus quarantine measures.

But, the Financial Conduct Authority says firms must take all reasonable step to keep operating effectively and support their customers.

"For example, we would expect firms to be able to enter orders and transactions promptly into the relevant systems, use recorded lines when trading and give staff access to the compliance support they need.

"If firms are able to meet these standards and undertake these activities from backup sites or with staff working from home, we have no objection to this."

12.13pm GMT

Over in the UK parliament, Boris Johnson has announced new measures to allow the payment of statutory sick pay from the first day someone is sick, not from day four.

That is designed to help households help with the coronavirus....and cut the danger that people keep working while suffering from Covid-19.

In PMQs @BorisJohnson says statutory sick pay will now be paid from the first day sick instead of after four days

At #PMQs where JC is asking about the impact of coronavirus on the "overstretched and underfunded" NHS.
Johnson responds by announcing government will change law to ensure people self-isolating are entitled to statutory sick pay immediately.

Corbyn asks if that will cover self employed people and those on benefits - PM says they are 'urgently looking at' how that would apply to everyone

Now JC asks about the impact on the self-employed and those on zero hours contracts. Johnson says the government is "very aware" of the issue.
JC asks him to promise that "nobody will have to choose between health and hardship".

11.57am GMT

European markets are pushing higher, with the UK's FTSE 100 now up 112 points or 1.7% at 6830.

That takes it back to last Thursday's closing levels (although it was also briefly higher yesterday).

Markets are really worried about how the coronavirus disruption will affect corporate earnings, consumer spending and ultimately economic growth.

"A lot of precautionary measures are being put into place such as more people working from home, yet there are concerns about how that will affect productivity and spending," says

11.25am GMT

There's no relief from the stock market volatility.

Wall Street is currently being called higher, with the Dow up 500 points (or 2%) in pre-market trading.

Dow Futures +500 volatility continues.

11.23am GMT

Ralf Preusser, global head of rates research at Bank of America, argues that interest rate cuts aren't the right policy response to the coronavirus.

All these things are much more likely to be effective than monetary policy."

11.19am GMT

Almost a quarter of British retailers are reporting severe disruption to their supply of goods as a result of the spread of coronavirus, a new survey has found.

News that retailers are starting to struggle to maintain supplies of some products comes as a survey found that one in 10 people have already started stockpiling food because of fear of an outbreak in the UK.

A survey from the consultancy Retail Economics has found that 24% of British retailers - ranging from food and fashion to health and beauty - say that supply chain disruption is having a significant impact on their business. However, only 7% of those businesses surveyed said that they had enough flexibility in their supply chain to be able to switch suppliers.

11.01am GMT

The interest rates on UK government bonds has fallen to a fresh record low this morning.

10-year UK gilts are yielding just 0.35%, an extremely low rate of return, as investors pile into government debt.

UK benchmark yields fall to all-time low on bets of BOE easing https://t.co/wiBv4j83d8 via @DEBaltaji pic.twitter.com/VtKGMaS62n

10.54am GMT

Two more major European trade shows have just fallen victim to the coronavirus outbreak.

The London Book Fair has been cancelled, after major publishers including HarperCollins UK, Simon & Schuster and Hachette said they would not attend. It was due to run from 10-12 March, but is now off until 2021. More details on The Bookseller.

pic.twitter.com/RTwhbli8GA

10.44am GMT

Reuters has learned that European Central Bank policymakers held an unscheduled telephone conference call late on Tuesday to discuss their emergency response to the coronavirus outbreak.

In light of the 50bps emergency rate cut by the Fed, we are changing our ECB call.

We now expect the ECB to cut rates by 10bps to -0.6% on 12 March - if not earlier - and not wait until 30 April as our previous call implied.

10.12am GMT

European stock markets are rallying this morning, lifted by hopes of stimulus measures...and the results of Super Tuesday.

Every index is up, with the FTSE 100 gaining 77 points or 1.1% to 6794. That's a boost for savers and pension-holders -- but still leaves the Footsie 8% lower than two weeks ago.

After the Fed's unscheduled rate cut ended up creating more panic than allaying concerns about the virus impact, investors found some solace in the results of Super Tuesday where 14 US states voted to choose their favourite for the Democratic nominee of the 2020 presidential election.

The big winner of the night was undoubtedly former Vice President Joe Biden, who made a remarkable comeback after a lacklustre start to his campaign. Biden now has more delegates than his main rival, Bernie Sanders, and this is music to Wall Street's ears, who have less to fear from Biden's centrist policies than Sanders' socialist agenda.

9.55am GMT

Economic activity in Hong Kong has also slumped last month.

The IHS/Markit private sector PMI revealed a deepening recession, falling for the 23rd month in a row, from 46.8 in January to 33.1 in February, the steepest decline in history. Job shedding accelerated to its steepest rate in more than 18 years.

9.40am GMT

Just in: Growth across Britain's service sector slowed slightly in February, as the coronavirus hits sales.

Data firm Markit reports that business activity, new orders and employment all rose at slower rates than in January.

There were a number of reports citing a negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets. The loss of momentum for incoming new business also contributed to the sharpest drop in backlogs of work since last September.

On one hand, February saw future output expectations climbing to the highest for over four and a half years as firms remained optimistic that reduced political uncertainty in particular will help drive further growth. On the other hand, the survey also highlights the risks to the economy from the coronavirus.

The outbreak was linked to reduced tourism numbers and lower travel and transport business volumes, but was also seen as having a wider hit to demand via reduced confidence and financial market volatility, as well as through supply shortages limiting the ability to fulfil orders.

UK's private sector registered solid growth in February as it continued its strong performance at the start of 2020. Composite PMI at 53.0, ai from 53.3 in Jan due to a softer rise in services activity. More: https://t.co/ckmgR1dVjW pic.twitter.com/H4nv2gB9ZQ

9.29am GMT

The recent stock market volatility has helped to scupper UK shopping centre Intu's bid to raise over 1bn in fresh funding.

The cash call was always going to be a stretch -- given Intu has a 4.5bn debt pile, and is struggling from the slowdown on the high street.

9.19am GMT

The coronavirus crisis has (understandably) hurt confidence across Europe's service sector companies.

That's according to IHS Markit's latest survey of purchasing managers, which says:

Business confidence regarding future activity was a little lower than January's 16-month high during February. There were reports from across the region of worries over the impact on business from an escalation of the Covid-19 outbreak.

German companies remained the least optimistic, whilst those in Ireland were the most confident.

9.10am GMT

Just in: The European Central Bank has banned all "non-essential travel" by staff, including its executive board, until 20 April, as it responds to the coronavirus outbreak.

The eurozone's central bank is also postponing all its conferences, apart from the monetary policy press conferences (to discuss interest rate moves and stimulus packages).

8.55am GMT

This chart from Bloomberg shows the dramatic slump in China's car sales last month.

The outbreak has paralyzed the industry just as it was looking to gradually halt a two-year decline, with manufacturers now left with little visibility into when sales might recover. Automakers have poured billions of dollars into the world's largest car market over the past decades in a bet on its growth potential.

8.51am GMT

China has also suffered its biggest monthly drop in car sales ever, in another sign of economic pain.

New auto sales slumped by 80% year-on-year in February, the China Passenger Car Association reports.

Feb car sales in China -80% yoy
Probably nothing for a biz with high fixed costs...$TSLAQ pic.twitter.com/2QEAmTBtDD

Some data coming in this morning:

*CHINA FEB. CAR SALES FELL 80% Y/Y, BIGGEST DECLINE ON RECORD

Surprisingly, equity markets are in the green.. but 80% ???

8.25am GMT

Overnight, we've seen fresh signs that China's economy is suffering heavy economic damage from the coronavirus.

Activity in its service sector slumped at a record pace, according to the latest survey of company bosses.

"Stagnating consumption amid the coronavirus epidemic has had a great impact on the service sector."

Another #PMI collapse from #China! Caixin Services PMI down to 26.5, even worse than the official Non-Manufacturing PMI. pic.twitter.com/FxOWApbf9x

8.18am GMT

French finance minister Bruno Le Maire believes that Europe may need to boost government spending to protect its economy from the impact of the coronavirus.

Speaking on BFM business radio this morning, Le Maire said eurozone governments should be ready to use fiscal stimulus, if economic growth is damaged.

Ma responsabiliti(C) en tant que ministre de l'iconomie et des Finances face au #coronavirus est de soutenir les entreprises au quotidien et d'anticiper pour que l'activiti(C) i(C)conomique franiaise puisse redi(C)marrer le plus vite possible, une fois sortie de cette crise sanitaire. pic.twitter.com/fiWo7ABMQb

7.34am GMT

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

After days of market turmoil, policymakers are starting to take action to protect the world economy from the ravages of the coronavirus outbreak - as it threatens to turn into a global pandemic.

"This includes emergency financing, policy advice, and technical assistance, building on the World Bank Group's existing instruments and expertise to help countries respond to the crisis."

European Opening Calls:#FTSE 6723 +0.07%#DAX 11973 -0.11%#CAC 5392 -0.03%#AEX 551 +0.08%#MIB 21748 0.00%#IBEX 8805 -0.08%#OMX 1697 +0.12%#STOXX 3371 -0.04%#IGOpeningCall

As if nothing moved... pic.twitter.com/73lnP40qsN

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