March 12, 2020 / 1:29 AM / 20 days ago

Trump lays out U.S. response to coronavirus pandemic, global markets dive

TOKYO (Reuters) - U.S. President Donald Trump on Wednesday laid out his administration’s response to the coronavirus after the World Health Organization called the outbreak a global pandemic, but investors were unconvinced and financial markets went into a tailspin.

U.S. President Donald Trump speaks about the U.S response to the COVID-19 coronavirus pandemic during an address to the nation from the Oval Office of the White House in Washington, U.S., March 11, 2020. Doug Mills/Pool via REUTERS

Trump said the United States will suspend all travel from Europe to the United States for 30 days. The restrictions do not apply to the United Kingdom nor to trade with Europe.

He also outlined steps to help small businesses and workers affected by the virus.

Following are reactions to Trump’s comments:

MICK MCCARTHY, CHIEF STRATEGIST, CMC MARKETS, SYDNEY

“I think markets are sending a clear signal to the White House that the measures announced today were too little, too late.

“While the travel ban from Europe is certainly dramatic and will help with the health aspects it is clearly damaging economically, and given the very limited nature of low interest loans to small businesses and potential tax deferrals for individuals and businesses, there isn’t enough here for markets to hang their hat on.

“The much touted payroll tax holiday that was reported in the last 48 hours did not eventuate and illustrates the other problem from a markets point of view: the president can only do so much with his emergency powers; certain changes, like a payroll tax, must get approval from Congress. With House Democrats indicating that their preferred economic stimulus will go to individuals rather than businesses, the White House could have a fight on its hands. All this adds up to at least a delay and a potential cancellation of the economic measures to deal with the outbreak.”

CARLOS CASANOVA, ASIA PACIFIC ECONOMIST, COFACE, HONG KONG

“A lot of people have tried to predict the trajectory based on what’s happened in China. But there is potentially more negative impact in Europe and the U.S. because of the lag in containment measures.

“Markets are very nervous as this is a real black swan event, we are potentially looking at a global recession. With the volume and volatility that we’re seeing, any political manoeuvre could edge the market into over-selling.”

MATTHEW SHERWOOD, HEAD OF GLOBAL INVESTMENT STRATEGY, PERPETUAL, SYDNEY

“The recent announcements in Washington haven’t gone down well with the markets, including the 30-day travel ban in and out of Europe as well as the stimulus package itself.

“It appears we are getting to the next stage of the crisis moving from self-isolation and regional isolation to almost now national isolation. That’s obviously terrible for the transport sector and there is much broader ramification because it seems the only way to halt the advance of the virus is by virtually shutting down major parts of the economy to the detriment of growth.

“I think there may be considerable time delays between the announcement of what President Trump wants to implement and Congress actually passing it. There is no immediate fiscal support actually coming. It will be heavily debated, it’s an election year. They are not going to make his job easy, the Democrats.

“I think global recession now has to be base case. We’re going to see some pretty large falls in the March quarter and into June. Market assumption that it’s going to be a one off hit to the March quarter will be proved to be far too conservative and it is really hard to see how the global economy doesn’t have a second quarter of contraction.”

ROB CARNELL, CHIEF ECONOMIST ASIA-PACIFIC, ING, SINGAPORE

“I am just left speechless for Trump to say this is the most comprehensive plan. He’s trying to deflect the blame to Europe.”If this was part of a comprehensive plan to lower the peak in total infections, it’s a justifiable action. Without all the additional testing and tracing and containment measures that certainly aren’t taking place in the United States, it’s just a PR stunt.”We are not getting any co-ordinated action across governments but we are also, in most cases, not getting co-ordination between central banks and governments. It’ll be interesting to see whether the European Central Bank manages to get anything along those lines later today.”

ANDY WONG, MULTI-ASSET SENIOR INVESTMENT MANAGER, PICTET ASSET MANAGEMENT, HONG KONG

“The latest measure - suspending travel from Europe except the UK, came a little too late. The U.S. has done little testing.  Community spread is happening already.

“The impact on the public is just beginning, as sports events NBA, Juventus games, EPL, Euro 2020, Olympics being cancelled/delayed will start to drive it home in the psyche.

“A significant added worry is Russia’s move to upend the oil market, which can have significant impact on credits and liquidity plumbing.

“While Trump moves to admit a stronger response is needed, proper leadership has been sorely lacking, and focus should be on appropriate measures and planning for the worst, rather than focusing on optics.”

CLIFF TAN, EAST ASIAN HEAD OF GLOBAL MARKETS RESEARCH, MUFG IN HONG KONG

“The market was looking for something much better designed, a plan that has major components all of which looked like they had been thought about. What they have seen in the last three days is looking increasingly more like brainstorming and throwing possibility and seeing which stick on the wall.

“Personally I think payroll tax (waiver) could be very useful temporarily. But that aside, the market sees this (package) as too haphazard, too little, too late.

“At this stage, we all need to take it on the chin and bear it for a few months (in terms of economic disruption). Here in Hong Kong and China we have been through it and know what’s it like to shut down... I don’t think the market has fully caught on with how disruptive this could be for the economy.”

DAVID KOTOK, CHAIRMAN AND CHIEF INVESTMENT OFFICER, CUMBERLAND ADVISORS, SARASOTA FL

“He gave a speech, he attempted to be presidential, he delivered the text in a very presidential way, and that is what he should do and it was the correct thing to do, and we can debate whether the amounts should be larger or smaller.

“A 30 day embargo on flights from Europe is a big move. Given what’s going on in terms of cases in Europe it’s hard to argue with.

“Now you have to say why did the market sell off and are off 900 points on the Dow within 30 minutes of the speech. Therein lies the three years of disruptive history which cannot be overcome with one speech. It can be overcome with a year of speeches and policies that go with them.

“He can’t deny three years of budget cuts on the same agencies that now have to respond to the coronavirus or the hundreds of vacant positions that need to be filled.

“The U.S. is playing catch-up as fast as it can and that’s where we are. The president destroyed trust and the world doesn’t believe him.

“We are going to make a bottom, my view is that the sentiment when it shifts, announcement of treatment, of vaccine, of peaking and rolling over in number of cases will turn the market from a level lower than now and it will be a very robust rally because it will come with all the monetary and fiscal stimulus worldwide.”

QUINCY KROSBY, CHIEF MARKET STRATEGIST, PRUDENTIAL FINANCIAL INC, NEWARK, NJ

“The market is not applauding the president’s address. Investors were expecting perhaps a more detailed outline of targeted stimulus and I think, according to the futures market at least, it left investors wanting. We could have this going through all the night, but the knee-jerk reaction showed a market that could have a difficult opening if we don’t pare some of those early futures losses.”

“Investors and traders know there has been a tug of war over the payroll tax cuts, which would certainly put more money in consumer pockets. But obviously there’s an issue regarding the democrats. He alluded to that. He alluded to need for bipartisan cooperation.”

“At top of this pyramid of uncertainty is the virus and the need to contain it. So perhaps this move to halt traffic from Europe will help, but then again you have that exception to the UK, which is by the way a major transit from other parts of Europe. So obviously, if this is to contain the virus that he characterized as coming in from outside the U.S. he’s going to have to do something about that.”

“He understands that for the stock market, which for him is a referendum on his performance, you’ve got to contain this because if you don’t it’s going to erode confidence and it’s going to erode consumer spending which is the key in terms of the economy.”

STEPHEN INNES, GLOBAL CHIEF MARKETS STRATEGIST AT AXICORP, SYDNEY

“US President Trump says the US will suspend all travel from Europe for the next 30 days. Travel restrictions equal slower global economic activity, so if you need any more coxing to sell sell sell sell after a massively negative signal from overnight trading in US markets it just fell in your lap.

KHOON GOH, HEAD OF ASIA RESEARCH, ANZ, SINGAPORE

“The travel ban from Europe has definitely taken everyone by surprise, hence the market impact.

“Already we know the economic impact is significant, and with this additional measure on top it’s just going to multiply the impact across businesses. This is something that markets had not factored in...it’s a huge near-term economic cost.

“This is the difficulty for any policymakers in this kind of environment. No matter what you announce...there’s a feeling that markets will probably always think it’s not enough, given that we’re dealing with a huge unknown.”

JUNICHI ISHIKAWA, SENIOR FX STRATEGIST, IG SECURITIES, TOKYO

“The initial reaction in financial markets shows that even after Trump spoke investors feel they need to avoid risk.

“Trump has outlined what he considered to be tough measures, but movements in stocks, stock futures, and currencies show that this is not enough to ease investors’ concerns. We are in a very difficult situation now.”

Reporting by Stanley White in Tokyo, Alden Bentley & Megan Davies in New York, Tom Westbrook & Anshuman Daga in Singapore, Noah Sin & John Alun in Hong Kong, Swati Pandey in Sydney; Editing by Kim Coghill & Shri Navaratnam

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