March 5, 2020 / 8:52 AM / a month ago

Daily Briefing: An emergency

(Reuters) - The coronavirus death toll has now reached 11 in the United States and lots of new cases saw California declaring an emergency.

FILE PHOTO: People wearing face masks walk through the Chinatown section of San Francisco, California, February 26, 2020. REUTERS/Shannon Stapleton

Italy has closed schools and universities. Company warnings are coming thick and fast, with GE the latest to warn of a hit to first-quarter results.

And a composite PMI index compiled by JPMorgan slumped in February to its lowest since 2009, the largest one-month drop on record – the bank is predicting what it calls a “rare non-recessionary contraction in GDP”.

Even the opening of the new James Bond movie -- ironically titled 'No Time to Die' -- has been postponed.

Yet for now, the promise of stimulus from central banks and governments is helping to stem the panic. The Federal Reserve and Bank of Canada have cut interest rates by 50 basis points, and euro zone money markets price in a 90% chance of the European Central Bank will cut by 10 basis points.

The Bank of England is expected to cut by 25 bps the following week. More important, hopes are rising for fiscal stimulus as a massive package was approved by U.S. lawmakers and countries from Italy to South Korea also proposing measures. Will Germany? That's the big question.

Another positive for markets is the surge of Joe Biden in Democratic primaries in the United States, which helped Wall Street gain as much as 4% on Wednesday. Better-than-expected U.S. private hiring data also helped.

So world shares have inched to one-week highs (up 5% this week) and bond yields are higher on the day. U.S. 10-year Treasury yields have risen above 1%.

Oil has risen 1% as OPEC is expected to cut oil output. Chinese shares rose 2% to six-week highs and European markets have opened higher.

The safe-haven bid hasn’t disappeared. Gold and the yen are both higher. (Though most currencies are up as the dollar is undermined by expectations of another 50-basis-point Fed cut by July). Wall Street futures are down quite a bit.

In European stocks, the big news is airlines. Just as coronavirus is more dangerous for humans with pre-existing conditions, it has pushed already troubled Flybe into administration. The company failed to withstand the plunge in travel demand caused by the virus.

Luxury retailers are also feeling the heat. German fashion house Hugo Boss' issued a first-quarter warning, with sales falling particularly in Asia. British supermarket group Tesco will start price matching German-owned competitor Aldi on hundreds of everyday items.

ProSiebenSat.1 Media said its e-commerce arm NuCom will buy U.S. dating app developer Meet Group Inc. ITV reported better-than-expected 2019 earnings, but said ad demand was hit by coronavirus.

Vonovia confirmed its 2020 guidance and Merck KGaA said adjusted core earnings will see "strong" growth.

Emerging-market stocks managed a 1% gain, rising for the fourth straight trading session. China’s CSI300 index added 2.2%, closing at its highest since mid-January, as fewer new coronavirus cases were recorded outside of the epicentre Wuhan.

South Korean stocks rose 1.3%. It reported 438 new cases, raising the national tally to 5,766.

Emerging-market currencies remain on the defensive, with Indonesia’s rupiah among the biggest losers, shedding 0.4%. Rate-cut expectations in the developing world are not helping.

In Lebanon, the clock is ticking down on the Eurobond maturing in mid-March with political sentiment apparently against paying.

Argentine officials met with representatives of several major creditors, including PIMCO, on Wednesday as its restructuring deadline looms.

— A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own —

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