US Fed cuts rates in emergency move against coronavirus

In what’s been the first inter-meeting rate cut since the 2008/2009 financial crisis, the Fed’s Federal Open Market Committee on Tuesday explained its surprise move with an “evolving risk to economic activity” from the spreading coronavirus.

The vote for the emergency cut to a range of 1% to 1.25% was unanimous and comes 15 days before the Fed’s next scheduled policy meeting.

The central bank said it was “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

Currently amid the longest-ever expansion, the US economy’s fundamentals would “remain strong,” the central banks noted however.

Nevertheless, the unusually large cut in US benchmark interest rates reflects growing concerns that the spreading virus will strongly hit economies around the world.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  Netflix and chill

  The video streaming platform was among the best performers during the $6 trillion global market rout last week. Analysts say ‘stay at home’ stocks such as Netflix and Zoom could provide a haven for investors during the coronavirus outbreak as more and more people are told to stay home.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  Ditch your gym

  The fitness startup Peloton Interactive, which makes exercise bikes and also offers online fitness classes, has seen its shares jump amid suggestions that coronavirus fears would prompt many fitness enthusiasts to ditch their gyms and opt for Peloton’s offerings.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  Coronovirus billionaires

  Moderna Chief Executive Stephane Bancel (R) briefly became a billionaire after the company shipped an experimental coronavirus vaccine for clinical testing in humans, boosting its share price, Bloomberg reported. Malaysia’s Lim Wee Chai (L), who owns a majority stake in medical gloves maker Top Glove, also entered the billionaire’s club amid the outbreak.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  Stay home, stay connected

  Shares in teleconferencing startup Zoom Video have soared nearly 50% since February as investors bet on a rise in remote workplaces amid fears of the coronavirus spreading further. The company has already added more active users this year — 2.22 million — than it did in all of 2019, Bernstein Research analysts said.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  Empty shelves

  Retailers such as Germany’s Rewe and France’s Carrefour have seen food items fly off their shelves in the past days as panicking shoppers stock up their pantries. The rush at the supermarkets is prompting investors to lap up shares of packaged food companies. Online retailers like Amazon are also seeing strong demand as virus-spooked shoppers avoid brick-and-mortar stores.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  Safety first

  Makers of face masks, hand sanitizers and sanitary wipes are witnessing a surge in demand as shoppers seek ways to protect them against the rapidly growing virus. 3M Corp, which makes face masks among other things, is one of the biggest beneficiaries.

• Coronavirus’ biggest winners: From Netflix to fitness bike maker Peloton

  ‘Anytime, anywhere’

  German software company TeamViewer that allows users work remotely is witnessing a brisk demand for its services, especially in China, the epicenter of the coronavirus. The Frankfurt-traded shares in the company have soared in the past few days.

  Author: Ashutosh Pandey

Concerted effort?

The Fed’s action could be just the first shot in a barrage of rate cuts from central banks worldwide. It came hours after Fed Chairman Jerome Powell and the finance chiefs from the Group of Seven (G7) nations said they would “use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.”

The reduction constitutes a stark shift in the central bank’s policy. Previously, Fed policymakers indicated that they would remain on the sidelines during the US election campaign and not lower rates in the course of the year. They pledged to monitor the coronavirus situation, but argued monetary policy was already easy and the fundamentals of the economy strong with unemployment near a 50-year low.

But as the number of reported cases of the virus rose around the world and the US reported its first fatality, pressure mounted on the Fed to boost confidence in the financial markets with a rate cut. Lower interest rates can also help sustain consumer and business sentiment during the current health crisis and ease financial conditions for companies by making debt payments easier to manage.

Most of the world’s advanced economies, including Britain, Canada, France, Germany, Italy and Japan, already have very low or negative interest rates. That is why the US Fed is the best-placed major central bank to fight the economic fallout of the spreading coronavirus.

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Article source: https://www.dw.com/en/us-fed-cuts-rates-in-emergency-move-against-coronavirus/a-52626425?maca=en-rss-en-bus-2091-xml-atom