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Investors weigh up US $2tn coronavirus rescue plan

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Investors weigh up US $2tn rescue plan

The $2tn coronavirus package agreed between Republicans and Democrats on Tuesday — the largest congressional bailout in US history — is expected to pass its legislative stages later today. It takes the total price of bailouts across the world to $4.5tn, points out Jonathan Guthrie, head of the FT’s Lex business column, putting to bed any doubts that ultimately the state, not business, is in charge.

The US deal, which includes bailouts for large companies and means-tested “helicopter money” for taxpayers, was initially welcomed by investors, as indices in the US and beyond rebounded at a record pace.

But, as we have seen so often during the current crisis, initial optimism appeared to fade amid the unrelenting wave of bad news, not least in the immediate vicinity of Wall Street itself: New York now has more infections than Iran or France.

Or as Governor Andrew Cuomo put it: the pandemic that had been rumbling like a freight train was now heading for NY “like a bullet train”. 

Markets

Rocketing household demand for non-perishable staples such as pasta is driving up wheat prices, which are also being lifted by government stockpiling. The situation has brought back memories of 2010, when drought and a sharp drop in the rouble prompted Russia — the world’s leading wheat exporter — to ban shipments of grains for almost a year.

Bargain hunters are circling the $4tn US municipal bond market after a selling frenzy pushed prices to record lows and prompted emergency intervention from the US Federal Reserve. Some investors are nervous about the possibility of defaults, given the ability of the pandemic to crush city revenues, such as those from local transport.

The shale revolution — and the hope of US energy self-sufficiency — has petered out as drillers cut spending and production in response to the price war and collapse of crude demand. The oil industry faces its biggest crisis in 100 years, says Energy Editor David Sheppard. Gulf economies are reeling.

Business

Investment banks’ markets revenues have grown by up to 30 per cent thanks to the frenetic trading spurred by the coronavirus crisis. The trading boom is at odds with the sharp fall expected in investment banking revenues due to the drying up of M&A and IPO activity.

In an announcement that surprised absolutely no one, the Tokyo Olympics was postponed. Big names involved in the most heavily sponsored sports event in history now have to recalculate how they will keep the momentum going for another 12 months. As our Lex column put it, there is a great irony in having to ditch an event designed to lift morale when the world has never needed it more.

Charts showing retail sales before and after Olympic games

Repurposing is becoming an important trend among industries hit by the crisis. In the US, clothes factories are retooling to make face masks while ethanol refiners are switching to hand sanitisers. FT Alphaville suggests infrastructure from cancelled music festivals could be turned into field hospitals or used to bolster storage facilities for food retailers.

Global economy

China is trying to turn its health crisis into a geopolitical opportunity.” The country has been adept at reframing its role from global villain to magnanimous global power, says our Big Read.

A closely watched survey suggests a “very deep recession” is on the way for the UK. Mainland Europe is also grappling with the trade-off between public health and long-term economic damage. The French finance minister said the impact was “comparable only to the great recession of 1929”.

“Drop the tariffs and save some lives. Quick.” Africa faces a severe economic shock if trade and aid are not pulling in the same direction, says our Trade Secrets newsletter.

Bookmark this: We’re tracking the economic fallout from the crisis here, with charts that are updating daily.

Readers respond

Ann Barnes, from Northumberland in the north-east of England, writes: 

“While supermarkets are allocating the first hour of trading on some mornings to the elderly and health compromised, these are the very ones who need to stay in isolation at home. Hitherto many have relied on home deliveries, but now there are no delivery slots available as they have been snapped up by shoppers at large. Surely it makes sense for supermarkets to prioritise delivery to the vulnerable groups. How could this be done? By asking customers to self-certify to being 70 or over instead of 18 as requested at present on some sites.”

The essentials

More than 436,000 people have been infected globally and more than 19,600 have died. The US, Spain and Italy are currently the global hotspots. Spain now has a higher death toll than China, with a total of 3,434.

Chart showing that New York and Madrid are on course to pass Lombardia as the worst-affected subnational regions of the world as measured by deaths from Covid-19. Both have had more deaths than Lombardia did at the same stage, which in turn has seen a more deadly outbreak than Wuhan.

Hubei province in China is experiencing some degree of normality as travel restrictions are relaxed after probably the biggest mass quarantine in history, with almost all 60m residents in lockdown. 

India has ordered all its 1.37bn people to stay at home for the next 21 days but migrant workers may have spread the disease as they fled the cities for the countryside. The country’s struggle is emblematic of the challenges facing much of the developing world, says an FT editorial.

Podcast from the lockdown “I have felt like I’ve been in the future somewhat, and it’s very grim because you know exactly what’s going to play out in British hospitals. Unless a miracle occurs, it’s extremely likely that the horrific scenes that we’ve seen in hospitals in Lombardy are likely to occur in the UK too.” Miles Johnson, our correspondent in Rome, discusses life in Italy in the Rachman Review, our world affairs podcast now focusing on the global impact of the pandemic.

Get in touch

How is your workplace dealing with the coronavirus? Please tell us what your company is doing by emailing covid@ft.com. We may publish your contribution in an upcoming newsletter. Thanks.

Final thought

One sector at least is benefiting from the increasing number of people living under lockdown: the video and chat apps that enable us to socialise without leaving home. One such app, Houseparty, is number one in the Apple store in 17 countries. The test will be whether such apps are just a fad for desperate times or a lasting shift in how we communicate.


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