It was less than 11 weeks ago that the first cases of pneumonia were detected in Wuhan, China. The speed at which what would soon be named COVID-19, the disease caused by the new coronavirus, knocked the global economy askew is unparalleled in our lifetimes.
Following are developments Thursday related to the outbreak, the efforts by governments to stabilize their economies, the companies that must navigate through an altered landscape, and the millions of people whose lives have been upended.
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CENTRAL BANKS AND GOVERNMENTS: Treasury Secretary Steven Mnuchin said Thursday that the Trump administration’s $1 trillion rescue plan for the economy would include payments of $1,000 for adults impacted by the coronavirus and $500 for each child. Mnuchin said the funds would amount to $3,000 for a family of four with the first payments going out on April 6. A second round of payments, if needed, would go out on May 18. According to a Treasury outline of the plan, the round of payments, the second if needed, would amount to $250 billion each. The administration proposal also includes $300 billion for small businesses to encourage them to keep paying workers and $50 billion in support for the airlines
The Federal Reserve created a program to exchange dollars for foreign currency with nine central banks to support dollar lending in global markets that are under pressure from the impact of the viral outbreak. The maneuver, announced Thursday, enables foreign banks to provide dollars to their banks that sometimes lend and trade in US currency. It is the latest effort by the Fed to smooth the functioning of financial markets, as investors, banks, and companies rush to stockpile cash amid plunging stock markets and a sharply slowing economy.
The European Central Bank launched an expanded program to buy financial assets in a bid to calm markets. The purchases are aimed at keeping borrowing costs down and making sure the bank’s low rates get through to the economy. The purchases will total up to 750 billion euros ($830 billion) by the end of this year and will include government and private-sector bonds as well as commercial paper. Market borrowing costs for heavily indebted Italy rose and as the eurozone faces a drastic economic slowdown with many businesses closed.
MARKETS: Stocks are swinging between gains and losses in early trading on Wall Street Thursday, but the moves are more subdued than the wild jabs that have dominated recent weeks. At least for now.
The Dow fell 112 points. European stocks swung between positive and negative repeatedly. Asian markets dropped following the brutal 5.1% loss for U.S. stocks the prior day. Crude oil clawed back some of its steep loses from the day before, and benchmark U.S. oil bounced back above $23 per barrel.
NATIONAL ECONOMICS: Mass disruptions have spread across globe nations simultaneously try to slow the spread of the coronavirus and limit damage to the economy.
The number of Americans filing new claims for unemployment benefits surged last week by 70,000, indicating that the impact of the coronavirus was starting to be felt in rising layoffs in the job market. The Labor Department reported Thursday that applications for benefits, a good proxy for layoffs, rose by 70,000 to a seasonally adjusted 281,000 last week.
A leading German economic index fell by the most since 1991, indicating Europe’s largest economy is plunging into recession due to the disruption from the virus outbreak. The Munich-based Ifo institute said Thursday its survey of business optimism fell to 87.7 points from 96 in February. That’s its lowest level since August 2009, when Lehman Brothers collapsed and the global economy reeled from the financial crisis. “As things stand, the German economy could shrink by 1.5 percent this year,” the institute said, adding that “the downside risk in the present forecast is considerable.
Saudi Arabia will cut spending by 5%, or about $13.3 billion, to offset the impact of plunging oil prices and the effects of the new coronavirus on its economic outlook and deficit. Saudi Arabia has around $500 billion in foreign reserves, but with oil prices plummeting to around $26 a barrel and tourism revenue drying up due to a suspension of the Muslim pilgrimage to Mecca, it was expected the kingdom would make cuts to its spending.
The Bank of England has slashed its key interest rate to 0.1%, its lowest-ever level, amid global economic turmoil sparked by the coronavirus pandemic. The bank’s Monetary Policy Committee says the unanimous decision is part of moves “to meet the needs of UK businesses and households in dealing with the associated economic disruption.” Thursday’s rate cut came a week after the central bank cut its rate from 0.75% to 0.25%.
Australia’s central bank on Thursday cut its benchmark interest rate to a record low 0.25% to ease the cost of credit and alleviate the shocks to the economy from the virus outbreak. The move comes two weeks after a cut of the same quarter of a percentage point magnitude and marks the first time since July 1997 that the Reserve Bank has acted on interest rates outside its monthly cycle of board meetings.
AIRLINES: Germany’s Lufthansa said that airlines may fail without government assistance if the outbreak lasts for an extended time. The airline has already slashed routes and frozen new hires. Lufthansa said members of its executive board also decided to take a 20% cut in basic pay for 2020.
The International Air Transport Association, which represents around 290 airlines worldwide, on Thursday put the price tag on combined lost revenue to date at $7 billion. It will get a lot worse. The group estimates total costs worldwide could reach $113 billion. The group called for emergency aid of up to $200 billion for airlines globally.
Seven Middle Eastern countries have suspended all commercial flights, while other airlines halted international flights amid a near total collapse in demand for travel. Vietnam Airlines was the latest with a halt to all international flights until the end of April.
DISLODGED: The hotel industry is being decimated as businesses cease travel and one-time tourists take shelter. Hotels were half emptied out last week, according to the analytics firm STR, with occupancy rates falling 24%. In cities particularly hard hit by the virus, like Seattle and San Francisco, occupancy was below 40%, according to STR.
Marriott’s CEO, as well as the son of the hotel company’s founders, have forfeited their salary for the rest of the year as the hotel company tries to slash costs. J.W. Marriott Jr., who serves as chairman, earned $3.2 million in 2018. CEO Arne Sorenson had a base salary of $1.3 million. The pay of other executives will be halved. Marriott occupancy in the U.S. and Europe is less than 25% — down from a usual rate of nearly 70%. Sorenson said cancellations have reached historic highs.
Greece ordered most hotels to shut down by Sunday and remain closed through all of April. One hotel per regional capital is allowed to remain open, along with three hotels in Athens and the country’s second largest city of Thessaloniki.
MANUFACTURING: More companies are closing factory gates a day after the top U.S. automakers announced a total production shutdown in North America.
Hyundai said Thursday that it would close its plant in the Czech Republic for two weeks starting Monday. The plant produced almost 310,000 cars last year and employs some 3,300 people. Auto factories have been closed across much of Europe already.
MANUFACTURING’S SECOND LIFE: Germany-based Beiersdorf, whose brands include Nivea and Coppertone, says it is launching production of medical disinfectant in Europe to support the fight against the virus. Beiersdorf said Thursday that it initially will provide 500 tons of disinfectant for hospitals, medical staff and emergency responders such as police and firefighters. The disinfectant will be produced at plants in Hamburg, Waldheim in eastern Germany and the Madrid suburb of Tres Cantos.
And Tesla CEO Elon Musk said in a tweet that the automobile maker will make ventilators if there is a shortage.
SUPPLY CHAIN: Factories in China, struggling to reopen after the coronavirus shut down the economy, face a new threat from U.S. anti-disease controls that might disrupt the flow of microchips and other components they need. Chinese manufacturers assemble more than 80% of smartphones for Apple, Samsung and other brands, half of the world’s personal computers and a big share of home appliances and other goods. But they need U.S. processor chips and other high-value components. It isn’t clear how U.S. anti-coronavirus curbs might affect trade.
GROCERS: British supermarkets have brought in measures to control the coronavirus-induced panic-buying that’s seen many of their shelves emptied and elderly and vulnerable people often unable to get the products they need. Tesco, Britain’s largest supermarket chain, is limiting customers to three items each across its entire product range. Another chain, Sainsbury’s, reserved the first hour of trading in its stores Thursday for elderly and vulnerable customers. Businesses in the U.S. that sell groceries are making similar moves, including Target and ShopRite.
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Follow AP coverage of the virus outbreak at https://apnews.com/VirusOutbreak and https://apnews.com/UnderstandingtheOutbreak
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The Associated Press receives support for health and science coverage from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content.