A10| Saturday/Sunday, March 14 - 15, 2020 ** THE WALL STREET JOURNAL.
THE CORONAVIRUS PANDEMIC
A patient sits in a hospital in Brescia, Italy. In recent days, the whole country was ordered not to move from place to place unless necessary..FLAVIO LO SCALZO/REUTERStem. The central bank said Fri-
day it would pump $37 billion
into the system by purchasing
Treasury securities from banks.
The next problem will be
finding ways to stimulate eco-
nomic growth as consumer and
business activity slows in many
nations. While central banks
have ample resources to pump
money into the financial system,
they are constrained in how
much they can stimulate the
broader economy because inter-
est rates are already very low.simultaneously. The most press-
ing problem Friday was reduc-
ing market disruptions tied to
economic uncertainty.
Market mayhem turned from
falling stock prices to bond vol-
atility not seen since the finan-
cial crisis over a decade ago.
The Fed and other central
banks are responding by mak-
ing sure banks are flush with
funds to back loans, credit lines
and trading so the economy’s
problems aren’t compounded by
a malfunctioning financial sys-part of continuing efforts to
ensure the stability of its fi-
nancial system. Australia’s
central bank also added funds
to its banking system.
“There is every reason to be
concerned that what we’re see-
ing on the ground with this vi-
rus and in this market, the re-
sponse [of global central banks]
might not be big enough,” said
Bruce Kasman, head of eco-
nomic research at J.P. Morgan.
The world’s central banks are
trying to manage several shockscial system and stabilize the
rise in long-term interest rates
and other credit costs.
The Bank of Canada cut its
main policy rate by a half-per-
centage point Friday, while the
European Central Bank sought
to reassure investors and gov-
ernments about its support a
day after ECB President Chris-
tine Lagarde sent unnerving
signals of a limited response
from Frankfurt. China’s central
bank pumped roughly $80 bil-
lion into commercial banks asfinancial firms rushed out of
complex bond-market trades
that pushed up long-term U.S.
Treasury borrowing rates, which
typically go down in a crisis.
In response, the Federal Re-
serve accelerated a program
announced just a day earlier
to pump funds into the finan-The world’s major central
banks are straining to tamp
down threats to financial mar-
kets and the global economy
created by the coronavirus
pandemic, held back by limited
tools and a new kind of risk
from outside the financial sys-
tem they are set up to manage.
Stocks rallied Friday, in part
on signs of progress in Congress
toward passing measures to
support the economy. However,
beneath the surface, Wall Street
was under growing pressure as
matter almost came to blows.
Mr. Icahn had stopped buy-
ing Occidental shares, which
bucked the trend and gained
in value. A conversation with a
reporter was briefly inter-
rupted by a call from a trader.
When he returned, he said he
had placed a nine-figure wager
against the bond market, part
of what he said are billions of
dollars of short positions he
currently holds. “I lost money
this week but probably not as
much as other people because
of the hedges.”
Thursday ended as the sin-
gle worst day for U.S. stocks
since 1987.Friday
The stock market opened
sharply higher. The Fed said it
would buy an additional $
billion of bonds to address
poorly functioning markets.
It was a welcome move for
a large quantitative trading
firm in midtown New York,
where the freezing up of the
Treasury market had rattled
traders all week. The firm has
positions across the credit
markets and has been trying
to test some of the assump-
tions it used in its algorithms
for years.
When asked by a Journal
reporter how he was holding
up, a trader at the firm texted
back: “I’m puking under my
desk. Could be corona or could
be what’s happening in debt?
Either way. This is bad.”out of the shower at around
6:15 a.m. in New York, his
phone was flashing warning
signs. The president of
Tradeweb Markets Inc., one of
the largest online trading plat-
forms, had missed a call from
the head of interest rates trad-
ing at a big European bank.
The executive had texted
twice: “Call me.”
Still dripping, Mr. Hult re-
turned the call. A quick safety
check—how’s the family? Fine,
yours?—turned into a rapid-
fire market diagnosis. How’s
liquidity in aged Treasury
bonds? Not great. Govern-
ment-backed mortgage bonds?
Holding up well. What are
people buying? European
swaps. What are they selling?
Everything.
Thursday was the day
America started to shut down.
There were widespread school
closures. Broadway and the
Metropolitan Opera went dark,
as did Disneyland and the Na-
tional Basketball Association.
Central bankers rushed to
calm the markets. The U.S.
Treasury said it would pump
$1.5 trillion into short-term
funding markets, which keep
the lights on overnight at
banks and companies.
Inside the London central
bank’s meters-thick walls,
though, tensions ran high. One
manager raided a colleague’s
stash of high-end Earl Grey
tea, which was dwindling as a
long week got longer. Theting slammed with orders
from clients who weren’t wait-
ing until Monday but instead
wanted to trade as soon as the
markets opened in Asia.
And in Miami, Carl Icahn
was just off the tennis court.
As oil prices fell, he thought
about Occidental Petroleum
Corp., the energy company he
has been publicly sparring
with for months. Shares closed
the prior Friday at $26.86. The
billionaire investor phoned his
lieutenant in New York with a
buy order.
“10 to 20 million shares.
And do it at $20 or better.”Monday
Mr. Laurence was back in
his seat at 7:45 a.m., his trad-
ing screens a sea of red as in-
vestors rushed to sell Norwe-
gian kroner, Canadian dollars
and other currencies tied to
oil. The 30-year-old was in
college in 2008, the last time
markets went this haywire.
“I’ve never seen anything like
it,” he said.
In New York, Ashok Varad-
han woke up with a cough.
The co-head of Goldman Sachs
Group Inc.’s trading arm
checked in with the bank’s
CEO, David Solomon, who told
him to stay home. He set up
open conference-call lines to
his trading floor downtown,
one of the world’s busiest, to
hear the action.
Mr. Varadhan made his
name as a superstar swaps- The yield on 10-year
Treasurys closed at 0.946%,
basically flat for the week but
after taking a wild ride.
Sunday
The first shot came not
from virus hot spots like China
or Italy, but Saudi Arabia,
which said it would ramp up
oil production after failing to
strike a deal with Russia, an-
other major producer. Energy
prices plummeted.
Derrick Chan, head of eq-
uity trading in Fidelity Invest-
ments’ capital-markets divi-
sion, watched the slide in
suburban Boston on the side-
lines of his son’s soccer game.
When Dow futures opened
more than 1,000 points lower
at 6 p.m., portending a sharp
selloff to come in the morning,
he thought, It’s real.
Four thousand miles away,
Ben Laurence was snowboard-
ing in the French Alps, when
his WhatsApp inbox started
filling up with messages from
the office: Get home. The
night shift at his Geneva trad-
ing firm, Swissquote, was get-
Continued from page A
Diary of
A Crazy
We e k
It happened just after the
9:30 a.m. opening bell.Wednesday
Mr. Solomon, Goldman’s
CEO, started his day bumping
elbows—no handshakes—with
40 members of Congress, ad-
dressing the Problem Solvers
caucus, a bipartisan group
that has been lobbying the
White House for more funding
to fight coronavirus.
Mr. Solomon told the group
big U.S. banks are fine and,
underneath the panic, so is the
economy.Thursday
By the time Billy Hult gottrader in the 1990s. He traded
through the blowout of Long
Term Capital Management, the
telecom bust, the global finan-
cial crisis and 9/11, which
killed his brother.
“It’s going to be tough out
there,” he told his team, scat-
tered across backup sites in
Connecticut and New Jersey
Stacey Cunningham was
waiting for what she knew was
coming. The president of the
New York Stock Exchange
stood on the executive com-
mand center on the floor,
watching as U.S. stock futures
dropped quickly toward a 7%
decline that would automati-
cally freeze trading.$30354045a barrelMarch689 101112131005%Jan. Feb. MarchBrentcrude-oil
futurespriceDowJonesIndustrialAverage,
dailymovesSource: FactSet Note: As of Friday at 4 p.m. EDTTHIS WEEKSunday
SaudiArabiasays
itwillrampupoil
productionafter
failingtostrikea
dealwithRussia.Thursday
Biggestdecline
sincebeen in contact with virus hot
spots, such as the Lombard
towns or China.
Most people who were poten-
tially infected weren’t tested if
they showed no or only light
symptoms. Only around 3,
tests a day were carried out, in a
population 20% larger than
South Korea’s. The virus contin-
ued to spread.
Italians soon began pushing
back against unpopular restric-
tions. Under public pressure, Mi-
lan relaxeda6p.m.curfewon
bars, letting them stay open late
provided people maintained a
distance of a meter between one
another. Many didn’t.
Italy’s infection count was
rapidly approaching South Ko-
rea’s. Worse, Italy’s daily death
toll surpassed China’s declining
fatalities on March 2. In the
worst-hit parts of the rich north,
hospitals were running out of
beds in intensive-care units.
The government’s scientific
advisers were urging more radi-
cal steps to cut down contact be-
tween Italians.
In recent days, Prime Minis-
ter Giuseppe Conte government
brought down the curtain on the
dolce vita. First the north, then
the whole of Italy was ordered
not to move from place to place
unless necessary. Everyone was
to stay home if they could. On
Wednesday night, Mr. Conte
shut down all bars, restaurants
and shops apart from groceries
and pharmacies.
—Dasl Yoon
in Daegu, South Korea,
contributed to this article.tion from getting even worse,”
Dr. Ryu said.
South Korea can carry out
more than 15,000 tests daily,
with a team of 1,200 medical ex-
perts able to diagnose patients
within six hours, health officials
say. But Seoul’s playbook has re-
lied equally on social norms.
Like many other Asian democra-
cies, South Korea could largely
count on its citizens to follow
government advice and wear
face masks, stay indoors and
avoid large groups—a leap of
faith now being tested across
the U.S. and Europe.
The combination of vigorous
detection and social compliance
helped bring down the rate of
new infections after it peaked on
Feb. 29.
From early on, Italy focused
on restricting movement rather
than testing. On Jan. 31, Italy
banned all direct flights to and
from China, to Beijing’s chagrin.
The government declared a state
of medical emergency, allowing
it to cut through bureaucracy
and impose measures on local
authorities in a crisis.
But the coronavirus had al-
ready begun to spread, unde-
tected, in small towns southeast
of Milan. How the virus got
there still hasn’t been estab-
lished.
Testing for the virus was ini-
tially unfocused and locally vari-
able, leading to 95% negative re-
sults. The government issued
more restrictive guidelines for
testing, telling local health au-
thorities to test only people who
showed symptoms and had alsoand keeping a distance.
South Korea accepted in
mid-February that the corona-
virus had seeped into the
country from China. Opposi-
tion lawmakers and the coun-
try’s largest physicians’ group
argued for restrictions on Chi-
nese visitors, but President
Moon Jae-in’s administration
rejected the idea, pointing to
Koreans who had traveled to
China as the conduit.
The virus spread mostly in
the city of Daegu, among mem-
bers of a secretive religious
movement with a nationwide
network of followers. The Moonadministration’s first moves
were aimed at identifying, cor-
ralling and testing all of the
roughly 10,000 members of the
Shincheonji Church of Jesus in
Daegu—whether or not they
showed symptoms.
The aggressive push to test
Shincheonji members put all of
South Korea on alert about the
virus at a time when it could
easily have spread across the
country, said Ryu Sukhyun, a
preventive-medicine professor
at South Korea’s Konyang Uni-
versity. “The government did a
good job of stopping the situa-South Korea and Italy offer
two bookends of how a country
can tackle the coronavirus. Their
divergent experiences hold ur-
gent lessons for the U.S. and
other democracies where the
pandemic is at an earlier stage.
Seoul, accepting the illness
had arrived, kept its borders
open and aggressively tracked
down the infected using data
and extensive tests. Rome, after
escalating attempts to reduce
travel and social interactions,
quarantined the whole country,
while screening people only
once they had shown symptoms.
The countries have two of
the biggest coronavirus out-
breaks outside China. But
South Korea’s known infec-
tions are now stabilizing at
around 8,000, whereas Italy’s
are rising relentlessly past
17,000. South Korea has 67
deaths as of Friday. Italy’s
death toll was a far higher
1,266 by late Friday, because
the virus has hit its large and
vulnerable elderly population
and overwhelmed hospitals in
some areas.
The different trajectories re-
flect how policy efforts have in-
teracted with the response of
the population, shaped by cul-
ture and recent experience. In
South Korea, as in Japan and
Taiwan, the cultural imprint of
Confucianism gives a paternalis-
tic state a freer hand to intrude
in people’s lives during an emer-
gency, says Lee Sung-yoon, an
international-relations professor
at Tufts University.
“Most people willingly sub-
mit themselves to authority and
few complain,” Mr. Lee said.
“The Confucian emphasis on re-
spect for authority, social stabil-
ity and the good of the nation
above individualism is an ame-
liorating factor in a time of
national crisis.”
In Italy, reducing social in-
teractions took a government
decree ordering the whole na-
tion not to gather in groups
nor to move about unless es-
sential. It was an unprece-
dented step for Italians.
As in many Western coun-
tries, reactions to the corona-
virus reflect a different social
contract that limits the claims
of the collective, as well as a
widespread skepticism toward
authority that has its own
deep historical roots.
The irony is that, to influence
behavior, easygoing Italy has
now suspended personal free-
doms to a far sharper degree
than Asian democracies. The
government is trying hard to
persuade the population that,
despite the decree, success rests
in citizens’ hands if they put
public spirit ahead of personal
preferences. It’s a hard sell.
In the U.S. and Europe, warn-
ing sirens from health officials
have similarly won a less-than-
urgent response from citizens,
health experts say. “There’s a
premium on the individualistic
Western mind to be defiant,”
said Gary Slutkin, an epidemiol-
ogist and former World Health
Organization official.
Many observers have noted
that China’s stringent lockdown
of 500 million people, which put
a brake on coronavirus infec-
tions, was far easier in a dicta-
torship than a democracy. But
the more important question in
developed countries might be:
Are some democracies better
than others at fighting global
epidemics? Are Western nations
at a disadvantage compared
with Asian democracies?
Globalization has increased
the risk of infectious diseases
spreading rapidly across bor-
ders, but Asia has had more
practice handling that threat
than the West has. The out-
breaks of SARS, MERS, H1N1 and
avian flu all gave Asian countries
a foretaste of what the new cor-
onavirus requires. Governments
developed new policy tools in
response. Citizens learned the
drill, including donning masksDivergence in
Strategy Holds
Lesson for U.S.
Italy’s known infections
are rising relentlessly,
while South Korea’s
have been stabilizing
Sources: World Bank (population, GDP);
governments (tests, cases and deaths)S.KOREA ITALY
$34,52million 60million67 1,39.7%10.6% 17.5%Over50 45.7%
yearsoldDeathsOver
yearsoldsqmiles
116,333sq.milesPOPULATIONPERCAPITAGDPCOVID-19OUTBREAKCasesTested7,979 17,240,668 97,TwoStrategies
SouthKoreaandItalyhave
sufferedtwoofthelargest
coronavirusoutbreaksByTimothy W. Martin
in Seoul andMarcus
Walkerin RomeCentral Banks Struggle to Confront Threats to Markets
Rome’s order not to
gather in groups was
an unprecedented
step for Italians.ByTom Fairless
in Frankfurt
andJon Hilsenrath
in Washington