The Economist USA - 21.03.2020

1
The world this week Business

• Stockmeri.t volatility
  Cloe volatlllty Ind• (VDC),,. paints

2017 18 19 2D

Source: Dat11tream from Rellnlliv

100

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Ill

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20

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The Federal Reserve took more

emergency measures to bolster

short-term liquidity in mar-

kets byprovidiognew funding

lifelines to banks. It also cut its

benchmark interest rate close

to zero and began a newpro-

grammeto buy commercial

paper. stockmarketswerein

free fall; tiading was halted

again on the New York Stock

Exchange after steep plunges

triggered an automatic •circuit

breaker". The S&P 500 had its

worst day sinceig87, falllng by

1296. nhasnowshed all the
      gains it made last year.

• Sinking sterling
  AB investors tumed to the
  dollar for safety, the pound fell
  to levels last seen during the
  198os, dropping below $LtS in
  tiading. Uncertainty about
  Brexl.twas an extra factor
  weighing on panickymarkets.

The European Central.Bank

launched a €7sobn bond-

buyingprogrammethatcovers

government and coJ:pOrate

debt. Banks Jn the euro zone

tapped €:1o9bn in ultra-cheap

loans under a new facility.

China's centr:al bank lowered

the amount of cash holdings

that banks are required to keep

in reserve, a measure intended

to free up loans to businesses.

Industrial output in China

shrank by13.5% in January and

February compared with the

same two months ill 2019, the

biggest drop on record. In

Brltainthegovemmentun-

veiled a £33obn ($38obn) loan

package for firms.

Andrew Bailey took over as

govemorof theBankof

England, a baptism of lire as

the centtal bank reacts to the

covid-i.9 crisis and continues

its preparations for Britain's

withdrawal from the Eu's

financial provisions bythe end

oftheyear. Mr Bailey said the

bankwouldseekto limit the

fallout from the crisis so that it

would be ·disruptiveD instead

of-destructive". He added that

the bank was willing to pump

unlimited amounts of money

into the economy through the

govemment's newoovid

financing facility.

At an emergency meeting

TUrkey's centtal bank cut its

benchmark interest rate by one

percentage point, to 9.75%,

causing the lira to slide. The

bank thinks a global slowdown

will cool inflation, which is on

the rise again in Turkey.

Commodity prices continued

totumbleamidgloomyfore-

casts for industrial demand..

Facingadoublewhammyof

reduced demand and a price

war started by Saudi Arab.I.a, oil

prices plunged, with Brent

audeata17-yearlowof around

$25 a barrel. Gold prices, usual-

ly a haven in stressed markets,

dropped as investors cashed in

their holdings. Silver, which is

widely used ill industrial

processes, was at its lowest

pricesince2009.

The International Air Tran-

sport Association warned that

the forecast it provided only

recently about the hit to ail'-

line revenues during the crisis

isnowoutofdate. Theassocia-

tion is calling for governments

around the world to provide

carriers with direct financial

support, favourable loans and

tax relief, which it now reckons

couldcostbetween$15obnand

$20obn. The situation is Mtotal-

lybeyond the control of the

airlines", it said.

Boeing also asked for help,

requesting $6obn •in access to

public and private liquidity",

including loan guarantees, for

the aerospace industty. Al-

ready battered by drawbacks in

getting the 787 MAX to .Oy again,

its share price has slumped

since mid-February, and fell

shaIPlY again this week when

Standard lit Poor's cut its credit

rating by two notches.

Amawndedded to employ an

extra 100,000 warehouse and

logistic workers in America to

help it cope with a suqe in

onllne shopping. It is also

resUicting space in its ware-

houses to household essentials

and medical supplies, leaving

little room for third-party

sellers.AlthoughAmuonJs

hiring, StevenMnuchin, the

treasmy secretary, reportedly

thlnksAmerlca'sunemploy-

mentratecould bit20% if

drastic action isn't taken.

11te Economist March 21st 2.

The crisis is taking a heavy toll

on otherretailen. Zara, a

fashion chain, temporarily

shut half its stores worldwide.

LauraAshley, a pwveyorof

textiles and other goods

themed in the English-

romantic style, was close to

collapse. It opened its first

shop in the196os.

France slapped a €1.ibn

($1.2bn) fine on Apple for

conniving with wholesalers to

suppress competition. Apple

said the decision, the biggest

antitrust penalty imposed on a

single company in France,

ignored 30 years oflegal prece-

dent. The film plans to appeal.

• TM mighty Quinn
  esBcappointedNoel Quinn as
  its chief executive. Mr Quinn
  was given the job on an interim
  basiswhenJohnFlintwas
  defenestrated last.AUgust and
  is ploughing ahead with a huge
  restructuring at the bank.

Stepping up to the coronavirus

crisis in France, LVMH, the

world's biggest maker ofluxury

goods, switched its perfume

and cosmetic production lines

to make hand sanitiser, which

it ls giving away to hospitals.

Sites that made Dior and Giv-

enchy scents are now chuming

out hydroalcobolic gel.