6 The EconomistMarch 28th 2020
The world this week Business
Inanunprecedentedmovethe
FederalReservesaidit would
buycorporatebonds,
includingnewissuesandthe
riskiestinvestment-grade
debt,actionthatit shiedaway
fromduringthefinancialcrisis
a decadeago.Thecentralbank
isusinga subsidiaryofBlack-
Rocktomanagetheinvest-
ments.It isalsobuyinggovern-
mentdebt(unlimited
quantitativeeasing),revivinga
facilitythatenablesit toabsorb
securitiesbackedbystudent,
carandcredit-cardloans,and
haspledgedtohelpsmall
businesses.Animal spirits
Marketshad another manic
week, as investors swung
between despondency and
optimism. On March 24th the
s&p 500rose by 9.4%, its big-
gest one-day gain since Octo-
ber 2008. The nasdaqwas up
by 8% and the Dow Jones
Industrial Average by 11.4%.
The ftse 100and German dax
recorded similar leaps.Easing the pressure on big
banks, the Bank of England
cancelled its annual stress
tests. This came after the cen-
tral bank cut its benchmark
interest rate to 0.1%, the lowest
in its 326-year history.Responding to plummeting oil
prices, Saudi Arabiaunveiled a
package of aid for the king-
dom’s businesses worth $32bn
and raised its debt ceiling from
30% of gdpto 50%.A measure of business activity
compiled by ihsMarkit fell to
record lows for America, Brit-
ain and the euro zone. Worse is
yet to come. The survey was
taken before many of the more
stringent lockdowns on com-panies and personal move-
ment were introduced.With passenger numbers down
by 70% on Britain’s railways
the government suspended for
at least six months the fran-
chise system through which
train companies operate on
routes. The Department for
Transport is doing this so that
it can take on all the revenue
and cost risk, in effect nation-
alising any losses. Train com-
panies will continue to run
services for a small fee.The International Air Tran-
sport Association increased its
estimate of revenue losses for
the airline industrythis year
to $250bn. Global carriers have
asked governments to bail
them out, but environmental-
ists want this linked to swifter
action on carbon emissions.Virgin Australiareportedly
asked Australia’s antitrust
authority to investigate public
comments made by Alan Joyce,
the chief executive of Qantas,
Virgin’s arch-rival. Mr Joyce
has suggested that Virgin
should not receive state aid
during the crisis, implying that
it is “badly managed”, and has
said he wants his airline to be
the “last man standing”. Re-
ports suggest Virgin is worried
that Qantas is using the crisisto reduce competition. Mean-
while, and despite stretched
credit markets, Qantas was
able to raise A$1.1bn ($635m) in
bank loans.Norwegian Air, which was
already struggling before
covid-19 grounded flights,
received its first cash injection
from Norway’s government
after securing a rescue package
for the country’s airlines.
Under the deal, commercial
lenders provide 10% of loan
guarantees and the govern-
ment the remaining 90%.Boeingsuspended production
at its factory near Seattle for
two weeks. Washington state
has been hit particularly hard
by covid-19 and dozens of
Boeing’s workers have con-
tracted the disease; one man
has died. Airbusreopened its
plants in France and Spain
after a four-day hiatus, but
reduced their output.Workers at several Amazon
warehouses in America tested
positive for covid-19, forcing
some of them to close while
they were cleaned. Amazon is
hiring 100,000 more people to
cope with a surge in online
shopping, but hundreds of
employees have signed a peti-
tion urging the company to do
more to protect them.A sales update from Target
provided a glimpse into the
impact of coronavirus on large
retailers. Total sales were up by
more than 20% in March so far
compared with the same
month last year, and by 50% for
food and household essentials.
Clothing sales were down by a
fifth, however.Nikerevealed that 80% of the
stores that sell its products in
China have reopened, after
closing in February soon after
the start of the virus outbreak.SoftBankannounced a sale of
up to ¥4.5trn ($41bn) of assets
to fund a share buy-back plan
and reduce its debt. The trou-
bled Japanese conglomerate’s
share price soared after the
announcement. That was not
enough to stop Moody’s from
cutting its rating for SoftBank’s
bonds by two notches.Frozen
Just in time for the family
lockdown, Disney+ launched
in Britain, Germany, Italy,
Spain and several other Euro-
pean countries. Being stuck
indoors has led to a surge in
streaming, which has caused
Netflix, Amazon Prime and
others to reduce their playback
quality in Europe to ensure
films don’t stutter.