Coronavirus Could Cause Global Recession
US treasury secretary Steven Mnuchin said he did not expect coronavirus to have a material impact on the Phase 1 US-China trade deal, although that could change as more data become available.
Mnuchin cautioned against overestimating the impact of what he called a “human tragedy” on the global economy, or on companies’ supply chain decisions, saying it was simply too soon to know.
The disruption caused by the virus will affect the US economy, but the magnitude of the hit remains uncertain, a White House economist said Monday. “The real threat is obviously the coronavirus. We don’t know yet, but we’re taking a wait and see approach,” said Tomas Philipson, acting director of the White House Council of Economic Advisors.
On Monday fears of a pandemic with deaths reported from Italy, Iran and South Korea, besides China lead to early signs of a recession across the globe. US stock index futures tumbled on Monday as investors scurried to safe haven assets. Gold rose to a seven-year high and the inversion between 3-month and 10-year treasury yields deepened.
On Monday Vietnam’s central bank put out an order to commercial banks to eliminate, cut or delay interest payments on loans to companies facing losses because of the coronavirus outbreak. “The order applies to all payments due January 23 to March 30,” the State Bank of Vietnam (SBV) said on its website.
Italy’s borrowing costs jumped on Monday and the German bond yield curve drop back to the negative after the virus spread to Italy. The euro fell to $1.08 on Monday and the Australian dollar plummeted to an 11-year low.
The safe-haven Japanese yen and Swiss franc gained slightly. The currency of choice remains the dollar because the US economy is viewed as better sheltered from the virus.
The ministers from the world’s 20 largest economies said they would keep a watch on the fast-spreading outbreak but stopped short of identifying it as a downside risk to the global economy.