Dow sinks, virus pushes it to sharpest quarterly plunge in over three decades

(Reuters) – Wall Street’s three major indexes tumbled on Tuesday, with the Dow registering its biggest quarterly decline since 1987 and the S&P 500 suffering its deepest quarterly drop since the financial crisis on growing evidence of massive economic damage from the coronavirus pandemic.

In one of the fastest turns into a bear market, the S&P 500 and the Dow both ended the first quarter more than 20% below the end of 2019, as the health crisis worsened in the United States and brought business activity to a standstill.

It was also the S&P’s biggest first-quarter decline on record as consumers were advised to stay at home, leading businesses to announce temporary closures and massive staff furloughs.

As a result, economists have slashed 2020 growth expectations and investors, eying dismal quarterly financial reports, fear corporate defaults and mass layoffs would lead to a deep recession.

An unprecedented round of fiscal and monetary stimulus had helped equity markets edge higher last week following wild swings that saw the benchmark S&P 500 rise 9% and slump 12% in two consecutive sessions.

But this was not enough to give investors confidence.

“After the battering we’ve taken in the last month, people aren’t willing to make big bets in any direction right now, especially since we’ll have more insight from commentary in early earnings reports starting next week,” said Carol Schleif, deputy chief investment officer at Abbot Downing in Minneapolis.

Many investors were also likely being cautious ahead of the release of jobless claims data on Thursday and the March non-farm payroll report on Friday, said Steven DeSanctis, a strategist at Jefferies.

“We’re leading into the end of the week that’s going to have more of the fireworks,” he said.

The Dow Jones Industrial Average .DJI fell 410.32 points, or 1.84%, to 21,917.16, the S&P 500 .SPX lost 42.06 points, or 1.60%, to 2,584.59 and the Nasdaq Composite .IXIC dropped 74.05 points, or 0.95%, to 7,700.10.

The technology-heavy Nasdaq registered its biggest quarterly decline since the end of 2018.

The utilities .SPLRCU and real estate .SPLRCR sectors were among the biggest decliners on Tuesday, with 4% and 3% declines respectfully following a recent rally, when investors sought ways to weather the economic slump.

The energy index .SPNY rose nearly 1.6%, boosted by a rebound in prices on the day although crude oil benchmarks ended a volatile quarter with their biggest losses in history, as both U.S. and Brent futures were hammered throughout March by the coronavirus pandemic and the eruption of a price war between Russia and Saudi Arabia. [O/R]

After bouncing between gains and losses, the technology sector .SPLRCT ended the day down 1.9%.

Declining issues outnumbered advancing ones on the NYSE by a 1.25-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and no new lows; the Nasdaq Composite recorded 14 new highs and 37 new lows.

On U.S. exchanges 13.13 billion shares changed hands compared with the 15.75 billion average for the last 20 sessions.

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UK banks scrap dividends on coronavirus fears, pressure on bonuses

LONDON (Reuters) – Britain’s top banks said on Tuesday they would suspend dividend payments after pressure from the regulator, saving their capital as a buffer against expected losses from the economic fallout from the coronavirus.

Barclays (BARC.L), HSBC (HSBA.L), Lloyds Banking Group (LLOY.L), Royal Bank of Scotland (RBS.L), Standard Chartered (STAN.L) and the British arm of Spain’s Santander (SAN.MC) all halted payouts.

The lenders had been due to pay out over 8 billion pounds ($9.93 billion) between them in 2019 dividends, with HSBC the biggest payer at $4.2 billion.

The move came in response to a request from the Prudential Regulatory Authority (PRA), which also asked banks and insurers not to pay senior staff bonuses this year.

The lenders said they would not pay interim dividends for 2020 and scrapped planned 2019 payouts, but held off announcing changes to their executive pay policies.

The PRA said banks entered the epidemic, which has put Britain into lockdown, with strong capital positions, enough to withstand a severe UK and global recession.

“The bank has a strong capital base, but we think it is right and prudent, for the many businesses and people that we support, to take these steps now,” Barclays chairman Nigel Higgins said.

Banks pay out dividends as a means of rewarding shareholders and disposing of excess profits, but they have the option to retain the earnings instead to preserve their capital levels.

FOLLOWING ECB’S LEAD

The statements from British lenders come after the European Central Bank (ECB) last week asked euro zone lenders to skip dividend payments and share buybacks until October at the earliest, and use their profits to support the economy.

Several of Europe’s largest lenders, including UniCredit (CRDI.MI), and Societe Generale (SOGN.PA) have already announced they will hold off paying 2019 dividends for now.

However there are some hold outs. Swiss banking giants UBS (UBSG.S) and Credit Suisse (CSGN.S) have both said they plan to press ahead with 2019 dividends despite their home regulator urging caution over payouts.

The move to scrap 2019 shareholder distributions is expected to free up capital that banks can instead lend to businesses and consumers rocked by the Covid-19 pandemic.

But some analysts believe cancelling dividends could actually harm the supply of credit to the real economy.

“We note that euro area bank market capitalization fell on 30 March by the same as the 30 billion euros ‘saved’ by its dividend ban on Friday 27 March,” analysts at Bank of America Merrill Lynch said in a note to clients, referring to the ECB’s move.

The European Union’s banking watchdog said earlier on Tuesday that banks should be “conservative” in how they award bonuses to preserve capital and keep lending during the coronavirus pandemic.

However it stopped short of calling on banks to stop bonuses altogether.

Italy’s UniCredit and Spain’s BBVA have both said this week that their top management will waive their 2020 bonuses.

Standard Chartered signaled in a memo on Monday that the bank would likely cut its 2020 executive payouts.

PRA Chief Executive Sam Woods also wrote to heads of insurers, saying they should pay “close attention” to the need to protect policyholders and maintain safety and soundness when considering bonuses or dividends.

HSBC signaled a gloomy first quarter earnings season ahead for British banks, warning in its statement that it would see bad loans rising and revenues falling as the economic impact of the pandemic hits.

($1 = 0.8059 pounds)

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Coronavirus: More than 90% of UK airliners grounded as travel demand plummets

More than 90% of passenger airliners in the UK have been grounded as demand for air travel has plummeted, Sky News can reveal.

EasyJet has become the latest airline to ground its entire fleet of aircraft, while Ryanair has warned it can’t rule out a complete shutdown over the COVID-19 pandemic.

International Airlines Group, which owns British Airways, has grounded 75% of its aircraft. More than 327 airliners belonging to the group have been parked in storage without a single flight for the past seven days, according to aviation analytics company Cirium.

Wizz Air, the Budapest headquartered airline that flies to 10 destinations in the UK, is operating 7% of its original scheduled capacity – utilising just 19 out of its entire fleet of 121 Airbus aircraft.

Low cost airline and package holiday provider Jet2.com has not operated a single flight over the past seven days on 93 aircraft. The company currently flies 110 airliners.

Data from Cirium also showed more than 40% of the global passenger jet fleet was now in storage – inactive for at least seven days – leaving just over 15,000 available.

It also showed a sharp increase in the number of aircraft placed in storage in the month of March as airlines around the world desperately try to trim costs.

Flight numbers have fallen to a trickle globally as international air travel responds to a collapse in demand and restrictions on movement.

Earlier this month, as a result of the coronavirus pandemic, the Foreign Office is advised against all non-essential worldwide travel for a period of 30 days.

The UK government has ruled out a support package but promised to work with individual airlines should they seek help.

Scottish regional airline Loganair has indicated it will do just that.

Flight information specialist OAG said the aviation industry was now less than half the size reported in mid-January.

It noted that 30% of global flight capacity was lost over the past week alone, with BA losing 72% to date.

Only KLM has lost more in Europe (73%).

Globally, the US, China, UK and India had the most number of airliners grounded.

Middle East-based Emirates said it been brought to a “sudden and painful halt” by the coronavirus pandemic as it too grounded majority of its passenger flights.

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IMF says ECB, ESM support key to strong EU coronavirus response

WASHINGTON (Reuters) – The International Monetary Fund said on Monday the relaxation of the euro zone’s fiscal rules and support from the European Central Bank and the European Stability Mechanism is critical to a strong regional response to the coronavirus pandemic.

“The determination of euro area leaders to do what it takes to stabilize the euro should not be underestimated,” IMF European Department Director Poul Thomsen said in a blog post on the IMF website.

He said large-scale interventions by the ECB and European leaders’ call for the ESM to supplement national fiscal efforts can allow countries with high public debt to react forcefully to the crisis.

Europe’s major economies are losing 3% of GDP output for every month that key sectors are shut down to try to slow the spread of the virus, and “a deep European recession this year is a foregone conclusion,” Thomsen said.

On Friday, IMF Managing Director Kristalina Georgieva said the global economy was already in recession and countries must respond with “very massive” spending to avoid a cascade of bankruptcies and emerging market debt defaults.

Thomsen said in his blog on Monday that the IMF’s main regional concern was with smaller countries outside the European Union, where the lack of depth of financial markets and limited access to external capital will make it difficult to finance large increases in their fiscal deficits.

He said most of the nine non-EU emerging economies in central and eastern Europe – excluding Russia and Turkey – are seeking IMF emergency funding from a $50 billion pool available in rapidly disbursing programs for coronavirus responses.

“More countries are likely to follow in what is already the largest number of requests for assistance ever received by the IMF at one time,” Thomson said, adding that the Fund was “dramatically streamlining” internal rules and procedures to respond with speed, agility and scale to the crisis.

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Wall Street set to open higher as investors weigh stimulus against shutdown

(Reuters) – Wall Street was set to open slightly higher on Monday as President Donald Trump followed last week’s massive fiscal stimulus by extending his stay-at-home guidelines, leaving investors guessing at their economic impact.

The S&P 500 .SPX posted its biggest weekly percentage gain in over a decade last week, while the Dow Jones .DJI its best since 1938, thanks to the record $2.2 trillion in aid agreed by officials.

All three major stock indexes, however, ended Friday more than 3% lower after the United States overtook China as the country with the most number of coronavirus cases.

The crisis has so far knocked $7.4 trillion off the value of S&P 500 companies and without any clarity on how long it will take to quell the outbreak, Wall Street’s main indicators of future volatility remain at high levels.

“There is no way to gauge the short-term direction of markets right now when there is still so much uncertainty,” said David Bahnsen, chief investment officer of Bahnsen Group in California.

“The shape of the inevitable economic recovery is unknown and will be for weeks or months.”

Trump on Sunday dropped a hotly criticized plan to get the economy up and running again by mid-April after White House health experts argued strongly with him to extend the stay-at-home order so the country could start seeing the rates of infection come down.

JPMorgan Chase & Co (JPM.N) said on Saturday it expected real U.S. gross domestic product (GDP) to fall 10% in the first quarter and plunge 25% in the second quarter.

The CBOE volatility index dipped on Monday, but was still near levels far above those in 2018 and 2019.

“Until we’ve got some evidence that can help deal with the virus, it’s probably more choppy markets ahead,” said Noah Hamman, chief executive office of AdvisorShares in Bethesda, Maryland.

At 08:41 a.m. ET, Dow e-minis 1YMcv1 were up 139 points, or 0.65%, S&P 500 e-minis EScv1 were up 23.5 points, or 0.92% and Nasdaq 100 e-minis NQcv1 were up 78.25 points, or 1.03%.

Johnson & Johnson (JNJ.N) rose 4.5% as the drugmaker announced plans to start human testing of its experimental coronavirus vaccine by September

Abbott Laboratories (ABT.N) was the top gainer among S&P 500 components, rising nearly 10% after it won U.S. approval for a diagnostic test that can detect coronavirus in minutes.

General Motors Co (GM.N) rose 5% as Trump praised the automaker’s ventilator production after he invoked emergency powers to compel the manufacturing of badly needed equipment to tackle the pandemic.

Norwegian Cruise Line Holdings Ltd (NCLH.N), Royal Caribbean Cruises Ltd (RCL.N) and Carnival Corp (CCL.N) slumped after Berenberg slashed its price targets on cruise operators by about a third.

Oil majors Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N) fell over 2% as U.S. crude prices fell below $20 for the first time in 18 years.

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Oil plunges to 2002 lows, shares sink again

LONDON/SYDNEY (Reuters) – Oil took another eyewatering 8% tumble on Monday and world shares buckled again as fears mounted that the global coronavirus shutdown could last for months.

There were some bright spots, with Australian equities posting a standout jump as the government launched a super-sized support programme, but that was about it.

Japan’s Nikkei had led the rest of Asia lower and Europe’s main markets slumped by 1.5-2.5% in early trade, adding to what has already been the region’s worst quarter since 1987.

The rout in oil took crude to its lowest since 2002. Brent was at only $22 a barrel by 0815 GMT, hammering petro currencies such as Russia’s rouble, Mexico’s peso and the Indonesian rupiah by as much as 2%.

It didn’t help that the U.S. dollar was back on the climb. The euro and pound were both batted back by about 0.6%, leaving the former near $1.1070 and sterling at $1.2350. On Friday Britain had become the first major economy to have its credit rating cut because of the coronavirus.

“I have been in this business almost 30 years and this is the fastest correction I have seen,” Lombard Odier’s Chief Investment Officer Stephane Monier said of this year’s plunge in global markets.

Wall Street futures had also backpeddled into the red, having been up as much as 1% in Asia after a late flutter of optimism.

Australia’s benchmark ASX200 registered a late surge, closing 7% up after Prime Minister Scott Morrison unveiled a $130 billion ($79.86 billion) package to help to save jobs.

Most other markets were down but trimmed earlier losses. Japan’s Nikkei dropped 1.6%, Shanghai blue chips were down 0.9% and there were sharper drops in Southeast Asia, with Singapore’ benchmark index down almost 3%.

JPMorgan now predicts that global GDP could contract at a 10.5% annualised rate in the first half of the year.

“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies,” said JPMorgan economist Bruce Kasman.

As a result, central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which have at least eased liquidity strains in markets.

China on Monday became the latest to add stimulus, with a cut of 20 basis points to a key repo rate, the largest in nearly five years.

Singapore also eased as the city state’s bellwether economy braced for a deep recession while New Zealand’s central bank said it would take corporate debt as collateral for loans.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

“To answer this question, one needs to know the magnitude of the containment measures and for how long they will be implemented,” he added.

“This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved.”

DOLLAR NOT DONE YET

Bond investors looked to be bracing for a long haul, with European government bond yields dipping and those at the very short end of the U.S. Treasury curve turning negative. Those on 10-year notes dropped a steep 26 basis points last week and were last standing at 0.68%.

That drop has combined with efforts by the Federal Reserve to pump more U.S. dollars into markets, dragging the currency off recent highs.

Against the yen, the dollar was pinned at 107.74, well off the recent high of 111.71, but its gains against the euro, pound and heavyweight emerging market currencies suggested it was regaining strength.

“Ultimately, we expect the USD will soon reassert itself as one of the strongest currencies,” argued analysts at CBA, noting the dollar’s role as the world’s reserve currency made it a countercyclical hedge for investors.

“This means the dollar can rise because of the deteriorating global economic outlook, irrespective of the high likelihood the U.S. is also in recession.”

The dollar’s retreat had provided a fillip for gold, but buying stalled as investors were forced to liquidate profitable positions to cover losses elsewhere. The metal was last at $1,613.6 an ounce.

Oil prices have also been hit by a fight for market share between Saudi Arabia and Russia, with neither showing signs of backing down even as global transport restrictions hammer demand.

Brent futures were down 8%, or $2, at $22.50 a barrel – their lowest for 18 years. U.S. West Texas Intermediate (WTI) crude futures fell as far as $19.92, near a 2002 low hit this month.

“Central banks have been easing (monetary policy) and governments have been offering stimulus packages, but they are only supportive measures, not radical treatments,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

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Asia shares suffer virus chills, central banks offer what they can

SYDNEY (Reuters) – Asian shares slid on Monday and oil prices took another tumble as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies despite central banks’ best efforts.

“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies has increased,” said JPMorgan economist Bruce Kasman.

They now predict global GDP could fall at a 10.5% annualized rate in the first half of the year.

There was much uncertainty about whether funds would have to buy or sell for month- and quarter-end to meet their benchmarks, many of which would have been thrown out of whack by the wild market swings seen over March.

E-Mini futures for the S&P 500 skidded 1.2% right from the bell, and Japan’s Nikkei 3.7%. EUROSTOXXX 50 futures fell 0.6% and FTSE futures 1.3%.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.1%, while Shanghai blue chips shed 1.4%.

Central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which have at least eased liquidity strains in markets.

China on Monday became the latest to add stimulus with a cut of 20 basis points in a key repo rate.

Singapore also eased as the city-state’s bellwether economy braced for a deep recession, while New Zealand’s central bank said it would take corporate debt as collateral for loans.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

“To answer this question, one needs to know the magnitude of the containment measures and for how long they will be implemented,” he added. “This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved.”

It was not encouraging, then, that British authorities were warning lockdown measures could last months.

U.S. President Donald Trump on Sunday extended guidelines for social restrictions to April 30, despite earlier talking about reopening the economy for Easter.

Japan on Monday expanded its entry ban to include citizens traveling from the United States, China, South Korea and most of Europe.

DOLLAR NOT DONE YET

Bond investors looked to be bracing for a long haul with yields at the very short end of the Treasury curve turning negative and those on 10-year notes dropping a steep 26 basis points last week to last stand at 0.65%.

That drop has combined with efforts by the Federal Reserve to pump more U.S. dollars into markets, and dragged the currency off recent highs.

Indeed, the dollar suffered its biggest weekly decline in more than a decade last week. [USD/]

Against the yen, the dollar was pinned at 107.27, well off the recent high at 111.71. The euro edged back to $1.1096, after rallying more than 4% last week.

“Ultimately, we expect the USD will soon reassert itself as one of the strongest currencies,” argued analysts at CBA, noting the dollar’s role as the world’s reserve currency made it a countercyclical hedge for investors.

“This means the dollar can rise because of the deteriorating global economic outlook, irrespective of the high likelihood the U.S. is also in recession.”

The dollar’s retreat had provided a fillip for gold, but fresh selling emerged on Monday as investors were forced to liquidate profitable positions to cover losses elsewhere. The metal was last off 0.5% at $1,609.42 an ounce.

Oil prices were again under water as Saudi Arabia and Russia show no signs of backing down in their price war.

Brent crude futures lost $1.56 to $23.37 a barrel, while U.S. crude fell $1.12 to $20.39.

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National Enquirer Publisher Is Cutting Employees’ Pay

American Media is the latest media outlet to announce cuts as the coronavirus has shaken the economy and the advertising market.

By Marc Tracy

American Media Inc., the publisher of The National Enquirer, Men’s Journal, Us Weekly and other titles, is cutting the pay of its employees by more than 20 percent, a spokesman said on Saturday, as the coronavirus has shaken the economy and the advertising market.

“American Media is committed to doing everything we can during the Covid-19 crisis to ensure our staff maintain their employment and health benefits,” the company said in a statement.

There have been no layoffs, the spokesman said.

The cuts, first reported on Saturday by The Daily Beast, are the latest instance of a media outlet looking to slim down as normally robust advertisers, like restaurants and travel businesses, shutter. Some alternative weeklies have laid off as much as three-quarters of their staffs. Last week, the digital giant BuzzFeed announced temporary payroll cuts.

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Coronavirus: ‘Third of UK harvest may go to waste’ due to COVID-19 travel ban

A third of this summer’s food harvest could go to waste on British farms because of a chronic shortage of migrant labour caused by the coronavirus outbreak, charities and farmers are warning.

UK farms and food producers rely on a migrant workforce of 60,000 to 70,000 seasonal labourers mainly drawn from eastern European countries including Romania, Bulgaria and Poland.

Within weeks, fruit and vegetable crops will need harvesting but travel restrictions across Europe and the UK, imposed to slow the spread of COVID-19, mean it may prove impossible to recruit overseas staff.

Farm labour charity Concordia, which sources seasonal labourers for British farms, says it is “desperately worried” about the impact on the UK harvest, and warned that UK workers will not fill the gap.

Chief executive Stephanie Maurel told Sky News: “We are extremely worried about what that means for the whole system.

“If there are 90,000 jobs in our sector, that’s usually 60,000 people that might do six weeks here and there, picking strawberries, asparagus, potatoes and so on.

“That’s at least 60,000 jobs, 60,000 people that we desperately need that we won’t find in the UK.”

Concordia is in negotiations with the Romanian and UK governments about providing dedicated flights for some seasonal workers, and is running a campaign called Feed The Nation, encouraging British workers to apply for vacancies.

But Ms Maurel warned that was unlikely to fill the gap, in part because of the government measures announced to cushion the economic impact of the virus.

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Norway's wealth fund lost $124 billion this year as stocks crash

OSLO (Reuters) – Norway’s $930 billion sovereign wealth fund, the world’s largest, has lost 1.33 trillion Norwegian crowns ($124 billion) so far this year as stock markets plunged amid the coronavirus outbreak, it said on Thursday.

The year-to-date loss on its investment portfolio is 16.2%, all but erasing the 20% gains made last year.

The fund’s stock market portfolio, its main asset class, has lost 22.8% of its value, it added.

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