*The coronavirus toll as of February 20;
Number cases worldwide: 75,725
Deaths: 2,126
New coronavirus cases from South Korea, Japan and Iran, and death reports from the three countries fanned market fears on Thursday.
China, where the virus appeared in December, reported a sharp decline in the number of cases but it was attributed to a new diagnosis method.
The Hubei Province on Wednesday reported 349 new cases of coronavirus and 108 new deaths. Hubei, crucial to international automobile and tech sectors told companies and schools not to start working until March 11.
China Interest Rate Decision
The People’s Bank of China, PBoC, reduced borrowing costs as an additional response to the impact of the corona virus on the economy. The bank reduced the 1-year loan prime rate from last month’s 4.15% to 4.05%.
It also cut its 5-year loan interest rate from 4.80% to 4.75%.
The Flight to the US Dollar
As China lowered interest rates in response to the virus outbreak, concerns for the coronavirus’s impact second-largest economy in the world lead investors to escape to safe havens such as gold, US dollar, and assets.
Investors sold the Japanese yen, Indian rupee, the Euro and Australian dollar. The US Dollar continued to pressure the Japanese yen, as the Euro hovered against the dollar near the last three years’ lows.
FOMC Minutes
The US central bank Fed’s Wednesday-released minutes from its January monetary policy meeting showed that some members were concerned about the financial imbalances, such as low corporate bond revenues, high business debts, and historical high stock market increases, as well as the damages that the coronavirus can cause.
Fed officials “a new risk to the global growth outlook” according to the Federal Open Market Committee FOMC minutes.
- Policymakers expected economic growth to continue at a moderate pace.
- Policymakers cited easing of trade tensions, receding risks from Brexit and stabilizing global growth as reducing downside risks but also generally expected trade uncertainty to remain somewhat elevated.
- Participants agreed that the threat of coronavirus warranted close watching.
- Participants expected payroll employment to expand at a healthy pace this year; consumption spending would likely remain on a firm footing.
British Retail Sales
British consumers started to spend again at the beginning of this year, after the sluggish 2019. The new figures indicate that the growing sense of confidence since the December elections has turned into a stronger economic activity.
The UK National Statistics Office announced on Thursday that the retail sales were up by 0.9% on a seasonally adjusted basis in January compared to the previous month.
EU Recovery in Danger
EU Economic Affairs Commissioner Paolo Gentiloni told the Italian radio, that the expected recovery after the slowdown in the economies of Italy, France, and Germany at the end of 2019 was now in danger due to the coronavirus.
*Reuters
