Newsflash: The head of the International Monetary Fund has warned that the coronavirus could cause a deeper downturn than the last financial crisis.

IMF managing director Kristalina Georgieva issued this warning, following a conference call of G20 finance ministers and central bank governors today (reminder: we’re expecting another call tomorrow)

Georgieva says she made three points on the call:

1) First, the outlook for global growth: for 2020 it is negative— “a recession at least as bad as during the global financial crisis or worse.”

The IMF expects a recovery in 2021 -- but for that to happen, countries must prioritize containment and strengthen health systems—everywhere.

The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.

2) Emerging market economies are in a worse position to ride out the crisis.

They are badly affected by outward capital flows, and domestic activity will be severely impacted as countries respond to the epidemic. Investors have already removed $83bn from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded. We are particularly concerned about low-income countries in debt distress—an issue on which we are working closely with the World Bank.

3) The IMF wants to help, and has $1trn of lending standing by.

We will massively step up emergency finance—nearly 80 countries are requesting our help—and we are working closely with the other international financial institutions to provide a strong coordinated response.

European finance ministers have taken the unprecedented decision to suspend limits on government borrowing, in response to the economic shock of coronavirus.

Meeting via telephone conference, the EU’s 27 finance ministers rubber-stamped a proposal from the EU executive to trigger the “general escape clause” that means a suspension of borrowing limits because of a severe economic downturn.
In a statement, the group said:

Ministers of finance of the member states of the EU agree with the assessment of the commission, as set out in its communication of 20 March 2020, that the conditions for the use of the general escape clause of the EU fiscal framework – a severe economic downturn in the euro area or the union as a whole – are fulfilled.

Although widely expected, it is a historic decision for the EU, which in normal economic times requires budget deficits to be no more than 3% of GDP and national debt not to surpass 60% of GDP.

The general escape clause was created in 2011, as the EU sought to learn lessons from the financial crisis. It has never been triggered until now.

The EU statement said that ministers remained “fully committed to the respect of the stability and growth pact”. But now the taboo has been broken, it is unclear how quickly the EU can return to its fiscal rules.

Eurozone watchers also predict that triggering the escape clause mean more ambitious measures could be off the table, such as “coronabonds” - common eurozone debt to help the most distressed member states finance health spending and repair their battered economies.

Newsflash: Britain’s blue-chip stock index has hit its lowest closing level since 2011.

The FTSE 100 has ended the day down 196 points, or 3.79%, at 4993.89 points.

That’s its lowest close since October 2011 (although it was lower during ‘intraday’ trading last week).

Investment platforms led the selloff, with Hargreaves Lansdown losing 17% and St James’s Place off 12% (the recent market mayhem hasn’t been good for their businesses).

Other European markets also closed lower, on fears of a deep global recession and disappointment that US politicians haven’t agreed a stimulus package.

Germany’s DAX lost 2.1%, and France’s CAC closed 3.3% lower.

Investors have shrugged at the latest attempt by the US Federal Reserve to prop up the US economy. Even the Fed’s pledge of unlimited money printing, through an open-ended quantitative easing programme, and the purchase of corporate debts couldn’t dispel the gloom in the markets.

David Madden of CMC Markets sums up the problem:

The coronavirus continues to hang over equity markets. A medial report said the number of infections has increased to 350,000 worldwide, and the fear factor is setting in for traders, which is why they are dumping equities. As far as the west is concerned, the situation is getting worse by the day, in addition to that, there is a perception things will get even worse within the next few weeks.

The Fed’s announcement about a quantitative easing programme that could run on for the foreseeable future jolted European equity benchmarks higher, but the optimism was short lived, and the markets moved south again. The absence of a fiscal stimulus package from the US government is playing a role in the sell-off too.

Even Greggs, the much-loved supplier of steak bakes and vegan sausage rolls to the British public, cannot resist the grip of the coronavirus.

The bakery chain has just told the City that it plans to close stores by end of play tomorrow,

Greggs is a great business that employs over 25,000 people, and prides itself on the way that it deals with the many stakeholders we rely on in order to make good freshly prepared food available across the UK.

However, given the current and likely impacts of coronavirus we are now planning for the closure of our shop estate by close of business on Tuesday 24 March in order to protect our people and customers.

Greggs says that it will not pay its 2019 dividend, will no longer hit its profits targets, and is cutting £45m from its capital expenditure plan. Unsold food will be distributed to the local communities.

Greggs also plans to keep employing staff on their full contract hours “for as long as is practicable”, with support from the Government’s Coronavirus Job Retention Scheme (which pays 80% of salaries). It is applying to the Bank of England’s new Covid Corporate Financing Facility (CCFF) scheme for help covering its finances too.

Donald Trump will not like this, not one little bit.

Wall Street has now sunk back to its levels when the president dramatically beat Hillary Clinton in the race to the White House in November 2016.

On the day America went to the polls, the Dow Jones industrial average opened at 18,251, and closed at 18,332 (with most pundits predicting a Democratic win).

Thanks to Trump’s tax cuts and deregulation push, the Dow hit a series of record highs - reaching 29,568 barely six weeks ago.

Right now, the Dow is down 940 points today (the sell-off is gathering pace), or 4.9%, taking the index down to just 18,233 points.

The S&P 500 has also fallen back to its lowest levels since the presidential race was run,

UK bankers will start restricting the number of customers in branches to try safeguard staff as they deal with a surge in demand for emergency loans during the Covid-19 outbreak.

It’s part of efforts to abide by social distancing rules and could result in lengthy queues outside branches reminiscent of the 2008 crash.

But this time it signals much different circumstances for Britain’s lenders which are now at the frontline of government’s financial rescue plans (rather than the recipients of it). Banks are being asked to distribute cheap loans to businesses and mortgage holidays to households impacted by the disease.

We’ve confirmed that Lloyds Banking Group, Barclays, TSB and Virgin Money UK (covering Clydesdale and Yorkshire bank branches) are among the banks taking extra precautions.

Here’s an example of posters being used in some of Lloyds’ Halifax branches, explaining that customers will be asked to keep their distance and do the same if they’re queuing outside:

Not unsurprisingly, morale among Europeans has plummeted this month.

The EC’s monthly gauge of consumer confidence across the eurozone has slumped to -11.6 this month, down from -6.6 in February.

That’s the lowest reading in over five years. But the true picture may be even worse -- data collection had to be halted early due to the coronavirus outbreak, so probably doesn’t capture the full panic.

BlackRock, the world’s largest investor, has pledged to donate $50m (£43m) to help people struggling with financial difficulties due to the global spread of the coronavirus.

The US fund manager says it has already made the first $18m (£15.6m) tranche of funding available to community organisations such as food banks in the United States and Europe, so that it can immediately provide support to the most vulnerable in society. It has provided $2m (£1.7m) to the UK’s National Emergencies Trust, and $1.25m (£1.1m) to provide medical supplies for healthcare workers across Europe. BlackRock says it has given financial support in Asia since January, as the virus first took hold in China, through the Give2Asia non-profitable organisation. Larry Fink, BlackRock’s chief executive, says the firm believes it has a “responsibility to support those least able to cope and bounce back, and who will feel its impact hardest.”

Fink explained:

“We’re committing $50 million to the immediate relief of those who are most affected right now, and to help address the financial hardship and social dislocation that this pandemic brings in its wake, as families grapple with job disruptions, school closures, and unexpected childcare and medical costs,”.

The asset manager has temporarily suspended hiring any new staff globally, as it helps its existing workforce to adapt to different ways of working, including asking some to work from home.

All BlackRock workers are working from home across EMEA and Americas, apart from a small number of people who have been designated “essential in office” and who are working in split teams from two locations in each city.

In addition, the company has committed to continuing to pay support workers who provide services such as catering and maintenance at its offices, even if they are unable to work.

HSBC said it will give extra relief to any company making or supplying ventilators during the outbreak.

The London-headquartered bank said it will fast track loan applications, offer cheaper interest rates and extended repayment terms to support the “unprecedented demand on UK hospitals.”

Amanda Murphy, head of commercial banking at HSBC UK said:

“We are committed to supporting UK businesses through these challenging times, and will continue to launch new measures to alleviate some of the pressures that our customers are facing.”

Here’s our US business editor Dominic Rushe on the US central bank’s latest bazooka:

The US Federal Reserve has launched an aggressive plan to buy as much government-backed debt as it needs to keep financial markets functioning as plans for a $1.8tn plus bailout of business and consumers stalled in Congress.

The central bank announced a series of programs on Monday aimed at supporting large and small businesses already reeling from the economic blow of coronavirus.

“Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate,” the central bank said in a statement, adding that “the Federal Reserve is using its full range of authorities to provide powerful support for the flow of credit to American families and businesses”.

As part of the effort the central bank will relaunch a massive bond-buying program, the Term Asset-Backed Securities Lending Facility, or Talf, last used in response to the 2008 financial crisis, to support the flow of credit to consumers and businesses.

The Fed has previously announced it would purchase at least $500bn of Treasury securities and at least $200bn of mortgage-backed securities but will now buy bonds in “the amounts needed to support smooth market functioning”.....

Full story here.

So much for the rally!

The New York stock market has opened lower... despite the Federal Reserve’s latest extraordinary moves to prop up the economy.

The Dow Jones industrial average dropped 352 points, or 1.8% at the start of trading, while the S&P 500 dropped 2% to its lowest since January 2017 - the month Donald Trump was sworn in as US president.

OK, that’s better than the 5% tumble expected when I woke up - but still a weak start, given the Fed just pledged to pump as much money into the system as needed.

Clearly monetary policy isn’t the solution to this crisis.....

The Federal Reserve has stunned the markets by pledging to inject as much money into the economy as needed, and to prop up the credit market too.

It’s a massive moment, says AXA’s chief economist Gilles Moec.

Odeta Kushi, deputy chief economist at First American, says the Fed is giving everything it’s got:

But economist professor Nouriel Roubini points out that the Fed is promising to buy some risky debt here -- including shabbier investment-grade bonds that are close to junk status.

But if the Fed’s plan succeeds in propping up the US economy....fewer of these companiis will slump to junk status....

NEWSFLASH: The US Federal Reserve is announcing a new wave of monetary policy measures to support the US economy.

In a statement, the Fed says:

The coronavirus pandemic is causing tremendous hardship across the United States and around the world. Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus. While great uncertainty remains, it has become clear that our economy will face severe disruptions.

Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.

The new plan includes a commitment to buy as many US government bonds and mortgage-backed securities as needed, to support the economy and financial system.

Just over a week ago, the Fed announced it would conduct $700bn of bond purchases (known as quantitative easing) -- this new policy looked like Unlimited QE!.

As the Fed puts it:

The Federal Open Market Committee (FOMC) will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy

The Fed is also announcing new measures to get $300bn of credit flowing to employers, consumers, and businesses.

The plan will address large employers, and also the consumer credit market, as America’s central bank deploys yet another bazooka as a deep recession approaches.

The Fed says its new plan includes:

• Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
• Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.

More to follow....

Global oil markets tumbled again on Monday morning as travel and industrial activity continued to contract in a bid to slow the spread of the coronavirus.

The oil markets were unable to hang on to the tentative price gains late last week when a string of government interventions designed to soften the economic blow of Covid-19 buoyed prices to just over $30 a barrel.

The price of Brent crude tumbled almost 6% on Monday morning to less than $25.50 a barrel as investors fear that the oversupply of oil in the market may soon outstrip demand and overwhelm oil storage facilities.

“We believe that prices will continue the slump,” said Rystad Energy.

“We estimate that supply will surpass demand by more than 10 million barrels next quarter and storage infrastructure will be insufficient to support the current production level.”

Oil markets have recorded four straight weeks of losses and prices have fallen by more than 60% since the start of the year. The price of other raw materials, such as coal and copper, have also been hit by the coronavirus crisis.

The latest UK retail footfall figures, just released, show precisely why so many retailers are closing their doors.

The number of people visiting the high street slumped by 31% last week (Sunday 15th to Saturday 21st Match), and was 41% down on last year, new figures from Springboard show.

Shopping centre visits were down 20% week-on-week, and 25% annually, as more shoppers heeded official advice to stay at home.

Across all shops, footfall was down 21.7% week-on-week and 28% year-on-year.

London was hardest hit, with footfall down 31.1% annually -- rising to a 63.3% slump in the centre of the capital compared to a year before.

Diane Wehrle, Insights Director at Springboard, says such annual declines simply haven’t been since the survey started (in 2002).

“The decline in footfall week on week was on par with the drop normally only ever seen in the week post-Christmas.

The annual change represented an unprecedented decline in retail footfall that was three times greater than the worst result we have ever previously recorded.”

Retail park visits were only down 2.9%, though - presumably supported by stockpiling missions to supermarkets.....

Diageo, the manufacturer of Johnnie Walker and Smirnoff, has pledged to provide alcohol to help make more than eight million bottles of hand sanitiser to help protect frontline healthcare workers across the world.

In the ongoing fight against COVID-19, it is donating up to two million litres of alcohol to hand sanitiser producers who are currently struggling to make enough.

The world’s leading distiller will provide Grain Neutral Spirit (GNS) – a 96% strength ethyl alcohol used primarily in the production of vodka and gin – and make it available at no cost to manufacturers. The donation will enable the production of more than eight million 250ml bottles of hand sanitiser.

The company’s products are on sale in 180 countries in the world. In the UK and Ireland, 500,000 litres of GNS will be made for use by staff and patients in hospitals and GP surgeries etc.

“Healthcare workers are at the forefront of fighting this pandemic and we are determined to do what we can to help protect them” said Ivan Menezes, chief executive of Diageo.

“This is the quickest and most effective way for us to meet the surging demand for hand sanitiser around the world.”

The UK-focused FTSE 250 share index is having another grim morning, down 4.5% after nearly two hours of trading.

Financial services group Virgin Money are leading the rout, down 27% despite Richard Branson’s £215m pledge of support for his empire.

Serviced offices and business lounge provider IWG has slumped by 18%, after deciding it won’t pay a final dividend for 2019, and is suspending its £100m share buyback plan.

The cinema industry is suffering too - with Cineworld down 15% and Rank down 18% , having shut their doors to film fans last week.

But Go-Ahead group are up 13%, leading the risers, after the government suspended the rail franchise system. Go-Ahead runs the Govia Thameslink and Southeastern franchises - both hit by a slump in demand in recent weeks.

The UK government has stated clearly that its new “Emergency Measures Agreements” transferring revenue and cost risk to the government (or the taxpayer, to be precise!).

City traders are concluding that it’s a WIN for the rail operators (even though the franchise model is meant to leave THEM with the risk....)

Billionaire businessman Sir Richard Branson has warned that Covid-19 is “the most significant crisis the world has experienced in my lifetime”, as he outlined plans to inject $250m (£215m) into his Virgin empire.

In a blog post published overnight, Branson said the coronavirus has hurt his businesses (which employ 70,000 people) badly:

Because many of our businesses are in industries like travel, leisure and wellness, they are in a massive battle to survive and save jobs.

Our airlines have had to ground almost all their planes; our cruise line has had to postpone its launch; our health clubs and hotels have had to close their doors and all bookings to our holiday company have stopped.

Branson, incidentally, was born in 1950 - so he’s putting Covid-19 above 9/11, the Cuban Missile Crisis, the 1970s oil shock, Lehman Brothers and the eurozone crisis.

And while Branson is committing “a quarter of billion dollars over the next weeks and months” to protect Viurgin companies and save jobs, he’s looking for government support too:

The chances of securing widespread economic recovery will depend critically upon governments around the world successfully mobilising various newly announced support programmes, which in these unique circumstances will be essential to protect people’s livelihoods.

Virgin Atlantic staff are already taking a heavy hit -- agreeing to take eight week’s unpaid leave.

And while £215m shouldn’t be sniffed at, Branson’s wealth was estimated at £4.5bn last year (but will presumably have gone down since the Covid-19 economic turmoil began)

In what would normally be a HUGE story, Britain is suspending its rail franchise system.

The Department for Transport has announced that the franchise agreements to run trains across the UK will be suspended for six months, in response to the slump in demand due to the coronavirus.

Instead of taking revenue from rail operators, the DfT will now pay train companies a small fee to keep operating some services (which are being severely cut back, due to weaker demand).

The rail franchising system was already looking troubled -- with the East Coast line taken back into public control in 2018, and Northern rail shunted into government hands month. But it’s still Quite A Moment -- ending a system created when the network was privatised back in the 1990s.

Ouch! Britain’s FTSE 100 has slumped by over 4.5% at the start of trading, wiping out its fragile recovery late last week.

The Footsie has tumbled by 245 points, back to 4944 -- with every share down.

Plumbing and heating provider Ferguson are the top faller, down 20%, followed by online estate agent Rightmove (down 11%).

Pearson are down 10% after its profits warning this morning (see earlier post)

Broadcaster ITV has announced it, too, is slashing its payments to shareholders.

It will save £300 by not paying a final dividend for 2019, or paying one in 2020 -- as it reels from a slump in advertising.

It has also been forced to postpone some TV productions in the UK,and abroad, due to the quarantine measures imposed to slow the spread of the covonavirus.

CEO Carolyn McCall told the City this morning:

“We are operating in unprecedented and uncertain times, requiring us to take difficult decisions, plan carefully and act with speed. Our absolute priority is to protect our people, while trying to ensure that we deliver the news and programmes our viewers value and love to watch, and to keep them informed.

We are actively taking measures to reduce costs and manage our cash flow so that we are best positioned to continue to deliver our strategy of building a digitally led media and entertainment company over the medium term.”

Oil giant Royal Dutch Shell is slashing billions of dollars of spending this year, as it faces the twin threats of covid-19 and Saudi Arabia’s oil price war.

Shell hopes to save between $8bn and $9bn by cutting capital expenditure and trimming underlying operating costs.

• reduction of underlying operating costs by $3-4 billion per annum over the next 12 months compared to 2019 levels;
• reduction of cash capital expenditure to $20 billion or below for 2020 from a planned level of around $25 billion; and
• material reductions in working capital.

Shell is also cancelling the next tranche of the share buyback programme to save money (even though those shares are a LOT cheaper than they used to be)

CEO Ben van Beurden,

“As well as protecting our staff and customers in this difficult time, we are also taking immediate steps to ensure the financial strength and resilience of our business.

The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past.”

An absolute flurry of companies are updating the markets about the impact of Covid-19 on their businesses.

Airbus first... It’s scrapped its dividend this morning (saving €1.4bn) and withdrawn its previous financial guidance for 2020.

Significantly, it has also lined up a new €15bn credit facility that will provide liquidity to help it ride out the crisis in the travel business.

Airbus says:

“By maintaining production, managing its resilient backlog, supporting its customers and securing financial flexibility for its operations, Airbus intends to secure business continuity for itself even in a protracted crisis,”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

We’re entering the fifth week of the markets panic over the Covid-19 crisis, and there’s no let-up.

Stocks have slumped in Asia overnight, and we’re heading for another rocky start in Europe.

This latest sell-off is triggered by the news, overnight, that the US Senate failed to approve a massive funding package to combat the impact of coronavirus.

A key Senate procedural vote Sunday evening was split 47-47, with Democratic senators refusing to support a package which (they argue) fails to provide enough support for workers who will suffer from the looming recession, while bailing out companies.

Leading Democrat Chuck Schumer described the plan as merely a:

...large corporate bailout with no protections for workers and virtually no oversight.

This ‘shell bill’ (effectively a place-holder into which the actual legislation would be dropped into later) needed 60 votes to advance. The 47-47 split has dashed hopes of a quick stimulus deal, with congressional leaders and the White House failing to agree a plan.

This stalemate had a predictably chilling impact on the markets - sending Wall Street future crashing 5% (the maximum allowed).

Stephen Innes, global chief markets strategist at AxiCorp, says the US political deadlock is scaring the markets:

While other governments around the world pour money into fiscal spending, the US can’t get over its political squabbling. Democrats claim the money will just go to corporates, and hence they can’t support it.

One senator, Rand Paul, has now tested positive for coronavirus - raising concerns that Capitol Hill could struggle to pass legislation if more lawmakers are incapacitated.

Donald Trump has also weighed in, tweeting that “we can’t let the cure be worse than the problem” -- seemingly attacking the medical advice that self-isolation is the only way to fight Covid-19.

Asian markets have suffered heavy losses (again), with South Korea’s Kospi and Australia’s S&P/ASX losing over 5%, and China down 3%.

India’s stock market has plunged over 10%, as it starts to implement a lockdown to slow the virus’s spread.

European markets are going to take a bath too, with the UK FTSE 100 expected to drop by 4%.

Tn the UK, chancellor Rishi Sunak is under pressure to provide more help for self-employed workers -- after he took the historic step of guaranteeing the wages of workers if their employers agree not to lay them off:

The economic calendar is quite quiet, apart from the latest survey of eurozone consumer confidence - which is expected to have slumped sharply this month.

The agenda

• 3pm GMT: Eurozone consumer confidence for March: expected to fall to -13, from-6.6