• Market Crumbs

Central Bankers To The Rescue?

Market Crumbs wrote yesterday that despite the markets being down only about 10% from the highest level ever amidst fears over the coronavirus, the calls for central banks to intervene will continue to grow. 

That's exactly what the Organisation for Economic Co-operation and Development (OECD) did yesterday when they released an interim economic assessment yesterday titled "Coronavirus: The world economy at risk."

In the report, the OECD lowered its global growth forecast to 2.4% from a previous estimate of 2.9%, while saying a "longer lasting and more intensive coronavirus outbreak" could cause global growth to fall even further to 1.5% in 2020. The OECD cited negative developments in confidence, financial markets, the travel sector and supply chain disruptions as causing them to revise growth estimates downwards. Global growth hasn't declined on a quarterly and annual basis since 2008 and 2009, respectively. 

The OECD urged governments "to act swiftly and forcefully to overcome the coronavirus and its economic impact." The organization said "governments need to ensure effective and well-resourced public health measures to prevent infection and contagion." In what can be seen as a call for central banks to step in, the OECD report read "supportive macroeconomic policies can help to restore confidence and aid the recovery of demand as virus outbreaks ease, but cannot offset the immediate disruptions that result from enforced shutdowns and travel restrictions."

The OECD said "it essential for monetary policies to remain supportive in all economies to ensure that long-term interest rates remain low." While that may give a boost to the markets and economy, low interest rates and further easing won't do much to help fight the outbreak of the coronavirus. The OECD even noted the limited effect low interest rates may have, saying "the impact of additional monetary policy measures on demand and inflation may be only modest."

Central banks across the globe haven't been shy in attempting to jawbone the markets higher over the last few days. 

U.S. Federal Reserve Chairman Jerome Powell said Friday the Fed will "use our tools and act as appropriate to support the economy." The Bank of Japan said it will "strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases." The Bank of England said it's working with the U.K. treasury and international partners "to ensure all necessary steps are taken to protect financial and monetary stability." The European Central Bank Vice President Luis de Guindos said "the Governing Council stands ready to adjust all its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner."

Members of the G7 will hold a call this morning, led by U.S. Treasury Secretary Steven Mnuchin and Fed Chairman Powell, "to discuss measures to deal with the widening coronavirus outbreak and its economic impact."

Markets soared yesterday on hopes central bankers will do whatever it takes to try and stabilize the markets and boost the economy. It remains to be seen what, if anything, they come up with, but one thing is certain, the potential effects of the coronavirus on the global economy are increasing by the day.

Leftover Crumbs

  • They had one job. Robinhood was the latest broker to succumb to technical difficulties yesterday, following in the footsteps of various brokers that had issues last week amidst the market selloff. Robinhood tweeted "Our system is experiencing downtime issues that are affecting all functionalities on our platform. We are aware of the issue and are working to have all systems up and running as soon as we can. We’re so sorry this is happening!" Users were obviously livid, with one person tweeting "Class action coming to that ass real soon."

  • It's pocket change for them. Apple has agreed to pay $500 million to settle a class-action lawsuit alleging it throttled, or slowed down, older iPhones to get people to purchase new models or replacement batteries. Apple will pay $25 per iPhone with a minimum payout of $310 million. Court papers show Apple agreed to settle to avoid litigation costs and having to admit wrongdoing. Lawyers representing the plaintiffs described the settlement as "fair, reasonable, and adequate."

  • A fight against counterfeit products. U.S. lawmakers introduced legislation, the Shop Safe Act of 2020, that would hold e-commerce companies liable for counterfeit products sold on their platforms. According to the OECD, counterfeit goods accounted for 3.3% of global trade in 2016. "Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace," Representative Doug Collins said. "Congress must create accountability to prevent these hazardous items from infiltrating the homes of millions of Americans."

  • Jack has Elon's support. Tesla co-founder and CEO Elon Musk tweeted his support for Twitter CEO Jack Dorsey, following news activist investor Elliot Management has built a stake in the company and will attempt to oust him as CEO. Musk tweeted "Just want say that I support @Jack as Twitter CEO. He has a good <3."

  • They'll pay you to leave. Chevron is offering buyouts to employees in its shale business in the eastern U.S. as the company copes with low oil and gas prices. Chevron is hoping employees who do not take the buyout will be able to find positions at its shale gas operation in the Appalachian region of the U.S. "We are taking active steps to reduce job loss," including moving employees to other operations, a Chevron spokesperson said. Chevron employs more than 48,000 people, with more than half of them located in the U.S.