Central banks on coronavirus alert as stock markets seek action

Global policy makers are on alert to the economic fallout from the spreading coronavirus after stocks slumped last week.Federal Reserve Chairman Jerome Powell is already standing ready to cut interest rates after saying Friday that the U.S. central bank will “act as appropriate” as the virus poses “evolving risks” to the economy.The week opens after Saturday’s release by China of an index of manufacturing activity. It’s plunge to a record low will renew fears that the world’s second largest economy may not rebound as fast as first hoped. A series of similar reports will be published in coming days around top economies, giving a sense of how they are faring.74423091 What Bloomberg’s Economists Say...“The data confirm the worse fears about a juddering halt in China’s economy in the first quarter, with significant spillovers to the region and the world.”The PMI should recover a little in March, but the damage will be far from being unwound and support from the government and central bank will strengthen, including more fiscal support, cuts to reserve requirement ratios for banks and lower borrowing costs. -- Chang Shu, David Qu, Tom OrlikHere’s what happened last week and below is our weekly wrap of what else is going on in the world economy this week.AsiaWith the Chinese PMI now published, the week kicked off Sunday with a South Korean export gain that masked the growing damage from the coronavirus. On Monday, the outbreak’s ripple-effect through the region’s supply chains is likely to be on display when PMI reports are released. Then on Tuesday, central banks in Malaysia and Australia meet, with economists at this stage expecting both to remain on hold. Rounding out the week, Australia releases output data for the fourth quarter on Wednesday, Japan will publish labor cash earnings numbers on Friday, and China will post trade numbers for the start of the year on Saturday.74423111 The US and CanadaIt’s a heavy week of speakers from the Fed. About a dozen policy makers will make public remarks including six on Friday at a conference in New York to commemorate former Fed economist Marvin Goodfriend. Investors will also be watching the release of the February employment report on Friday as a sign of the labor market’s strength before the virus spread more widely. The Bloomberg survey points to non-farm payrolls gaining 175,000 versus 225,000 the previous month. Monday sees the release of Markit’s Purchasing Managers’ Index for manufacturers which consensus of economists reckon will stay above the 50 marker between contraction and expansion. Productivity data on Thursday and a durable goods orders report the same day will also draw attention as will Friday’s release of the trade balance for January which is expected to show a deficit of $47 billion.74423140 The Bank of Canada sets monetary policy on Wednesday, the penultimate such decision before Stephen Poloz steps down as Governor. Investors increasingly bet he will lower borrowing costs at least once before he steps aside in the summer. Canada also releases an employment report on Friday.Europe, Middle East and AfricaWhether the virus will increase the risk of recession in several European countries remains the top area of debate now that cases of the coronavirus have occured across the region. The OECD gets a chance to weigh in on Monday when it updates its economic outlook for the first time since November. Bank of England Governor Mark Carney speaks on Thursday as his time in office enters its final days. On the data front, the week begins with surveys of manufacturing activity across the continent, again a chance to assess the impact of the virus. The services gauges come Wednesday, the day after the euro-area publishes inflation and unemployment numbers. Italy releases a final estimate of fourth quarter gross domestic product on Wednesday. Poland’s central bank is set to keep interest rates at a record low 1.5% on Wednesday.74423148 Turkish data on Tuesday is expected to show inflation climbing to 12.7%, pushing real interest rates further into negative territory. In South Africa, the statistics office will reveal whether the nation averted a second recession in as many years in the fourth quarter, and will probably also confirm the weakest annual economic growth since the global financial crisis.Latin AmericaBrazilian data on Wednesday will likely show Latin America’s biggest economy slowed in its first year under President Jair Bolsonaro. Economists are also scaling back their forecasts for 2020 as the virus reaches the country, yet most still expect an acceleration from 2019. The Argentine Congress starts regular sessions after President Alberto Fernandez won extraordinary powers to cope with the financial crisis.

from Economic Times https://ift.tt/38cpBwO