Sell signal: Trump's shallow virus plan blows floor out
of markets
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[March 12, 2020] By
Anshuman Daga and Tom Westbrook
SINGAPORE (Reuters) - All global investors
got from U.S. President Donald Trump's coronavirus package were a shock
travel ban on Europe and a flashing signal to sell, and none of the
large-scale tax breaks or medical tests for Americans they'd been
expecting.
The deep disappointment with Trump's much-touted plan, which he unveiled
late on Wednesday, spurred massive falls in global stock markets. U.S.
stock index futures <ESc1> plunged nearly 5%, almost hitting their
circuit breakers for the second time in a week.
The highlights of what Trump described as "the most aggressive and
comprehensive effort to confront a foreign virus in modern history,"
were a three-month tax holiday for individuals and small businesses and
low-interest loans for affected companies.
That fell way short of market expectations for relief from an outbreak
that has spread to 122 countries, infected more than 126,000 people,
sowed fears of a world recession and wiped about $6 trillion off the
U.S. stock market.
Even expectations that Trump would try to fix the delays in getting U.S.
virus testing up to speed were dashed.
"I am just left speechless for Trump to say this is the most
comprehensive plan," said Rob Carnell, chief Asia-Pacific economist at
ING in Singapore.
"Without all the additional testing and tracing and containment measures
that certainly aren't taking place in the United States, it's just a PR
stunt."
Investors were also stunned at what to them was a tardy plan to restrict
travelers from Europe for 30 days, and then left confused when he
clarified that cargo would not be banned.
"Travel restrictions equal slower global economic activity, so if you
need any more coaxing to sell, sell, sell, sell after a massively
negative signal from overnight trading in U.S. markets it just fell in
your lap," said Stephen Innes, global chief markets strategist at
Sydney-based brokerage Axicorp.
ANZ's head of Asia research, Khoon Goh said that travel ban would
multiply the adverse impact on businesses. "This is something that
markets had not factored in, it's a huge near-term economic cost."
NOT SO SWEET
While markets are accustomed to Trump's flip-flops and policy bluster,
Wednesday's speech was a stunning failure in its attempt to put a floor
under tumbling stock markets ahead of his Nov. 3 re-election bid.
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U.S. President Donald Trump addresses the nation during a live
television broadcast regarding the COVID-19 coronavirus pandemic,
from inside the Oval Office at the White House in Washington, U.S.,
March 11, 2020. REUTERS/Tom Brenner
Trump, whose campaign could be shaped by how well he responds to the crisis,
stopped short of declaring a national emergency.
One measure Trump wants -- an elimination of the "payroll tax" on workers'
earnings that would free up cash for businesses and consumers - is unlikely to
get bipartisan support.
"There is no immediate fiscal support actually coming," said Matthew Sherwood,
head of global investment strategy at fund manager Perpetual in Sydney. "It will
be heavily debated, it's an election year. They are not going to make his job
easy, the Democrats."
Michael McCarthy, chief strategist for CMC Markets in Sydney, said markets were
clearly signaling to the White House that the measures were too little, too
late.
"While the travel ban from Europe is certainly dramatic and will help with the
health aspects, it is clearly damaging economically," he said. "Given the very
limited nature of low interest loans to small businesses and potential tax
deferrals for individuals and businesses, there isn't enough here for markets to
hang their hat on."
Importantly, everything Trump said on Wednesday fell short of what markets
expected from an economic superpower coming late to the virus battle.
"The U.S. is playing catch-up as fast as it can and that's where we are. The
president destroyed trust and the world doesn't believe him," said David Kotok,
chairman and chief investment officer at Cumberland Advisors in Sarasota
Florida.
(Additional reporting by Alun John, Noah Sin in Hong Kong, Swati Pandey in
Sydney and Megan Davies in New York; Writing by Vidya Ranganathan; Editing by
Sam Holmes)
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