Here’s what you need to know:
- Asian markets follow Wall Street’s surge, but doubts linger.
- Stocks have their biggest gain in weeks as Wall Street is encouraged by a vaccine prospect.
- Poor countries borrowed billions from China, but can’t pay it back.
- The central bank will use its “full range of tools,” the Federal Reserve chair will tell Congress.
- Catch up: Here’s what else is happening.
Asian markets follow Wall Street’s surge, but doubts linger.
New hopes that economies could emerge successfully from the global coronavirus outbreak helped Asian markets follow Wall Street higher on Tuesday, but other indicators suggested the rise might be short-lived.
Australian and South Korean stocks led the surge, which sent markets in the Asia-Pacific region more than 1 percent higher.
The rise followed a jump of more than 3 percent in major Wall Street indexes on Monday. A drug company, Moderna, said early testing of its coronavirus vaccine on a small group of people showed promising early results. Investors also focused on comments from Jerome H. Powell, chair of the U.S. Federal Reserve, who said the central bank could do more to help the American economy.
Investors glossed over Mr. Powell’s other comments about a potentially slow and painful recovery, and other market indicators on Tuesday suggested the rally in global markets could come to an end.
Futures markets indicated Wall Street would open moderately lower later on Tuesday. Prices for U.S. Treasury bonds rose, which is often a sign of growing investor skepticism. Oil prices dropped in futures markets after a big Monday rally.
In Japan, the Nikkei 225 index was 1.8 percent higher at midday. In Hong Kong, the Hang Seng index was up 1.9 percent. Mainland China’s Shanghai Composite index was up 0.5 percent. South Korea’s Kospi and Australia’s S&P/ASX 200 were up 2 percent.
Stocks have their biggest gain in weeks as Wall Street is encouraged by a vaccine prospect.
Many of the world’s economies have begun to loosen restrictions on commerce, the Federal Reserve chair on Sunday signaled that the central bank has more firepower to lend to recovery efforts, and a drugmaker reported positive developments in an early trial of a coronavirus vaccine.
Taken together, the developments set off a surge in global stock prices and Wall Street had its best day in about six weeks.
The S&P 500 rose more than 3 percent Monday, while stock benchmarks in Europe were 4 percent to 6 percent higher.
Before trading began in the United States, the drugmaker Moderna said its coronavirus vaccine showed promising early results in tests on humans. The early-stage tests were on just eight people, but the hope that a vaccine might be quickly developed was enough to give stock prices a lift.
Also bolstering markets was a pledge from Jerome H. Powell, the Fed chair, that there was “really no limit” to what the central bank could do with its emergency lending facilities.
The Fed chair also suggested that the worst economic readings were yet to come, even as states begin to gradually reopen. He said that he expected “a couple more months” of job losses and acknowledged that the unemployment rate, which hit 14.7 percent in April, could peak at 20 percent or even 25 percent.
Still, investors were looking for silver linings as the world grapples with lockdowns and other restrictions. Japan released economic figures on Monday that showed its economy formally fell into recession, but Tokyo has begun easing some of its containment efforts. Some restrictions have also been lifted in parts of Europe and the United States.
And trading on Monday had all the characteristics of a rally focused on the prospects for a return to normal. Shares of companies that stand to gain the most, like United Airlines, Expedia Group and Marriott International were among the best performers in the S&P 500.
Poor countries borrowed billions from China, but can’t pay it back.
As the coronavirus spread around the globe, countries like Pakistan, Kyrgyzstan, Sri Lanka and several African nations asked Beijing to restructure, delay repayments or forgive tens of billions of dollars of loans coming due this year.
With each request, China’s drive to become the developing world’s biggest banker is backfiring. Over the last two decades, it unleashed a global lending spree to expand its influence and become a political and economic superpower. Borrowers put up ports, mines and other crown jewels as collateral.
Now, as the world economy reels, countries are increasingly telling Beijing they can’t pay the money back.
China faces difficult choices. If it restructures or forgives these loans, that could strain its financial system and infuriate the Chinese people, who are suffering under their own slowdown. But if China demands repayment when many countries are already angry with Beijing over its handling of the pandemic, its quest for global clout could be at risk.
The central bank will use its “full range of tools,” the Federal Reserve chair will tell Congress.
Jerome H. Powell, the chair of the Federal Reserve, will tell members of Congress that the central bank stands ready to do what it can to help the American economy make it through the sharp downturn underway.
“The scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II,” Mr. Powell said in prepared testimony that he is scheduled to deliver to the Senate Banking Committee on Tuesday.
He added that the Fed was “committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response.”
Mr. Powell will testify alongside Treasury Secretary Steven Mnuchin. The pair will explain to senators what they are doing with a $500 billion congressional appropriation in the CARES Act that was primarily meant to back up Fed emergency lending programs, which can keep credit flowing to businesses and local governments in times of crisis.
Mr. Mnuchin will testify that he expects economic conditions to improve in the third and fourth quarters of this year as the economy begins to reopen, according to prepared remarks. He will also defend his work on the economic relief effort, pointing to the Paycheck Protection Program, economic impact payments and payroll support for the airline industry.
“While these are unprecedented and difficult times, these programs are making a positive impact on people,” the Treasury secretary will say.
Mr. Mnuchin will also testify that Treasury has committed up to $195 billion in credit support and that the remaining $259 billion is being held in reserve to “create or expand programs as needed” as they monitor different sectors of the economy.
Catch up: Here’s what else is happening.
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A prolonged global recession is the top near-term worry among leaders in risk management, according to a report published Tuesday by the World Economic Forum. The report relied on surveys of 350 risk professionals, who also listed high unemployment, another outbreak and protectionism among their fears in the next 18 months. The authors of the report call on world leaders act together now to stem rising economic distress and social discontent caused by the pandemic.
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Uber said on Monday that it laid off 3,000 employees, closed 45 of its global offices and reorganized several of its secondary businesses as the coronavirus caused an 80 percent downturn in its ride-hailing business. Uber has also cut back its food delivery service, Uber Eats, in several countries where it was not successful and sold its bike and scooter arm, Jump. The company has laid off about 25 percent of its work force over the last month.
Reporting was contributed by Carlos Tejada, Maria Abi-Habib, Keith Bradsher, Jeanna Smialek, Kate Conger, Mohammed Hadi and Gregory Schmidt.
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May 19, 2020 at 12:39PM
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