WASHINGTON- Senior officials in President Donald Trump’s administration on Sunday tried to calm market panic that the coronavirus could cause a global recession, saying the US public had over-reacted and that stocks would rebound due to the American economy’s underlying strength.
The S&P 500 index tumbled 11.5 percent last week as the virus accelerated beyond China’s borders, the worst weekly drop since the 2008 global financial crisis. Roughly $4 trillion has been wiped off the value of US stocks.
The selling continued when S&P 500 e-mini futures resumed trading Sunday night, falling more than a 1 percent. But they later recouped initial losses on growing expectations that the US Federal Reserve and other global central banks will take action soon to cushion the economic fallout from the epidemic.
Futures rose for the safe-haven US 10-year Treasury note, pushing implied yields for that instrument below 1 percent for the first time.
“We need to see more of a peak panic before investors are convinced it’s time to go in,” Quincy Krosby, chief market strategist for Prudential Financial Inc, said on Sunday, adding that a recovery in the 10-year yield would be a gauge of steadying sentiment.
Economists have begun to worry that the losses could soon start to weigh on consumer spending even before the virus becomes widespread in the United States.
US financial regulators who will gather on Wednesday face their most challenging week in a decade. One official told Reuters that the coming days will determine whether the federal government must take measures to bolster market confidence.
Speaking to NBC’s “Meet the Press” on Sunday, Vice President Mike Pence, who is leading the administration’s response to the virus, said that the market “will come back.”
“The fundamentals of this economy are strong. We just saw some new numbers come out in housing and consumer confidence and business optimism. Unemployment is at a 50-year low. More Americans are working than ever before,” Pence said.
On Friday afternoon, Federal Reserve chair Jay Powell sought also to quell fears, stoked by dire economic data from China, flagging that the central bank would take action if necessary to support the economy, which he said remained strong.
Trump, seeking re-election on Nov. 3, has pressed his view that the risk to the American people from the virus remains “very low” even as he has faced Democratic criticism that his administration had bungled its response to the outbreak.
When asked on the “Fox News Sunday” program if the American people are over-reacting to the current threat, US Health and Human Services Secretary Alex Azar responded, “Yes, absolutely.”
The World Health Organization’s director-general Tedros Adhanom Ghebreyesus likewise told CNBC on Sunday that the market panic was uncalled for, even after the organization on Friday raised its threat assessment for the virus to its highest level.
“Global markets … should calm down and try to see the reality,” he said. – Reuters
