Futures pointed lower in Japan, Hong Kong and Australia, with regional shares poised to snuff out two days of gains. The S&P 500 index fell almost 3% following the Fed’s 50 basis-point rate cut and comments from Chairman Jerome Powell that the virus outbreak will weigh on activity “for some time.” The two-year Treasury yield sank below 0.65%, while the 10-year plunged below 1% for the first time and the dollar retreated. Australian bonds opened higher.

“We are worried that there’s going to be a massive disruption of the economy,” Jim Bianco, president and founder of Bianco Research, told Bloomberg TV in New York. “That’s what is driving these markets. Now hopefully that doesn’t happen and the Fed can reverse” it.

Treasury yields at all-time lows and expectations the Fed may act again as soon as this month show markets remain extremely cautious about the economy’s prospects to weather the hit. The OECD said the world economy faces its “greatest danger” since the 2008 financial crisis. Still, some are suggesting stocks look better value following the recent tumble.

“We saw a massive re-pricing of risk assets and with the repricing it’s made equities a better and more attractive risk-reward for us,” Anna Han, equity strategist at Wells Fargo Securities, told Bloomberg TV. “However, we are very eyes wide open and we absolutely don’t think that the worst is over.”

Elsewhere, oil advanced for a second day after an OPEC+ committee recommended a larger supply cut to offset lost demand from the spread of the virus.

These are the main moves in markets:

– – –

-The S&P 500 index dropped 2.8% on Tuesday.

– Futures on Japan’s Nikkei 225 declined 0.9%.

– Hang Seng futures retreated 0.9%.

– Futures on Australia’s S&P/ASX 200 index fell 1.3%.

– – –

– The yield on 10-year Treasuries fell 17 basis points to 1%.

– Australia’s 10-year dropped seven basis points to 0.72%.

– – –

– The yen rose 1.1% to 107.13 per dollar.

– The offshore yuan rose 0.2% to 6.9486 per dollar.

– The euro rose 0.4% to $1.1179.

– – –

– West Texas Intermediate crude rose 1.2% to $47.31 a barrel.

– Gold climbed 3% to $1,637.76 an ounce.

The Dow Jones industrial average sank nearly 3%, or close to 800 points, and the yield on the U.S. 10-year Treasury bond – a foundation of global finance – briefly fell below 1%, before recovering slightly, as investors fled equities for the safety of bonds. Investors are worried that the spreading outbreak will upend the global economy and end the decade-long expansion.

The Standard & Poor’s 500 and Nasdaq composite were off more than 3% by midafternoon. Ten of the 11 S&P stock market sectors were in negative territory, and so was nearly every one of the 30 Dow stocks.

Stocks twisted and turned most of the day, despite the central bank announcing it would slash the benchmark U.S. interest rate by half a percentage point.

“The Fed went a little early,” said Jamie Cox, managing partner of Harris Financial Group. “Everybody knew the Fed was going to lower interest rates, but they left markets with a lot more questions than answers. That’s why the early-morning bounce was quickly sold.”

The Fed, whose leaders were unanimous in their decision to bring the rate to just below 1.25%, had not taken such an emergency step since 2008. The announcement came after the Group of Seven failed to offer a specific course to combat the economic fallout from the outbreak, which has upended global supply chains since the first cases emerged in Wuhan, China, in December.

Speaking at an 11 a.m. news conference, Fed Chair Jerome Powell said the central bank took action to help counter the economic risks that have emerged in recent weeks. He said the Fed is in active discussions with other central banks and that any future changes to monetary policy would come based on the best information available at that time.

“We do recognize the rate cut will not reduce the rate of infection. It won’t fix the broken supply chain. We get that . . . but we do believe our action will provide a meaningful boost to the economy,” Powell said.

But his comments did little to settle markets.

“In times of crisis, the Federal Reserve should just let the policy decision stand on its own,” Cox said. “It’s too easy for those comments to be misconstrued.”

The Fed has been under increasing pressure to take action to quell the anxiety that has roiled global markets for days and filtered down to consumers, who are clearing store shelves of water, disinfectant and shelf-stable food in anticipation of quarantines and shortages. But interest rates were already at low levels, and economists worry that any further reductions will give the central bank less leeway in the event of a downturn.

“The Fed’s rate cut is a psychological palliative but I have severe doubts it will make a difference to economic growth going forward,” said Daniel P. Wiener, chairman of Adviser Investments. “The rate cut is not going to drive consumers out of their homes and into the malls if they fear contagion.”

Vanguard Group, the mutual fund giant with more than $6 trillion under management, called the Fed cut “premature, given the lack of data suggesting a significant drag on the economy.”

“Today’s announcement could send the wrong signal to market participants, including individual investors who are concerned with recent market volatility,” according to a statement from Roger Aliaga-Diaz, Vanguard’s chief economist for the Americas.

The 10-year Treasury yield’s new record low beneath 1% rattled markets.

“Two things are driving the 10-year bond yield lower,” said Luke Tilley, chief economist at Wilmington Trust. “First is the Federal Reserve decision to reduce interest rates. Also is the growing concerns about future economic growth and inflation, which are sharply lower the past week because of the coronavirus.”

Dropping bond yields, which decrease as bond prices increase, “means the U.S. Treasury is the safe haven of choice for investors concerned about economic growth and equities,” Tilley said.

Early Tuesday, before the rate cut, President Donald Trump blasted Powell for not doing enough to boost the economy. Even after the announcement, Trump called for further measures.

“The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors,” Trump tweeted. “We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!”

The whirlwind day came just after Wall Street staged an explosive rally, shaking off its worst week since the 2008 financial crisis. The Dow surged nearly 1,300 points, closing up 5.1%, its largest percentage gain since March 2009. And the three major indexes all exited correction territory, which marks a 10% reversal from recent highs.

European markets climbed, with Britain’s FTSE 100, Germany’s DAX and France’s CAC posting gains of roughly 1%. In Asia, Japan’s Nikkei fell 1.2% and Hong Kong’s Hang Seng finished essentially flat.

Arturo Bris, professor of finance and lead of the IMD World Competitiveness Center at the IMD business school in Lausanne, Switzerland, said that markets and companies could emerge from the current crisis better prepared for the next one, to “prevent the overreaction and panic we’re in now – and help keep markets and economies stable even during the unthinkable.”

Though the outbreak is serious, it “is not the end of the world,” he said. “In addition to making preparations for a pandemic, they also need to be planning for what comes after a pandemic, when things return to normal.”

The coronavirus has caused a rupture in global supply chains, particularly for goods manufactured and produced in China, where economic activity has largely stalled. And the longer fears swirl around its spread, shaky consumer confidence could push Americans to rein in their spending. The world economy is now expected to have its worst year of growth since 2009, according to numerous forecasts. And Goldman Sachs is predicting no growth in the second quarter, which would be the worst quarter the country has experienced in six years.

“Stocks are likely to continue reacting to ebbs and flows in the news cycle, and it is too early to tell if Monday’s 1,300 point rally in the Dow means a bottom is in place for stocks,” said David Bahnsen, chief investment officer of The Bahnsen Group, based in Newport Beach, Calif., with over $2.25 billion in assets under management. “Economic damage has certainly been done, but how severe and for how long, remains to be seen.”

In the United States, the number of confirmed cases surged past 100 in 15 states, with six people dead. There are at least 18 confirmed cases of coronavirus in Washington state, with evidence suggesting the virus may have spread undetected there for weeks.

Roughly 70 countries have reported incidences of the virus, and new countries are added to the list each day. In South Korea, the number of confirmed cases exceeded 5,000, the highest outside China. Government officials were placed on 24-hour alert, and health tests expanded in virus-hit areas. China, the epicenter of the outbreak and still the worst-hit country, announced its lowest number of new cases since late January.

The economic think-tanks will also attend the meeting to propose relief measures.

Public Health Ministry representatives too will join the meeting to provide updated information on the situation.

If approved, they will be forwarded to the National Economic and Social Development Council, said minister Saksayam Chidchob on Tuesday (March 3).

Topping the PPP projects due for consideration are the Orange Line mass transit system ( Bangkunon-Minburi) worth Bt235.320 billion; the Purple Line mass transit system (Taopoon-Rat Burana), costing Bt124.791 billion; the Nakhon Pathom-Cha-Am highway, Bt79 billion and the Bt4.942 billion Samui cruise terminal.

He added that the ministry has a budget of Bt208.317 billion for fiscal 2020, which will be fully disbursed within September.

The Department of Highways plans to disburse Bt108.124 billion, the Department of Rural Roads Bt45.881 billion and the Department of Airports Bt5.48 billion.

The Organization of Petroleum Exporting Countries and allies face an unprecedented challenge as the epidemic that started in China threatens to become a global pandemic. Growth in fuel consumption could be wiped out this year and prices have just had their biggest weekly drop since the global financial crisis.

To secure a supply cut that could stop the rout, the group must overcome Russian resistance while also grappling with the risks of bringing together delegations from 23 nations as the deadly disease continues to spread. One of those members, Iran, has a serious outbreak at home affecting top government officials.

There’s an “extremely grave situation” in the oil market, Algerian Energy Minister Mohamed Arkab said on Tuesday, according to state-run Algeria Press Service. “Algeria calls for a concrete, credible, cohesive and rapid action.”

In an effort to limit potential contagion, OPEC will take the unprecedented step of blocking journalists from entering its Vienna headquarters during the meeting, while also seeking to limit the size of members’ delegations to “a bare minimum,” according to a statement. The cartel’s meetings typically attract a contingent of hundreds of officials, reporters, TV crews, analysts and consultants from around the world.

—

The OPEC+ Joint Technical Committee gathered in the Austrian capital on Tuesday to reappraise the impact of the epidemic. At their previous meeting in February, they recommended a production cut of 600,000 barrels a day, but the outbreak has worsened since then.

“The recommended 600,000 barrel-a-day additional cut for the second quarter of 2020 will be seen as too little,” Mohammad Darwazah of consultant Medley Global Advisors said in a note. “It is clear that the group is mulling a deeper production pullback.”

OPEC+ has been struggling to manage the price impact from the U.S. shale boom since it was formed in late 2016. It launched a new round of supply curbs at the start of this year, removing about 2.1 million barrels a day from the market. Any cut agreed on this week would deepen that reduction.

The group’s experts are looking at five scenarios for demand, said one delegate, who asked not to be named because the talks were private. Those numbers will determine whether the previous recommendation for the size of the cut is maintained, said another delegate.

With flights canceled in Europe, schools closed in Japan, towns quarantined in Italy and a rising death toll from Iran to Washington state, the coronavirus crisis has gone global, and with it, its impact on energy demand. For only the fourth time in almost 40 years, oil consumption may not grow at all in 2020, according to a growing minority of traders, investors and analysts.

That possibility is reflected in crude, which slumped 16% in New York last week, the biggest drop since December 2008. The market has rebounded somewhat, but at about $48 a barrel on Tuesday prices remain too low for most of the cartel’s members to balance their budgets.

“The coronavirus poses evolving risks to economic activity,” the Fed said in a statement to announce the move, its first such inter-meeting reduction since October 2008 during the financial crisis.

U.S. stocks were higher after the announcement, while the 10-year Treasury yield touched 1.08%. Fed funds futures are pricing more than a percentage point of central bank rate reductions for 2020, including another quarter-point cut in the first half of the year.

The central bank also said it is “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”

The Fed’s action could presage a wave of easing from other central banks around the world although those in the euro-area and Japan have less scope to follow with rates already in negative territory.It came hours after Chairman Jerome Powell and finance chiefs from the Group of Seven nations said they would “use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.”

The vote for the emergency cut to a range of 1% to 1.25% was unanimous. The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.”

The decision came amid public pressure for a cut by President Donald Trump, whose stewardship of the economy is central to his reelection campaign this year. Following today’s shift he called for more, demanding in a tweet that the Fed “must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA.”

U.S. central bankers were scheduled to gather March 17-18 in Washington. Tuesday’s decision was the first time it had cut by more than 25 basis points since 2008.

The reduction marks a stark shift for Powell and his colleagues. They had previously projected no change in rates during 2020, remaining on the sidelines during the election year, after lowering their benchmark three times in 2019 to a range of 1.5% to 1.75%.

As recently as last week, some officials, including Vice Chairman Richard Clarida, had indicated they thought it was too soon to respond to the virus. They pledged to monitor the situation, but argued monetary policy was already easy and the fundamentals of the economy strong with unemployment near a 50-year low.

But as the number of reported cases of the virus rose around the world in recent days and the U.S. reported its first fatality, traders increasingly bet the Fed would step in. Powell seemed to cement that view with a promise on Friday to “act as appropriate,” which lent some support to stocks.

Lower rates do little for factories lacking needed materials from abroad and are unlikely to spur consumers to shop if they’re scared of infection. But they should support consumer and business sentiment as well as ease financial conditions by making debt payments easier to manage and by calming market volatility.

Powell has staked his chairmanship on sustaining the expansion, words he has used to describe the essential mission of the Federal Open Market Committee, the Fed’s rate-setting panel. Despite the limited ability of monetary policy to ease the impact of a public health emergency, the rate cut could support consumer and business sentiment. Lawmakers are working on a $7.5 billion virus response bill, another reminder that critical fiscal policy can take weeks to move through Congress.

One lesson Fed officials will take away from this moment is how rapidly their policy space is used up in a crisis.

Total cuts of one percentage point this year, which several Wall Street firms are forecasting, would bring the bottom range of the Fed policy rate down to 0.5%. If the virus impact is worse than expected, or if the economy is hit by a separate shock, the policy rate could strike zero.

At that point, Fed officials are left with unconventional tools, such as purchases of longer-dated Treasuries — known as quantitative easing. The effectiveness of such tools when longer-term rates are already low remains to be seen.

The Fed is in the midst of a review of its tool kit to achieve its goal of maximum employment and stable prices. They are considering policies such as outcome-based forward guidance, where a policy change would be linked to some tangible metric such as achieving an inflation rate, and yield curve caps.

Wherever the discussion lands, the virus has highlighted the need for better fiscal and monetary policy coordination in a time of exceptionally low interest rates, says Julia Coronado, the president of MacroPolicy Perspectives.

The Fed is “carrying the domestic burden and the global burden” because they are one of the few central banks in developed economies that still has rates to some degree above zero, Coronado said. “The fiscal policy response has been lacking. There are people that are going to be struggling to pay their bills and certain workers are going to lose incomes. This is the shock that needs to be insured and we are really behind the curve.”

Initially, markets dove after G-7 leaders failed to reassure investors they would be taking action soon to boost their economies. But then at 10 a.m., the Federal Reserve announced it would slash the benchmark U.S. interest rate by half a percentage point, sending the markets into a short-lived surge.

The Dow initially climbed 300 points off the news. But within 30 minutes, the index swerved 200 points back into the red, then popped up 140 points. The Standard and Poor’s and Nasdaq composites also swung.

The Fed, whose leaders voted unanimously in favor of the rate cut, has not made an emergency reduction like this since 2008. The move would reduce the current interest rate to just below 1.25%, down from 1.75%.

The volatility carried through almost every point of Tuesday morning, with futures initially pointing upwards and then staging a U-turn. Group of Seven finance ministers and central bankers held a call to discuss how to respond to the outbreak. But a statement released afterwards contained no specific actions, prompting the futures drop.

“Alongside strengthening efforts to expand health services, G-7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase,” the finance ministers and central bank governors said in a statement.

The whirlwind morning came just after Wall Street staged an explosive rally on Monday, shaking off its worst week since the 2008 financial crisis. The Dow Jones industrial average, the Standard & Poor’s 500 and the Nasdaq composite all exited correction territory, and the Dow rose nearly 1,300 points, closing up 5.1%, its largest percentage gain since March 2009.

Markets appeared more stable in Europe. Britain’s FTSE 100 climbed roughly 2.25%, , and Germany’s DAX rose 2.8%. Asian stocks dipped, with Japan’s Nikkei down 1.2% and Hong Kong’s Hang Seng essentially flat.

Arturo Bris, professor of finance and lead of the IMD World Competitiveness Center at the IMD business school in Lausanne, Switzerland, said that markets and companies could hopefully come out of the outbreak with crisis response plans “that prevent the overreaction and panic we’re in now — and help keep markets and economies stable even during the unthinkable.”

“The virus, of course, is serious, but this is not the end of the world,” Bris said. “In addition to making preparations for a pandemic, they also need to be planning for what comes after a pandemic, when things return to normal.”

For weeks now, coronavirus has caused a rupture in global supply chains, particularly for goods manufactured and produced in China, where economic activity has largely stalled. And the longer fears swirl around the virus’ spread, shaky consumer confidence could push Americans to rein in their spending. The world economy is now expected to have its worst year of growth since 2009, according to numerous forecasts. And Goldman Sachs is predicting no growth in the second quarter, which would be the worst quarter the country has experienced in six years.

“Stocks are likely to continue reacting to ebbs and flows in the news cycle, and it is too early to tell if Monday’s 1,300 point rally in the Dow means a bottom is in place for stocks,” said David Bahnsen, chief investment officer of The Bahnsen Group, based in Newport Beach, California, with over $2.25 billion in assets under management. “Economic damage has certainly been done, but how severe and for how long, remains to be seen.”

Early Tuesday morning, President Donald Trump continued to call on the Fed to cut rates. Interest rates are already low, leaving little room for further reductions in the event of a recession. Still, Trump often attacks the central bank and Fed Chair Jerome Powell for not going far enough to heat up the economy.

“Our Federal Reserve has us paying higher rates than many others, when we should be paying less,” Trump tweeted. “Tough on our exporters and puts the USA at a competitive disadvantage. Must be the other way around. Should ease and cut rate big. Jerome H. Powell led Federal Reserve has called it wrong from day one. Sad!”

In the United States, the number of confirmed cases surged past 100 in 15 states, with six people dead. There are at least 18 confirmed cases of coronavirus in Washington state, with evidence suggesting the virus may have spread undetected there for weeks.

Roughly 70 countries have reported incidences of the virus, and new countries are added to the list each day. In South Korea, the number of confirmed cases exceeded 5,000, the highest outside China. Government officials were placed on 24-hour alert, and health tests expanded in virus-hit areas. China, the epicenter of the outbreak and still the worst-hit country, announced its lowest number of new cases since late January.

Delivering his keynote speech at a seminar hosted by the Pheu Thai Party on Tuesday (March 3) , Virabongsa said the sagging economy would likely continue for another five years and poor performance of the Thai economy was mainly due to impact of the global economic slowdown on Thai exports, while the Covid-19 outbreak hastened the decline.

Business sentiment plunges to lowest level in a decade

The government, he said, lacks confidence in managing the economy as it has no credibility in the eye of the global communities and seen as a dictatorship.

“Over all, Thailand is facing a multi-crisis on the economic, political and rule of law fronts,” Virabongsa noted.

He said the Thai economy depended to a large extent on export performance which accounted for 70 per cent of gross domestic product. Those who say that exports are not the most important aspect of the Thai economy do not understand its structure, he added.

Virabongsa said he had heard the Deputy Prime Minister’s comment that exports were not important as the country could boost domestic demand to revive the economy. “The statement demonstrates ignorance of the one who uttered the words”.

He may have outwitted the military but he could not deceive people in the financial market and the manufacturing sector,” said Virabongsa in an apparent reference to Deputy Prime Minister Somkid Jatusripitak who oversees the economic policies of General Prayut Chan-o-cha’s government.

If there were no exports, no foreign tourists, national income will drop to 30 per cent of the current level, he pointed out.

Virabongsa also turned to criticise the Bank of Thailand. The market determines the dollar value of Thai export and import products but Thailand could determine the baht value of those products via exchange rate management, he noted.

The central bank governor, however, did not seem to have sufficient knowledge of the matter as he often said that exports were not affected by the changes in baht value, Virabongsa said.

“If I were the prime minister, I would fire the central bank governor one way or another, despite the Bank of Thailand being an independent agency ” he said.

He claimed that both the government and central bank were ignorant while working together.

Thailand could progress to a developed country status but was stalled by the military coup in 2014 , as Malaysia moved ahead, he said.

The global communities oppose military rules as seen in the refusal of several economic blocs on entering free trade agreements with Thailand, he said.

“Our leader could not participate in free negotiations as he has the title of a general before his name,” he pointed out , adding that even Myanmar now has a civilian government after long periods of military rules.

“Since our political system is not in line with a civilised country, it has always been an obstacle for Thailand to achieve an advance country status. We aimed to become the fifth tiger of Asia but military coup has pulled the country back,” he said while stating that ” political system does matter to economic progress”.

The government did not fully understand importance of the exchange rate and let the baht surged to become the strongest currency in the world last year. With the government not paying much attention to Thai exports, the country is lagging behind other Asean nations and the country’s export value is expected to face negative growth this year, he warned.

Generally, the Thai economy cycle is 10 years, but with the military having managed the the economy for the past five years, the next five years would likely see an economic recession, he said.

While the SET Index and local stock prices have dropped to their lowest levels in four years, they could further drop next month to the lowest points in five or six years as the country has yet to see light at the end of tunnel, he said.

If the current government were elected, it would have been toppled but it has remained in office, thanks to the power of the gun, he said.

Current economic weakness is different from those we have experienced. In the past, economic woes were mainly caused by the country’s failure to export enough products while importing a substantial amount of foreign goods, resulting in deficits of current and capital accounts.

However, Thailand now faces a larger contraction in imports than exports, resulting in trade and current accounts surplus. “The economy is weakening but the baht is strengthening ,” he said.

The situation invited fund managers to speculate on Thai debentures , leading to historic low yield of government bonds. The lower yield of long-term bond maturity than short-term interest rate indicates that the Thai economy will continue to register declining growth rates for many years to come, he said.

Virabongsa does not believe government spending will boost the local economy after the Bt3.2 trillion annual budget has recently been approved.

Government spending accounts for only 18 per cent of gross domestic product and capital spending is just 20 per cent of total outlays, he explained while playing down

the effect of the ” Eat, Shop and Spend” stimulus scheme.