Fed cuts rates to soothe virus economy worries

by Heather Scott, with Laurent Thomet in Beijing

The US Federal Reserve has slashed interest rates to mitigate the damage the new coronavirus is wreaking on the world economy, as global health chiefs warned supplies of essential protective gear were shrinking rapidly.

But the Fed’s unusual sudden stimulus had the opposite effect on Wall Street, with stocks sliding as investors took the move as a signal the virus looked set to do real damage.

The disease, which first emerged in China, is appearing in new countries almost every day, with Iran and South Korea particular hotspots.

Italy is also a growing worry, as the death toll rose to 79 on Tuesday, with more than 2,500 people infected. A group of Italian tourists was placed in quarantine in India, with 17 testing positive for the virus.

One bright spot has been China’s apparent progress in slowing the epidemic, with official figures on Wednesday showing new cases falling for a third straight day.

More than 90,000 people have been infected and around 3,200 have died worldwide.

The vast majority of cases and fatalities have been in China where tens of millions of people have been placed under quarantine.

But infections are rising faster outside China now, prompting more extraordinary measures, with France closing dozens of schools, Nigeria’s parliament shutting down for two weeks, the IMF and World Bank shifting a meeting to a “virtual format”, and India delaying naval drills.

The death toll in the United States climbed to nine, many linked to a nursing home near Seattle, while the overall number of infections shot past 100 including cases on both coasts and the Midwest.

An Amazon employee in the internet giant’s home city of Seattle has been quarantined after testing positive for the virus.

Experts warn that with millions of uninsured people who cannot afford to seek medical care, the true number of cases in the US could be much higher.

In a sign of official disquiet, the Fed’s policy-setting committee slashed its key interest rate by half a point to a range of 1.0-1.25 percent — the first between-meeting cut since the height of the global 2008 financial crisis.

“My colleagues and I took this action to help the US economy keep strong in the face of new risks to the economic outlook,” Fed Chair Jerome Powell told reporters.

But the move failed to impress investors on Wall Street, with the Dow Jones Industrial Average finishing nearly three percent lower.

“The Fed’s emergency rate cut was supposed to boost confidence but it may wind up raising fears that the coronavirus is likely to cause a major economic downturn,” economist Joel Naroff said.

Asian markets were mostly up in afternoon trade Wednesday, but Hong Kong was down.

– Mask shortages –

The World Health Organization voiced concern that masks, goggles and other protective equipment used by health workers were running out due to “rising demand, hoarding and misuse”.

“We can’t stop COVID-19 without protecting our health workers,” WHO chief Tedros Adhanom Ghebreyesus told reporters in Geneva, noting prices of masks have surged sixfold and the cost of ventilators has tripled.

Tedros said the WHO had shipped more than half a million sets of personal protective equipment to 27 countries, but warned that “supplies are rapidly depleting”.

French President Emmanuel Macron said his government would requisition all face mask stocks and production in the coming months in response to the outbreak, after 2,000 masks were stolen from a hospital.

Shortages of equipment caused thousands of medical workers to become infected in China, prompting the country to step up supplies by repurposing production lines at diaper, coat and smartphone factories to make masks and hazmat suits.

Huge lines formed outside a supermarket in South Korea as people rushed to buy masks.

Panic buying for some products has occurred in other countries, with Australia’s Woolworths supermarket chain restricting sales of toilet paper and hand sanitisers following panic buying Down Under.

Indonesian police seized over half a million face masks from a Jakarta-area warehouse after the country’s first confirmed cases of coronavirus sparked panic buying and sent prices for prevention products skyrocketing.

– Virus spreads further –

China reported 38 more deaths on Wednesday but only 119 new cases, its lowest number since January, with most infections in central Hubei province, where the virus was first detected.

There are now 2,981 deaths in China and over 80,000 cases.

South Korea, the second biggest cluster of infections outside China, had more new cases than China again, with 142, though much lower than the previous day.

South Korean President Moon Jae-in has declared “war” on the virus, which has infected more than 5,300 people and killed 32 in his country.

In Europe, attention turned to containment, including Switzerland where all soldiers were confined to their bases after a case of the virus was discovered in their ranks.