A 30 percent plunge, or so, across global stock markets in few weeks would normally have been the world’s absolute top topic in the news. Yet now, with the covid-19 epidemic exploding, it seems to be just the bi-story.
The exponential nature of the viral growth make it very hard to predict when this storm will subside, and what losses will be incurred in the meantime. To corporate treasuries this pulls the carpet. Will our businesses stay running? Will customers have cash to pay their bills? Can we borrow if we must? Is this simultaneously the trigger for a cyclical recession after a long line of strong years? And what risks, in all of this, should we try hedging? Certainly, we will not be alone in seeking protection.
Can our team collaborate efficiently over Skype? Will cancelled meetings mean postponed projects? And then, on top of this we are all human beings: what about my family and old relatives if they catch the disease?
Worst day since 1987
New types of issues arise. Treasury Today discusses the implications for treasury team members of working from home.
Marketwatch is among media noting that the US stock market losses of nearly 10 percent on Thursday 12 March were the worst one-day setback since the Black Monday crash in 1987. This marked the end to a record-setting 11-year bull market. If the stock breakdowns in 1929, 1987 and 2008 are to guide us, we could still have a long distance to fall. A five-fold rise over one month in the CBOE Volatility Index, VIX, is another indicator of the whether change.
Oh, and there was an oil market collapse too, by the way. And a ban on transatlantic flights to the US, I nearly forgot.
Governments and central banks rush to the overall access to money. “Fed promises to pump trillions of dollars into financial markets,” reads a Financial Times headline [behind paywall], while other articles touch on whether the coronavirus is triggering a corporate debt crisis and a “dash for cash”.
This is seeing the Fed face a zero-rate debate, notes a Bloomberg article in Treasury & Risk.
Emergency low-interest loans available to affected businesses is another tool in discussion these days.
Further, Risk.net sees the coronavirus pandemic as a possible threat against the much-discussed plans for transitioning financial contracts away from the Libor benchmark.
At Thursday’s close, the New York stock exchange was on track for its worst week ever, but by opening on Friday, some bounce-back was indicated by futures prices and by strong tick-ups across Europe.