German carmaker Volkswagen has announced it is preparing to temporarily shut down most of its European plants in the wake of the coronavirus pandemic.
Speaking to reporters on Tuesday, Chief Executive Herbert Diess said the company would shut down production at factories operated by the group's brands "in the near future," with most European plants set to suspend work for at least two weeks.
Production at Volkswagen plants in Spain, Slovakia and Italy would all be halted before the end of the week, Diess added.
It comes shortly after the world's largest carmaker by sales warned 2020 would be a "very difficult year," with the coronavirus outbreak posing "unknown operational and financial challenges."
As of Tuesday, more than 182,000 cases of the coronavirus have been reported worldwide, according to data compiled by Johns Hopkins University, with 7,155 deaths.
Last week, the WHO recognized Europe as the epicenter of the outbreak, with many countries ushering in lockdown measures in an effort to contain the spread.
Italy has recorded the most cases of COVID-19 in Europe, with nearly 28,000 confirmed infections and 2,158 deaths nationwide.
"The spread of coronavirus is currently impacting the global economy. It is uncertain how severely or for how long this will also affect the Volkswagen Group," Frank Witter, chief financial officer at Volkswagen, said in a statement Tuesday.
"Currently, it is almost impossible to make a reliable forecast. We are making full use of all measures in task force mode to support our employees and their families and to stabilize our business," he added.
Shares of Volkswagen were 0.5% higher during mid-morning deals.
U.S. stock futures pointed to a firm bounce for Wall Street on Tuesday, on the heels of a 3,000-point loss triggered by investor fears that a sharp economic downturn was unavoidable as a result of the rampant coronavirus outbreak.
How did stocks perform?
U.S. stock futures surged, hitting a 5% limit up at one point late Monday. Dow Jones Industrial Average futures
YMH20,
+0.57%
were last up about nearly 800 points early Tuesday, or 3.7%, to 21,012, while S&P 500 futures
ESH20,
+0.66%
climbed 88.45 points, or 3.7%, to 2,493.75. Nasdaq-100
NQH20,
+1.06%
futures rose 236.75 points, or 3.4%, to 7,277.25.
On Monday, the Dow Jones Industrial Average
DJIA,
-12.92%
plunged 2,997.10 points, or 12.9%, to settle at 20,188.52, while the S&P 500 index
SPX,
-11.98%
declined 324.89 points, or 12%, to end at 2,386.13, and the Nasdaq Composite Index
COMP,
-12.32%
shed 970.28 points, or 12.3%, to finish at 6,904.59.
Trading was so intense that circuit breakers temporarily halted trading for 15 minutes at one point on Monday. It marked the worst session in history for the Nasdaq.
What’s driving the market?
There were small shoots of green among Asian markets, while European stocks also rose. Italy and Spain have seen the biggest hits from the virus, but France is quickly up to that, and governments have been locking down citizens as cases climb quickly.
That’s as the U.S. has also been shutting down cities, and investors have been overwhelmed by rapid-fire updates of unsettling coronavirus update, including a warning by President Donald Trump of a possible recession due to the outbreak. The Federal Reserve’s emergency Sunday interest rate cut has done little to spark any buying on Wall Street, spooked by the rapid spread of COVID-19, and investors are now waiting for more relief for individuals and small businesses.
The head of the International Monetary Fund said Monday that it will mobilize its $1 trillion lending capacity if needed to help countries lessen the blow from the coronavirus pandemic.
“Hence, governments around the world are seeking other measures to calm down the markets’ nerves. The U.K. promised extra help for businesses battling the virus-led slowdown, and temporary business shutdowns. France pledged to allocate 300 billion euros of bank loans to companies hit by the pandemic. Spain banned short selling for a month to contain the heavy volatility that may cause additional damage to the financial system,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note to clients.
Tuesday will see the release of several data points, including February retail sales, industrial production, job openings, a home builders index and business inventories.
Oil prices also attempted to gain, with April crude futures
CL00,
+1.70%
climbing 4% to $29.88 a barrel.
Prime Minister Shinzo Abe of Japan talking with other Group of 7 leaders during a video conference at his official residence in Tokyo, on Monday.Credit...Kyodo, via Reuters
Asian markets stabilize after Wall Street’s dismal day.
Markets in the Asia-Pacific region were mixed midday on Tuesday as investors tried to grapple with a disastrous Monday on Wall Street.
Japan’s Nikkei 225 index was down about half a percent midday. In mainland China, the Shanghai Composite Index was down 0.3 percent.
By contrast, Hong Kong shares were up 0.6 percent.
The region’s biggest loser was South Korean stocks. The Kospi index there fell 2.1 percent. The biggest gainers were in Australia, where the S&P/ASX 200 index was up 3.2 percent.
Futures markets signaled a positive opening on Wall Street, though they also were predicting more losses in European trading.
Markets showed other signs of confidence. Oil prices rose, with barrels of West Texas Intermediate, the American benchmark, up more than 3 percent. The yield on the 10-year U.S. Treasury bond rose as bond prices fell, suggesting investors were warming to the idea of putting their money in riskier assets like stocks.
Volkswagen and Airbus to close factories in Europe.
Volkswagen said Tuesday it would close most of its European factories because of the coronavirus, adding the world’s largest carmaker to the growing list of large manufacturers that have shut down production.
The aircraft manufacturer Airbus also said Tuesday it would suspend manufacturing in France and Spain for the next four days while it takes measures to prevent the spread of the virus.
Herbert Diess, the chief executive of Volkswagen, said during a news conference that Volkswagen would close plants in Spain, Italy, Portugal and Slovakia by the end of this week, and that most other European sites would prepare to close for several weeks.
Peugeot, Renault, Fiat and Ford have already closed some or all of their European plants. The German carmakers have resisted shutting down production, but Volkswagen’s decision was an indication that health concerns and supply chain issues have made it nearly impossible for manufacturers to continue operating normally.
Philippines becomes the first financial market to close.
The Philippine Stock Exchange on Tuesday became the first market to close over the coronavirus. In a memorandum on its website, it said trading would stop until further notice.
Even in a time of ailing financial markets, the country’s stock performance stands out. Its main index has plunged by nearly one-third from its January high, making it one of the worst performers in the Asia-Pacific region.
The closures came hours after President Rodrigo Duterte put big chunks of the country’s population under quarantine to stop the coronavirus outbreak. The country lists 142 confirmed infections and 12 deaths so far.
Big banks plan to borrow funds from the Fed.
Eight major financial-services firms are borrowing money from the Federal Reserve, a move that has long carried negative connotations but that the Fed is encouraging to help stave off a cash crunch.
Morgan Stanley was the first within the group to tap the Fed’s so-called discount window on Monday, according to three people familiar with the matter. Other banks, including Goldman Sachs and JPMorgan Chase, are expected to borrow as early as Tuesday, the people said.
The central bank has urged the firms to tap its short-term funding facility to make it easier for credit to continue flowing through the economy, destigmatizing the use of central bank funding at a tumultuous time. Banks have avoided borrowing from the central bank out of fear it will make them look as if they are on shaky footing.
“While forum member institutions individually have substantial liquidity and multiple sources of funding, they believe it is important to lead by demonstrating the value of the Federal Reserve’s discount window facility,” the Financial Services Forum, an industry trade group, said in a statement late Monday.
Amazon will hire more workers and raise pay as delivery orders surge.
Amazon said it would hire 100,000 new workers and raise pay by $2 an hour for many employees in response to a surge in delivery orders from people staying at home to combat the spread of the coronavirus.
Amazon said the 100,000 new jobs would include both full and part-time positions across the United States to staff its warehouses and make deliveries. The company encouraged people who lost work as a result of coronavirus-related shutdowns and cancellations to apply.
“We also know many people have been economically impacted as jobs in areas like hospitality, restaurants, and travel are lost or furloughed as part of this crisis,” the company said in a news release. “We want those people to know we welcome them on our teams until things return to normal and their past employer is able to bring them back.”
Amazon said it would also spend $350 million to raise pay by $2 or more an hour for workers staffing its enormous logistics operation in the United States, Britain and parts of Europe. The raises would last at least through April. In the United States, such workers start at $15 an hour.
S&P 500 has its worst day since the outbreak began.
Financial markets cratered on Monday, as investors were confronted with evidence that a steep decline in the world’s largest economies may have already begun.
The sell-off began after the Federal Reserve took extraordinary steps on Sunday afternoon to bolster the American economy, signaling that it saw an economic crisis unfolding as businesses shut down and borders are closed to contain the coronavirus. The financial downdraft was global, with major benchmarks in Asia, Europe and the United States all falling on Monday.
The S&P 500 fell 12 percent, its biggest drop since the coronavirus outbreak began to roil markets in the United States last month — and its worst daily decline since October 1987, when stocks plunged about 20 percent in what came to be known as Black Monday. For the technology heavy Nasdaq, the drop was its worst on record.
Energy prices also slid sharply as investors factored in significant slowdowns in economic activity.
Global oil prices plunged to below $30 a barrel, the lowest level in more than four years. Oil has fallen by half since the start of the year, and some analysts predict that oil prices could drop below $20 a barrel in the coming weeks.
The ‘Trump bump’ in stocks has deflated.
The decline of the stock market, which hit a record high less than a month ago, has wiped out many of the gains that President Trump has crowed about throughout his presidency.
Mr. Trump’s victory in 2016, along with the Republican Party’s control of Congress, set off a surge in share prices as investors looked forward to the prospect of steep cuts to corporate tax rates and an administration stocked with industry-friendly faces.
In December 2017, Mr. Trump delivered a sweeping tax overhaul. By the following month, the S&P 500 was up more than 30 percent, and the gains kept coming for much of the year. For Mr. Trump, this was a surefire barometer of his success as president.
There was one other nasty dip along the way: In late 2018, investors grew increasingly worried about Mr. Trump’s trade war with China and the prospect that the Federal Reserve would raise interest rates.
Stocks climbed 28.9 percent last year, thanks largely to the Fed’s decision to reverse course. But that rally has unraveled in the past month.
Though stocks have now given up most of their gains since the president was elected, the S&P 500 would have to fall another 12 percent for the entire Trump bump to be erased.
Food distributor plans to hire displaced workers.
Companies that power the supply chain are taking steps to make sure food keeps flowing to Americans in the coming weeks and months.
United Natural Foods Inc., one of the nation’s largest distributors of food to supermarkets, is planning to hire potentially thousands of out-of-work warehouse workers to staff in its 59 distribution centers, the company’s chief executive, Steven L. Spinner, said.
The distributor has been crushed by demand from grocery stores, but other food distributors like US Foods and Sysco, which supply restaurants and schools, are likely to experience significant layoffs as cities and states shut down public places.
UNFI, as the company is known, is making plans to hire the displaced workers to help relieve its employees, many of whom have been working 60 to 70 hour a week to keep up with the panic buying in supermarkets across the country. The hiring could take place as soon as next week.
This unusual industry effort where companies are essentially sharing their work force is also meant to ensure there is a larger pool of trained warehouse workers in case illness incapacitates some of them.
“We are going to do creative things and work out a way to use their folks,’‘ Mr. Spinner said. “The beauty of a shared work force is that these people have already been hired and are screened. They are already trained to work in a warehouse.”
Reporting was contributed by Alexandra Stevenson, Michael Corkery, Jack Nicas, Daniel Victor and Carlos Tejada.
While stocks remain squarely in the red at midday, the three major US indexes have bounced back from their session lows.
The S&P 500 is down 7.1%, while the Dow is 7.7%, or around 1,780 points. The Nasdaq Composite fell 7.1%.
Stocks tripped a circuit breaker this morning when the S&P dropped more than 7%. But a circuit breaker can only be triggered once, which is why the index can now fall below 7% without trading being halted again. The next circuit breaker is at a 13% drop on the S&P.
The S&P was down as much as 11.4% at its low point earlier. The Dow fell nearly 2,800 points at its worst.
"There has been indiscriminate selling," said Ralph Bassett, head of North American equities at Aberdeen Standard Investments, in emailed comments about today's market activity.
Still, Bassett is staying put:
"At this stage we’re making very few changes to portfolios," he said. "The focus is on looking at how the drivers of these businesses are going to be impacted, but importantly their ability to fund their operations during what will likely prove an acutely weak period of demand for most companies."
Stocks fell sharply Monday even after the Federal Reserve embarked on a massive monetary stimulus campaign to curb slower economic growth amid the coronavirus outbreak.
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The S&P 500 dropped 8.14% shortly after the open, triggering a “circuit breaker” trading halt that will last for 15 minutes. The Dow was down about 2,300 points, or nearly 10%. The Nasdaq Composite sank 9%.
Before the open, futures contracts tied to the major averages hit their “limit down” levels, meaning they could not trade below that threshold. Those limits are imposed by the CME Group to maintain orderly market behavior.
While the central bank’s actions may help ease the functioning of markets, many investors said they would ultimately want to see coronavirus cases peaking and falling in the U.S. before it was safe to take on risk and buy equities again.
“The Fed blasted its monetary bazooka for sure,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “This better work because I don’t know what they have left and no amount of money raining from the sky will cure this virus. Only time and medicine will.”
Fed announces QE
The Fed cut interest rates down to basically zero, their lowest level since 2015. The U.S. central bank also launched a massive $700 billion quantitative easing program. President Donald Trump said he was “very happy” with the announcement, adding: “I think that people in the markets should be very thrilled.”
“This, coupled with an important fiscal package, should help cushion the economic downside from the virus’ effect on economic activity,” said Quincy Krosby, chief market strategist at Prudential Financial. “It’s going to be positive, but the market is at the mercy of the virus and at the mercy of whether the containment policies work.”
The Fed’s announcement came after they issued another emergency rate cut earlier this month. It also comes on the heels of the market’s biggest one-day gain since 2008, with the major averages all surging more than 9% on Friday.
However, the weekend’s news about the coronavirus outbreak was not helping sentiment. U.S. cases have jumped to 3,774 and 69 deaths, according to Johns Hopkins University. The U.S. Centers for Disease Control and Prevention urged organizers to cancel or postpone events with at least 50 people.
“The main problem this time as to other market disruptions is the abrupt closure of economic activity,” said Dan Deming, managing director at KKM Financial. “The speed of the impact to middle America, let alone the global community is relatively unprecedented.”
Apple shares plunged by more than 11% in the premarket. Airline stocks also fell broadly. Delta and United traded at least 15% lower while American lost about 20% before the bell.
Bank stocks took a hit, with Bank of America and JPMorgan Chase dropping 16.6% and 15.8%, respectively. Goldman Sachs and Morgan Stanley each traded at least 14% lower while Citigroup fell 16.8%. The big banks announced Sunday they were halting their buyback programs in an effort to provide capital where needed.
The Dow and S&P 500 both fell more than 8% last week along with the Nasdaq Composite, tumbling into bear market territory. A bear market is usually defined on Wall Street as a decline of at least 20% from a high.
Investors have been dumping equities amid worries the coronavirus will slow economic growth and take a bite out of corporate profits. Economists at JPMorgan see negative growth for the first quarter while Goldman Sachs downgraded its first-quarter growth forecast to flat from 0.7%.
“The rapid spread of COVID-19 across the globe has dramatically heightened investor uncertainty and rocked global financial markets,” strategists at MRB Partners said in a note, adding the situation will “get worse before it gets better.”
“Looking ahead, the number of active cases is likely to worsen in the near run,” they said.
More than 169,000 cases around the world have been confirmed, data from Johns Hopkins University shows.
CNBC’s Jeff Cox, Silvia Amaro and Pippa Stevens contributed to this report.
