Fed sees coronavirus as risk to global growth, markets face pretty serious reckoning

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All times below are in Eastern time.

  • Total confirmed cases: More than 75,200
  • Total deaths: At least 2,007

The coronavirus may significantly weaken a global economy that was already in a precarious position, Yale University’s Stephen Roach told CNBC. “If the global economy is as weak as I think it is in the first half of this year, that points to a pretty serious reckoning for frothy financial markets,” the former Morgan Stanley Asia chairman said on “Closing Bell.” Investors have been trying to make sense of what the coronavirus means for businesses since late January. And yet, the market has only seen a few pullbacks in that stretch as the major U.S. stock indexes continue to set fresh highs. — Stankiewicz

Goldman Sachs sounded the alarm to clients about a possible correction in the stock market, noting investors are underestimating how big of a risk the coronavirus really is. “We believe the greater risk is that the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high,” strategist Peter Oppenheimer wrote in a note. Oppenheimer thinks the market could be in trouble if earnings expectations aren’t ratcheted down. “Equity markets are looking increasingly exposed to near-term downward surprises to earnings growth,” said Oppenheimer. “While a sustained bear market does not look likely, a near-term correction is looking much more probable.” — Imbert

Financial leaders of the world’s 20 largest economies, the G20, expect a modest pickup of global growth this year and next, but see the coronavirus epidemic as a downside risk, a draft communique prepared for the meeting on Feb. 22 to 23 said. G20 finance ministers and central bank governors meet on Saturday and Sunday in Riyadh to discuss the global economy, as China grapples with a virus that has killed more than 2,000 people and forced drastic curbs on travel and commerce. “After signs of stabilisation at the end of 2019, global economic growth is expected to pick up modestly in 2020 and 2021,” the draft, seen by Reuters, said. “However, global economic growth remains slow and downside risks to the outlook persist, including those arising from the impact of the novel coronavirus outbreak, geopolitical tensions and policy uncertainty,” said the draft, which may still be changed before the final version is adopted on Sunday. — Reuters

Investors’ confidence around the coronavirus may end up being misplaced, the former head of the International Monetary Fund’s China division told CNBC. The S&P 500 and Nasdaq Composite rose to fresh record highs, continuing a strong start to the year despite uncertainty around the virus. “It could be a short-term shock but one that ends up having a somewhat longer-term impact,” Eswar Prasad, now a senior fellow at the Brookings Institution and Cornell University professor, said on “Squawk on the Street.” Prasad said Wall Street believes China’s government will continue to take aggressive steps to prop up financial markets.Prasad said he agrees with that view on policy responses, but suggested action from the People’s Bank of China might not be enough to prevent negative economic impacts. — Stankiewicz

Source: https://www.cnbc.com/2020/02/19/coronavirus-latest-updates.html

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