KITCO NEWS/Jim Wyckoff

Gold, silver prices collapsing amid markets panic – “sell what you can”

March 16, 2020

panic buttonGold and silver prices are trading sharply down in panic market conditions in early U.S. trading Monday. Gold prices hit a 3-month low and silver futures prices dropped to an 11-yr low. U.S. stock index futures are pointed toward untradable locked-limit-down openings, further exacerbating the ‘sell what you can’ panic at present … Global markets were also solidly lower. Trader and investor confidence appear to be going from bad do worse to start the trading week, as over the weekend … Major stores are closing, public schools are closing … some states have ordered the closing of bars and restaurants. Airlines are in financial peril as passenger traffic plummets. This follows the moves last week to shut down major sporting events in the U.S.

The U.S. Center for Disease control has warned most Americans to stay home and recommended gatherings of 50 or more people be cancelled for at least the next two months. The Fed on Sunday afternoon again cut its key interest rate, by 1.0% this time, to a range of zero to 0.25%. The Fed also will pump an additional $700 billion into the U.S. financial system (QE) and has opened up swap lines with other major central banks, in an effort to keep liquidity in the financial markets. President Trump and Congress agreed on an aid bill for businesses and consumers negatively impacted by the virus outbreak. Speculation is it will take at least two months for this situation to get under control.”

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MARKET WATCH/Mark DeCambre

S&P 500 tumbles 8%. Triggers stock-market halt for third time in March

March 16, 2020

“Stocks on Monday morning triggered circuit breakers, temporarily halting stocks for 15 minutes, after investors failed to take comfort in the Federal Reserve’s decision to slash its benchmark interest rate to nearly 0% to combat the economic fallout from the coronavirus outbreak.  The Dow Jones Industrial Average fell 2,250.46 points, or 9.7%, to 20,935.16, the S&P 500 index declined 220.55 points, or 8.14%, at 2,490.27, and the Nasdaq Composite Index declined 482.15 points, or 6.12%, at 7,392.73.

Circuit breakers are triggered when the S&P 500 drops by 7%. At that point, stocks see a 15-minute pause. A similar halt occurs if stocks fell by 13%. A 20% drop in the S&P 500 would trigger what’s known as a level three circuit breaker, which would stop trading for the remainder of the session … The Fed’s rare Sunday evening rate cut has done little to encourage the buying mood on Wall Street that has been spooked by the rapid spread of the COVID-19 outbreak.”

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CNBC/Thomas Franck

IMF says it’s ready to mobilize its $1 trillion lending capacity to fight coronavirus

March 16, 2020

IMF ready to mobilize“The International Monetary Fund on Monday said it ‘stands ready’ to use its $1 trillion lending capacity to help countries around the world that are struggling with the humanitarian and economic impact of the novel coronavirus. ‘As a first line of defense, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs,’ IMF managing director Kristalina Georgieva said in a statement. ‘The Fund already has 40 ongoing arrangements — both disbursing and precautionary — with combined commitments of about $200 billion,’ she added. ‘In many cases, these arrangements can provide another vehicle for the rapid disbursement of crisis financing.’

Georgieva wrote on the IMF’s website that the lending could be used to aid its members, especially emerging and developing countries. She said the Fund’s Catastrophe Containment and Relief Trust ‘can help the poorest countries with immediate debt relief, which will free up vital resources for health spending, containment, and mitigation.’  The announcement comes ahead of what’s expected to be another dismal day on Wall Street despite a multilateral move by the globe’s central banks to ease monetary policy to help countries cope with the fallout of the coronavirus. The Federal Reserve, for example, said Sunday that it will embark on a historic and massive monetary stimulus campaign to juice economic growth. The central bank said it will slash U.S. interest rates to zero and launch a $700 billion quantitative easing program to shelter the economy from the effects of the virus.”

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THE WALL STREET JOURNAL/Greg Ip

U.S. Economy Slides into the Monetary Black Hole

March 16, 2020

monetary black hole“The Federal Reserve is now officially spent. Saving the U.S. economy from this point forward is now up to someone else. On Sunday, the Fed used the last of its conventional monetary ammunition to counter the economic crisis triggered by the new coronavirus. It cut its short-term interest-rate target a full percentage point to between 0% and 0.25%. The Fed has been here before, from 2008 to 2015. This time, the prospect of an escape from zero feels more tenuous, because the near-term economic shock of the pandemic adds to deeper seated forces pressing down on inflation and interest rates globally. With this cut the Fed joins the European Central Bank and the Bank of Japan, whose policy rates have long been at or below zero. This is what Harvard University economist Lawrence Summers has called the “monetary black hole.”

‘The pandemic mechanism is unexpected but it’s been clear for years that some negative shock would bring us to the liquidity trap,’ Mr. Summers said in an email. With Treasury bond yields below 0.8%, ‘there is virtually no juice left in monetary policy,’ which he said explains why markets sold off after the previous emergency half-percentage-point rate cut and were set to sell off after Sunday’s cut as well. Some critics will say the Fed should have conserved some ammo for later, but its officials have always maintained they should cut rates when the economy needs it. The rate cuts won’t halt the pandemic or reopen restaurants, but they will, at the margin, help.”

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BLOOMBERG/Bloomberg Breaking News

China’s Economy Suffers Historic Slump Due to Virus Shutdown

March 15, 2020

China's economic slump“China suffered an even deeper slump than analysts feared at the start of the year as the coronavirus shuttered factories, shops and restaurants across the nation, underscoring the fallout now facing the global economy as the virus spreads around the world. Industrial output plunged 13.5% in January and February from a year earlier, retail sales fell 20.5%, and fixed-asset investment dropped 24.5%. The unemployment rate jumped to a record 6.2% in February, when the outbreak worsened and much of the economy was shutdown. The outbreak of deadly viral pneumonia in Wuhan dramatically worsened in January, prompting China to lockdown Hubei province, extend holidays and restrict travel and business across the country. That brought much of the nation’s economic activity to a halt in February, undercutting a stabilization seen in December. Gross domestic product is now all but certain to contract in the first quarter compared to the same period last year — the first time that has happened since comparable data begins in 1989.

‘Covid-19 made the economy stop, from factories to spending,’ said Iris Pang, ING Bank NV in Hong Kong. ‘As the coronavirus spread to almost everywhere, global demand and global supply chains will take a hit and will feedback to China’s manufacturers and exporters in March and April.’ Even as governments in China and some other Asian nations look to be getting their outbreaks under control, the coronavirus is now spreading rapidly in Europe, the U.S. and other parts of the world. That will likely hit demand for Chinese exports, lengthening the damage to firms and the economy.”

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CNBC/Silvia Amaro

Germany seals off borders as European countries report record jump in coronavirus deaths

March 16, 2020

Germany seals off bordersGermany is the latest European country to seal off its borders in an effort to contain the coronavirus outbreak, as the number of deaths in Europe jumped overnight. As of Monday morning, Germany had shut its borders with Austria, Switzerland, France, Luxembourg and Denmark. Only German citizens, those who reside in the country and work in a neighbouring nation and vice-versa, and physical goods, can cross the German border. Though Berlin is not the first European capital to impose border restrictions, the move marked a U-turn in Chancellor Angela Merkel’s policy. ‘It’s a crisis situation,’ Friedrich Heinemann, head of public finance at the German-based think tank ZEW, told CNBC about the German decision.

He said there’s a ‘competition’ between politicians ‘to show leadership.’ ‘Nobody wants to risk showing that it is less cautious,’ he said. At the height of Europe’s migration crisis in 2015, Merkel defended an open border policy. German chancellor called on all European countries to coordinate their approaches rather than take unilateral actions. Germany has a total of 5,813 confirmed cases of coronavirus and 13 deaths, data from Johns Hopkins showed Monday morning. Italy, Spain and France experienced the highest daily jump in the number of coronavirus-related deaths Sunday.

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