Even partial view of economic damage from virus is massive
The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Friday related to the global economy, the work place and the spread of the virus.
GOVERNMENT & CENTRAL BANKS: Governments around the globe are laying out billions of dollars to stabilize their economies even as revenue from taxes seizes up.
— The famous French cafes, along with restaurants and bars, will remain closed at least through May. In support, Finance minister Bruno Le Maire said the government is further deferring tax payments and extending short-term unemployment payouts to support those businesses.
— Factory orders in the U.S. plunged last month and will get worse. The nation was on lockdown for only the first half of March.
PLANES: There are few industries that have been harder hit that airlines, and the situation grows worse daily. Shares of Southwest Airlines have falling almost 50% this year, and it has by far the best performing stock among all major U.S. airlines.
— “Traffic is virtually zero” and if it doesn’t improve by July, “we will have to prepare ourselves for a drastically smaller airline,” said Southwest Airlines CEO Gary Kelly.
The airline is burning through cash at “an alarming rate,” although Kelly didn’t give a figure. Southwest reports quarterly results Tuesday, after a dismal report from Delta.
— Planes owned by Virgin Australia, the largest airline seeking bankruptcy protection, have been prevented from leaving an airport in that nation.
Virgin Australia, the nation's second biggest airline, sought protection Tuesday and Perth Airport says Virgin has significant outstanding payments due for airfield and terminal use. Virgin says the debt is a matter for Deloitte administrators and the airport to resolve.
— Economists with Oxford Economics say withering rail traffic illustrates seizing business activity. Steel production is down 34% through the first week of April, compared with last year, and that will grow weaker as investments dry up and profits shrink, wrote Oxford economists Oren Klachkin and Gregory Daco.
— Data from the American Railroad Association shows that by industry, railcar loads of motor vehicles and parts, coal, and metallic ores and metals have dropped the most, down 88%, 36%, and 25%, respectively, in the week ending April 11.
AUTOMOBILES: There is a push to open auto manufacturing plants, particularly in Europe, but they remain closed in the U.S.
— Japanese automaker Mitsubishi Motors anticipates 26 billion yen ($240 million) for the year. Previously, it had expected a profit of 5 billion yen ($46 million).
The auto industry is the pillar of Japan’s economy and the fallout is expected to be great, with the world’s third largest economy possibly headed to a recession.
MARKETS: U.S. markets will in all likelihood end down for the week, but they have stabilized from earlier routs.
— Equities fell across much of Europe and Asia, but were steady in the U.S.
DAWN OF FLANNEL: In what may be the first of many deals to blow up because of the pandemic, the private equity firm that said it would buy Victoria's Secret for $525 million said this week that it's walking away. L Brands, which agreed to sell the lingerie chain, is having none of it.
Sycamore Partners said L Brands violated the terms of the deal because it closed all its stores and furloughed its workers. Responding in a court filing, L Brands said both sides were aware of the emerging coronavirus when the deal was signed and that Sycamore tried to lower the agreed-upon price.