J.P. Morgan: U.S. economy to shrink 14% in the next quarter

World leaders raced to shore up panic-stricken global markets on Thursday, pouring liquidity into the financial system as investors everywhere dumped assets, switching to dollars in cash amid the escalating coronavirus pandemic. Policymakers in the United States, Europe and Asia resorted to emergency action as the pandemic left their economies virtually comatose, with quarantined consumers, broken supply chains, paralyzed transportation and depleted shops.

There were almost 219,000 cases of coronavirus reported globally, including over 8,900 deaths linked to the virus. Over 20,000 of those cases were reported in the past 24 hours, a new daily record. The European Central Bank launched new bond purchases worth 750 billion euros ($817 billion) at an emergency meeting late on Wednesday, in a bid to prevent a deep recession that threatened to outdo the 2008-09 global financial crisis.

“Extraordinary times require extraordinary action,” ECB President Christine Lagarde said, amid concerns that the strains from burgeoning crisis could eventually tear apart the euro zone as a single currency bloc. In the United States, the Federal Reserve rolled out its third emergency credit program in two days, aimed at keeping the $3.8 trillion money market mutual fund industry functioning if investors made rapid withdrawals.

On Sunday, the Fed slashed interest rates to near zero and pledged hundreds of billions of dollars in asset purchases, while President Donald Trump’s administration drew up a $1 trillion stimulus and rescue proposal. The desperate state of industry was writ large in Detroit, where the big three automakers – Ford Motor Co (F.N), General Motors Co (GM.N) and Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) – confirmed they would be shutting U.S. plants, as well as factories in Canada and Mexico.

The British pound GBP=D3 plunged to its lowest level against the dollar since 1985, as Bank of England Governor Andrew Bailey said he would not rule anything out when asked about printing money to give to individuals. Britain ordered all schools to close from Friday as the number of confirmed coronavirus cases rose 48% on Wednesday. Australia made a historic foray into quantitative easing after an out-of-schedule meeting on Thursday and cut interest rates for the second time in a month.

South Korea warned of a global credit crunch and said it was setting up crisis funds to stabilize its financial markets. Central banks in emerging countries from Brazil to India have stepped in this week to buy government bonds to prevent a jump in borrowing costs that would put more pressure on their economies.

J.P. Morgan economists forecast the U.S. economy to shrink 14% in the next quarter, and the Chinese economy to drop more than 40% in the current one, one of the most dire calls yet on the potential scale of the fallout. U.S. infections were closing in on 8,000, with the death toll climbing to at least 151. Millions of Americans were staying at home.

World leaders rush in to shore up panic-hit global financial system, Reuters, Mar 19