Wall Street looks set for another tough day.
Stock futures in the United States pointed to a gloomy opening for Wall Street on Wednesday as topsy-turvy trading throughout global markets signaled continued investor concern about how governments would deal with the coronavirus fallout.
Major indexes in London, Frankfurt and Paris rose after the Bank of England said it would cut interest rates to help British businesses. By midmorning, though, they had lost about half their gains. The performance followed a broad drop in Asia.
Investors are vacillating between the threat the coronavirus poses to the global economy and the hopes that governments will unveil a series of measures to help businesses.
President Trump has signaled he would consider ways to stimulate the economy. Options include cutting payroll taxes and extending the American tax filing deadline past April 15. But so far, the White House has yet to announce any specific measures.
U.S. stock index futures dropped more than 2 percent on Wednesday, indicating Wall Street’s surge on Tuesday may be short-lived. It had followed a Monday plunge that marked the market’s worst daily performance in more than a decade.
Other markets signaled persistent investor jitters. Futures for gold, a traditional safe haven, edged higher. The yield on the 10-year Treasury bond fell, another indicator of investor nervousness.
Oil prices fell after Saudi Aramco, the Saudi Arabian state oil company, said for the second time this week that it would expand production capacity. The announcement signaled no let up in Saudi Arabia’s clash with Russia over oil supplies, which sent crude prices crashing earlier this week.
The Bank of England cuts its key lending rate.
The Bank of England made an emergency cut to its key borrowing rate on Wednesday by half a percentage point before the opening of stock trading in London.
The move, which brings the rate down to one-quarter of a percent, was approved unanimously in an emergency meeting of the central bank’s policymaking board, the Bank of England said.
It is intended “to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability, of finance,” the bank said.
Wednesday’s move is the Bank of England’s first rate cut since the virus outbreak. The Federal Reserve did the same last week in the midst of a market sell-off.
Aramco plans to raise oil output further, putting more pressure on prices.
In what appears to be more jousting with Russia, Saudi Aramco, the national oil company of Saudi Arabia, said Wednesday that it had been directed by the country’s ministry of energy to increase its oil output capacity to 13 million barrels a day from the current 12 million barrels a day.
After Saudi Arabia and Russia failed to agree on new production cuts at a meeting in Vienna on Friday, the Saudis have been making highly visible preparations for a price war with Russia and other producers.
Over the weekend, Saudi Aramco offered its customers deep discounts on crude, and on Tuesday the company said that it would sell 12.3 million barrels a day in April, well over the 9.7 million barrels a day it has been producing.
The opening shots of what could be a prolonged battle have hit the oil market hard. Brent crude, the international benchmark, has plunged about 20 percent this week.
On Wednesday, the price was slowly rebounding until Aramco’s announcement. It was down about 3 percent to $36.08 a barrel.
A strengthening yen adds to Japan’s economic problems.
Japan is keeping a close eye on the value of the yen. Investors have piled into the currency this week, seeking a safe haven against instability in global stock markets.
That has made the yen more valuable against other currencies, creating a new headache for Japanese policymakers. They fear that a strong yen could put additional pressure on the country’s fragile economy, which has been hit hard by a sudden drop in demand at home and abroad brought on by the coronavirus.
The Japanese economy shrank at an annualized rate of 7.1 percent in the last quarter — the largest contraction since 2014 — after an increase in the country’s consumption tax and the damage from Typhoon Hagibis.
The coronavirus was already exacerbating the country’s economic woes. Tourism has dried up, particularly from China, and domestic demand has plummeted as consumers stay home to avoid spreading the illness. The strong yen, which will eat into corporate profits earned abroad and make Japanese exports more expensive, could further raise the risk of Japan falling into recession, generally defined as two consecutive quarters of contraction.
The currency was trading at close to 100 yen to the American dollar earlier in the week, and was trading at about 105 on Wednesday. A month earlier, it was at 110 to the dollar. If the currency strengthens to 100, that will most likely provoke an effort from the country’s central bank to curb the rise.
No studio audience for “Jeopardy” and “Wheel of Fortune.”
“Jeopardy” and “Wheel of Fortune” will now tape without a studio audience for the foreseeable future, according to two people familiar with the plans. The average audience for those shows skews older and tends to travel to Los Angeles from locations all over the country, prompting the temporary ban, those people said.
Alex Trebek, the “Jeopardy” host, has pancreatic cancer, putting him potentially at even greater risk to the virus, one of the people said.
The Norman Lear comedy “One Day At A Time” — which like “Jeopardy” and “Wheel of Fortune” is produced by Sony — also taped an episode on Tuesday without a studio audience present, according to one of the people.
Warner Bros., which produces shows like “The Ellen DeGeneres Show” and “Conan,” is not yet canceling studio audiences for its programs. But the studio said on Tuesday that it would begin screening prospective audience members and ask them to confirm that they or a member of their household have not traveled to countries with the Centers for Disease Control and Prevention level three designation in the last three weeks. That includes China, Italy, Iran and South Korea.
CBS and NBC — which also produces a number of talk shows, including “The Late Show With Stephen Colbert” and “The Tonight Show Starring Jimmy Fallon” — declined to comment.
Fiat warns of factory closures in Italy.
Fiat Chrysler warned Wednesday that it might have to close some of its factories in Italy because of the coronavirus epidemic, which has hit the country especially hard.
Any closures would be for health reasons, not because of problems getting parts or raw materials needed to keep assembly lines running, a Fiat spokesman said.
Fiat’s announcement suggests that the need to keep workers from infecting each other could be a bigger problem for carmakers and other manufacturers than disruption to supply chains.
Some experts have begun predicting that other European countries like Germany may soon have to introduce travel restrictions similar to Italy’s, dealing a severe blow to industries where it is not possible for employees to work from home. Manufacturing output in Europe was declining even before the coronavirus began to disrupt daily life.
“Fiat Chrysler Automobiles is implementing new measures across its facilities in Italy to support the nationwide campaign addressing the COVID-19 crisis,” the company said in a statement. “As a result of taking these actions the company will, where necessary, make temporary closures of its plants across Italy.”
Is the outbreak an act of God? Lawyers study the issue.
The coronavirus has public health officials talking about things like social distancing and self-quarantine to reduce the spread of the virus. And now it has corporate lawyers closely examining commercial contracts.
Big law firms have been churning out client notes advising business executives to start paying attention to force majeure clauses in contracts with vendors, subcontractors and insurers. Such clauses are common in contracts to protect parties in the event of a so-called act of God — earthquakes, hurricanes or floods — that prevent one side from completing its end of a deal, or disrupts a company’s business for an extended period.
But these clauses often do not include provisions for things like epidemics or pandemics. So will a force majeure clause provide legal protection to a company that cannot perform a contractual task because it had to effectively shut down because of the coronavirus?
Well, lawyers said, it often depends on the specific facts of each situation. Judges have tended to enforce such provisions narrowly and want to see evidence that a company did everything possible to keep up its end of the bargain. Courts are reluctant to interpret a force majeure clause as a “get out of jail free” card for a company that simply fails to perform.
Companies might want to protect themselves by coming up with contingency plans to demonstrate they did everything possible to complete a contractual obligation, Paul Weiss, the big New York law firm, said in a client note. “Ideally, business will be able to plan accordingly to avoid any disruption in their operations if the virus continues to spread,” the firm said.
Reporting was contributed by Alexandra Stevenson, Ben Dooley, Kevin Granville, Carlos Tejada, Matthew Goldstein, Jack Ewing and John Koblin.