Fed Minutes Highlight Coronavirus Concerns and Uncertainty 8 Times

Mish

The minutes from the Fed's January 28-29, 2020 FOMC meeting show coronavirus concerns.

Wall Street Journal Take

The Wall Street Journal reports Fed Minutes Show Comfort With Economy, Rate Stance Last Month

Mish Take

Excuse me WSJ, but my take is a bit different.

The Minutes of the Federal Open Market Committee on January 28-29, 2020 show the Fed's concerns about the global impact.

Eight Instances of Coronavirus

  1. Over the final few days of the intermeeting period, financial markets responded to news of the spread of the coronavirus that started in China, which reportedly contributed to downward moves in Treasury yields and, to a lesser extent, U.S. equity prices. On balance, U.S. financial conditions became more accommodative over the intermeeting period, with equity prices rising notably.
  2. Incoming data suggested that foreign economic growth slowed further in the fourth quarter to a very subdued pace. In the advanced foreign economies (AFEs), growth appeared to have remained weak as the manufacturing slump continued and a consumption tax hike in Japan led to a sharp contraction in household spending. In contrast, early GDP releases showed a pickup in growth in China and some other Asian economies, though news of the coronavirus outbreak raised questions about the sustainability of that pickup.
  3. Late in the period, concerns about the spread of the coronavirus and uncertainty about its potential economic effect weighed negatively on investor sentiment and led to moderate declines in the prices of risky assets. On net, equity prices increased notably over the intermeeting period, while corporate bond spreads were little changed and yields on nominal Treasury securities declined. Financing conditions for businesses and households eased a bit further and generally remained supportive of spending and economic activity.
  4. Broad stock price indexes increased notably, on balance, over the intermeeting period, with gains largely attributed to improved market sentiment about trade negotiations and a perceived lower probability of a disorderly Brexit. Late in the period, equity prices retraced some of their gains, as concerns about the spread of the coronavirus weighed negatively on risk sentiment.
  5. For most of the intermeeting period, foreign equity prices rose amid progress on U.S.–China trade negotiations, generally favorable data on global economic activity, and the reduced risk of a disorderly Brexit following the U.K. general election. Late in the period, however, concerns about the coronavirus outbreak in China weighed on risk sentiment.
  6. The broad dollar index weakened slightly over the period, predominantly against emerging market currencies. The Chinese renminbi appreciated notably against the dollar on positive trade policy developments, but this gain was more than undone late in the period by concerns about the coronavirus.
  7. Participants generally judged that the current stance of monetary policy was appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective. Nonetheless, uncertainties about the outlook remained, including those posed by the outbreak of the coronavirus.
  8. Participants generally expected trade-related uncertainty to remain somewhat elevated, and they were mindful of the possibility that the tentative signs of stabilization in global growth could fade. Geopolitical risks, especially in connection with the Middle East, remained. The threat of the coronavirus, in addition to its human toll, had emerged as a new risk to the global growth outlook, which participants agreed warranted close watching.

Mohamed A. El-Erian Observation

Comment Worth Sharing

The comment was in reference to Wuhan Mother Speaks Out "No Beds, No Medicine, All Lies"

Fed Ahead?

Looking back to the end of January, the Fed actually seems a little ahead of the mainstream media on the threat.

Yet, I doubt anyone yet realizes the full impact.

Please note that Half the Population of China, 760 Million, Now Locked Down

From an economic standpoint, January say the Largest Shipping Decline Since 2009 and That's Before Coronavirus impact hit.

Supply chain disruptions have barely started.

The Fed has every reason to be concerned.

Mike "Mish" Shedlock

Comments (19)
No. 1-13
Freebees2me
Freebees2me

Mish,

It's amazing how easily Mr. Market has laughed off the Coronavirus. And, let's send TSLA on a tear while we're at it!

Just amazing....

Tony Bennett
Tony Bennett

"The Wall Street Journal reports Fed Minutes Show Comfort With Economy"

...

That very same Wall Street Journal has written not one but two stories on the absolute sausage factory of vehicle financing ... on par with subprime mortgage lending prior to last recession.

ReadyKilowatt
ReadyKilowatt

It's always time for a rate cut!

Flic1
Flic1

So when this Corona Virus eventually passes and is no longer in the news the Central Banks will of course withdrawal all of this added liquidity back out of the system..right?...right?? Jerome?

shamrock
shamrock

Macao casinos reopened. Factories restarting. Virus under control?

njbr
njbr

Goldman Sachs listening to Powell...“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.

Meanwhile, in a group of Germans evacuated from Wuhan without symptoms...In this effort to evacuate 126 people from Wuhan to Frankfurt, a symptom-based screening process was ineffective in detecting SARS-CoV-2 infection in 2 persons who later were found to have evidence of SARS-CoV-2 in a throat swab. We discovered that shedding of potentially infectious virus may occur in persons who have no fever and no signs or only minor signs of infection.

Greggg
Greggg

Powell just sent another risk on signal to the traders. S&P infinity, baby!

magoomba
magoomba

The arrival of global disaster amidst the inflationary depression and the onrush of crippling shortages is something far beyond the ability and scope of the fed and central banks to relieve or solve.
All they can do is play their interest games and continue to inflate.
With this in mind, there is no reason why their play 'assets', markets, and indexes can't continue to increase regardless of the destruction below.
Even the physical demise of their minions of bean counters, or even the feudal lords themselves, won't have much effect on their monetary machine.
It is their irrelevance that will eventually catch up to them. At some point they will simply be disposed of.

magoomba
magoomba

The fed doesn't need any more bean counters but they are always looking for PhD's in Semantics.

Carl_R
Carl_R

With new cases in China coming quickly to a halt, it is inevitable that they will try to re-open soon, probably next week. That is when things will get interesting. Can they be open without the spread picking up where it left off?

Going back to the first of the month, the daily new cases reported from China, excluding Wuhan, have been 830,837 (peak), 745, 710, 627, 566, 480, 433, 387, 359, 324, 263, 216, 173, 117, 81, 54, 42. From here, if they don't re-open, it should taper off to zero slowly, but of course, they need to re-open at some point.

If they are successful in re-opening, they will no doubt have some special workplace rules to limit human contact, and that will hold down production. Even in this case, there will still be some supply disruption. If they are unsuccessful, and the new case rate starts taking off again, the disruption will be much worse.

AussiePete
AussiePete

A documentary on the Spanish Flu on YouTube mentioned the story of a man in Capetown South Africa who boarded a street car just as the conductor died. In the three mile journey to his home, six other people on board died. When the driver died the car stopped and he walked the rest of the way. Three percent of the world's population died from that flu. Seems a bit strange to be talking about economics at a time like this.... https://www.youtube.com/watch?v=UDY5COg2P2c

Carl_R
Carl_R

In a new piece of data that may be a warning of unseen cases, Iran reported 2 new cases today, and then reported 2 deceased. It is unlikely that they died the same day their symptoms appeared, so my guess is that they were at a very advanced stage before they were tested. That would mean that there may be many, many cases that are less far along in Iran.

Also concerning, Japan continues to rise as a rapid pace, and there was a huge jump in S. Korea today.

Areas with the most growth in SARS-COV-2 in the last week:
S. Korea +271%
Japan +190%
Cruise Ship +185%
Singapore +45%
Tiawan +33%
Hong Kong +26%
Hubei Province +19%
Rest of China +10%

Curious-Cat
Curious-Cat

Has it occurred to anyone that some (unknown) portion of the population may have an immunity to this? After all, not everyone came down with the Spanish flu.


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