Mar 8, 2019

The global economy's road to "Japanization"

Pedestrians walk past a stock indicator board for the Tokyo Stock Exchange. Photo: Behrouz Mehri/AFP/Getty Images

The market may be losing faith in central banks' ability to fire up financial markets, as further stimulus measures are expected to have less of an impact on the real economy. U.S. stocks have had their best start to a year since 1991 on the back of the Fed's rate hike reversal, but have gone ice cold in March.

Why it matters: This is similar to what happened last year when stocks skied until September and then skidded downward as economic reports from Italy, Switzerland, Germany, Japan and China all started to spell bad news.

Details: Currently the U.S. is expecting less than 1% economic growth in the first quarter, money managers doubt the eurozone can even hit 1% growth for the year and Canada and Japan may be looking at recessions.

  • American companies could also be running out of will and ammunition for stock buybacks, which drive down PE ratios and inflate prices, as lawmakers look set to target the practice.

What they're saying: This is all setting the stage for the developed world to "be Japanized," Zhiwei Ren, managing director and portfolio manager at Penn Mutual, tells Axios. Japan has been stimulating its economy with asset purchases, government spending and negative interest rates for years and still can't generate lasting inflation pressure.

Europe and the U.S. are a few steps behind, but we're all moving that direction. If you look at the recovery, we're into it for 10 years and GDP is 3% and we’re still not seeing inflation, which is a big issue because for an economy with a lot of debt you want some inflation every year.
What the ECB has already done with quantitative easing and negative rates is all they could have done. The purpose of TLTROs is to push more credit into market. But the issue isn’t on the supply side, it’s a lack of demand.
"When GDP is growing below potential that means there's not enough demand. So, no matter how much credit you provide if nobody comes to borrow that's a liquidity trap. The ECB is in a liquidity trap. They can pump as much as they want but liquidity isn't flowing into the real economy.

Go deeper: Almost everything going on in the world is bad for the economy

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Gilead expands access to experimental coronavirus drug in emergency cases

Photo: Olivier Douliery/AFP via Getty Images

Gilead Sciences CEO Daniel O’Day said in an open letter Saturday the company is expanding access to its experimental anti-coronavirus drug remdesivir to include severely ill COVID-19 patients.

The big pig picture: President Trump has called the antiviral drug "promising," but the results of six clinical trials on this investigational medicine are still being conducted, so its effectiveness in COVID-19 the treatment has yet to be proved. The World Health Organization is involved in the tests.

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Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 1 a.m. ET: 664,695 — Total deaths: 30,847 — Total recoveries: 140,156.
  2. U.S.: Leads the world in cases. Total confirmed cases as of 1 a.m. ET: 124,464 — Total deaths: 2,191 — Total recoveries: 1,095.
  3. Federal government latest: President Trump announces new travel advisories for New York, New Jersey and Connecticut, but rules out quarantine enforcement. Per the CDC, residents of those states must now "refrain from non-essential domestic travel for 14 days," with the exception of critical infrastructure industry workers.
  4. State updates: Alaska is latest state to issue a stay-at-home order — New York is trying to nearly triple its hospital capacity in less than a month and has moved its presidential primary to June 23. Some Midwestern swing voters who backed Trump's handling of the virus less than two weeks ago are balking at his call for the U.S. to be "opened up" by Easter.
  5. World updates: In Spain, over 1,400 people were confirmed dead between Thursday to Saturday.
  6. 🚀 Space updates: OneWeb filed for bankruptcy amid the novel coronavirus pandemic.
  7. Hollywood: Tom Hanks and Rita Wilson have returned to U.S. after being treated for coronavirus.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Coronavirus updates: Global death toll tops 30,000

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

The novel coronavirus has now killed more than 30,000 people around the world — with Italy reporting over 10,000 deaths, per Johns Hopkins data.

The big picture: The number of deaths from COVID-19 in the U.S. surpassed 2,000 on Saturday. The United States leads the world in confirmed coronavirus infections — more than 124,000 by late Saturday. The number of those recovered from the virus in the U.S. passed the 1,000-mark on Saturday evening.

Go deeperArrowUpdated 3 hours ago - Health