Coronavirus: G7 vows to protect global markets
Statement 'raises the risk that central banks will disappoint markets'
G7 finance ministers and central bankers reassured investors Tuesday that they're ready to protect the global economy from the impact of the widening coronavirus outbreak, but did not promise any specific actions.
“Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against the downside risks,” the leaders said in a statement after a conference call led by U.S. Treasury Secretary Steve Mnuchin and Federal Reserve Chairman Jerome Powell.
The lack of action by the G7, a group of seven of the world's largest developed economies, prompted a brief drop in equity futures markets, though they quickly rallied. They are now pointing to only a small decline ahead of the opening bell.
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"The G7 statement falls short of hopes of a coordinated policy response and raises the risk that central banks will disappoint markets’ expectations in the months ahead," wrote Jennifer McKeown, head of global economics service at the London-based research firm Capital Economics.
Concern about the coronavirus epidemic and its impact on corporate profits has hammered global markets, with major U.S. indexes last week suffering their steepest losses since the financial crisis, according to data from the Dow Jones Market Group.
The Dow Jones Industrial Average plummeted 3,583 points, or 12.4 percent, through Feb. 28, while the S&P 500 and Nasdaq Composite slid 11.5 percent and 10.5 percent, respectively. Stocks turned around on Monday, with all three of the major averages climbing by at least 4.5 percent and posting their biggest point gains on record.
“Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase," the statement said. "G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.”
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The group said it welcomed Monday's statement from the International Monetary Fund and the World Bank, which promised to use "available instruments to the fullest extent possible, including emergency financing, policy advice, and technical assistance."