Pre-market actions: why this market shock is not like 2008

Fears that the coronavirus pandemic would plunge the world into recession and an oil price war plunged stocks Monday, temporarily halting trade in the United States amidst the worst market defeat for more than 39 years ;a decade.

"It was truly an historic session," Bespoke Investment Group told its clients. "Unless the financial crisis, these kinds of fluctuations have not happened in the past 30 years."

The markets rallied Tuesday, with some investors plunging their toes. The S&P 500 futures contract increased 4.4%. Gains in Asia and Europe were more lukewarm. The Hong Kong Hang Seng finished 1.4% higher, while the FTSE 100 climbed 3.6% in London.

But investors still want to know: is this a repeat of the 2008 financial crisis?

The BlackRock Investment Institute admitted on Monday that the magnitude of market movements "reminded" 2008. But the asset manager sees fundamental differences.

"The economy is on a firmer footing and, more importantly, the financial system is much more robust than it was going in the 2008 crisis," BlackRock said in a note to customers. .

Wall Street quickly noticed that banks are better capitalized this time due to new regulations and that debt levels, although high, are concentrated in less risky areas. Corporate debt, particularly in the energy sector, could be a problem, but does not seem "enough (yet) enough to trigger a global crisis," Group chief economist Neil Shearing said on Monday. at Capital Economics.

This should allow a faster economic rebound after mastering the coronvirus. "Fear can bring down (the market), but expect a (rapid) recovery when the health threat recedes," former Goldman Sachs CEO Lloyd Blankfein tweeted on Monday. "Unlike 2008, this will prevent systemic damage."

One problem, however, is that governments and central banks were able to devote considerable sums to the problem in 2008. It may not be as effective this time. President Donald Trump said Monday he would push for reduction of social charges, but if people stay at home, it is unlikely that they will put that money back into the economy.

Central banks, meanwhile, have far less ammunition at their disposal, with interest rates already at historically low levels or close to it. And it is feared that monetary policy remedies will take time to pass through the system.

Could a coronavirus shut down Wall Street? Banks move staff

The US stock markets were briefly interrupted on Monday, when a record drop in oil prices and fears of the coronavirus sparked panic sales. But the epidemic poses a much bigger logistical headache for Wall Street: how to continue trading if banks have to vacate their offices to fight the spread of the disease.

The Details: Global Banks Strive To Break Down Their Workforce To Reduce The Risk Of Large Numbers Of Employees Falling Sick And Test Backup Sites To Make Sure They Are can continue to do business even if they can no longer access Wall Street or central London locations.

JPMorgan Chase ((JPM) began to distribute its sales and sales teams between separate offices. He told employees in an email that this was a "precautionary measure" to ensure that the bank can continue to function properly. The company operates alternative sites in Brooklyn and New Jersey, as well as in Basingstoke, about 80 kilometers southwest of London.

Bank of America ((BAC) said it was splitting its fixed income and equity trading teams, sending some people to a backup site in Stamford, Connecticut. German Bank ((DB), meanwhile, said he had split up some London operations and business teams, with some employees working from home.

Why this is important: it is the biggest logistical challenge for the financial sector since Hurricane Sandy in October 2012, and before that, the terrorist attacks of September 11, 2001. And it happens while banks are facing a global stock market rout and major volatility.

Falling oil prices could hurt the U.S. economy

A boom in shale production has made the United States the largest producer of oil in the world. This has helped protect the country from geopolitical instability in the Middle East and in countries like Venezuela, but also means that falling oil prices will be far more damaging to the US economy than previous declines in 2008 or 1991, reports my CNN Business colleague Chris Isidore.

If oil prices remain low, it could reduce US GDP in the first quarter by 0.35 percentage points, according to Morgan Stanley. The investment bank also fears that consumers will not spend any of their savings due to falling gas prices. If people don't travel, airlines may not benefit either.

The drop in oil prices is also a "little comfort" for China, Tuesday told Julian Evans-Pritchard, the world's largest oil importer, the main Chinese economist at Capital Economics. "The boost to growth will be modest and will not offset the blow to Chinese exports by weaker global demand," he said.

next

Dick sporting goods ((DKS) announces earnings before US markets open.

Upcoming: President Donald Trump has invited bank CEOs to the White House for a meeting on the coronavirus epidemic.

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