WASHINGTON (REUTERS) - Senior officials in US President Donald Trump's administration on Sunday (March 1) tried to calm market panic that the coronavirus could cause a global recession, saying the US public had overreacted and that stocks would rebound due to the American economy's underlying strength.
The S&P 500 index dropped 11.5% last week as the virus accelerated beyond China's borders, the worst weekly drop since the 2008 global financial crisis. Roughly US$4 trillion has been wiped off the value of US stocks.
Economists have begun to worry that the losses could soon start to weigh on consumer spending even before the virus becomes widespread in the United States.
US financial regulators who will gather on Wednesday face their most challenging week in a decade. One official told Reuters that the coming days will determine whether the federal government must take measures to bolster market confidence.
Speaking to NBC's Meet the Press on Sunday, US Vice-President Mike Pence, who is leading the administration's response to the virus, said that the market "will come back."
"The fundamentals of this economy are strong. We just saw some new numbers come out in housing and consumer confidence and business optimism. Unemployment is at a 50-year low. More Americans are working than ever before," Pence said.
On Friday afternoon, Federal Reserve chair Jay Powell sought to quell fears, stoked by dire economic data from China, flagging that the central bank would take action if necessary to support the economy, which he said remained strong.
Trump, seeking re-election on Nov 3, has pressed his view that the risk to the American people from the virus remains "very low" even as he has faced Democratic criticism that his administration had bungled its response to the outbreak.
When asked on the "Fox News Sunday" program if the American people are over-reacting to the current threat, US Health and Human Services Secretary Alex Azar responded, "Yes, absolutely."
The fast-spreading virus has infected around 85,000 people in 53 countries. China, the world's second-largest economy and epicentre of the outbreak, is home to the vast majority of cases, with about 70 diagnosed in the United States.
A Washington state man in his 50s with underlying health conditions was the first American to die from the virus, officials said Saturday.
The rapid spread of the virus has led businesses globally to restrict travel, send workers home and cancel conferences, hitting stocks in the aviation, gambling, tourism and luxury goods sectors. That disruption to global supply chains and productivity has darkened the outlook for a world economy already was struggling with the fallout of the US-China trade war.
So far, the outbreak's biggest measurable effect has been in China, but a purchasing managers survey last month signaled it was beginning to hit US businesses. Another batch of US economic indicators due out early this week will be closely watched for evidence of a growing impact.
Investors now fully expect the Fed to respond with interest rate cuts this month. Questions remain over how far the Fed would cut and what more officials there and at other central banks can do beyond lowering borrowing costs already at rock-bottom levels for more than a decade.
Pence said the US government is doing "everything possible" to prevent the virus from spreading and that he is "confident" the United States is prepared.
Azar said that during a meeting of the White House's coronavirus task force on Saturday, US Treasury Secretary Steven Mnuchin had discussed the negative stock market reaction, saying that much of it was driven by uncertainty. Azar said the administration aimed to quell that uncertainty by being as transparent as possible about latest developments.
"That's why we are trying to give the American people all the information we have when we have it so they don't think there's secret information they're not getting," Azar said.