SYDNEY (BLOOMBERG) – A combination of President Donald Trump’s unprecedented travel ban between the US and Europe and underwhelming stimulus measures sparked a fresh exodus from risk assets in global financial markets on Thursday (March 12).

Trump in an address on Wednesday night in Washington, announced the US would significantly restrict travel from Europe to the US for the next 30 days.

The government will also give individuals and small and mid-sized businesses a three-month tax holiday to try to fight the economic impact of the coronavirus, and give affected companies US$50 billion (S$69.8 billion) more in low-interest loans, Trump said.

The rush to gauge the impact on the global economy and corporate earnings, a sense of disappointment at the lack of detail in the US stimulus package and an impression that Washington has fallen behind the curve in its coronavirus response occupied the minds of market participants.

Here is a sample of their views:

NO ENDGAME

Stephen Innes, global chief markets strategist at AxiCorp

“By criticizing Europe and not announcing stricter domestic travel measures in the US, President Trump is treating Covid-19 as a European and Asian problem. Clearly, the market doesn’t like this.” Announcing stricter containment efforts in the US could have cushioned the sell-off, he said.

“Now the ‘no endgame in sight’ risk-off trade takes over as traders are hammering the sell button now thinking the US government has fallen well behind the curve in its Covid-19 response.”

LIGHTWEIGHT MEASURES

Chris Weston, head of research at Pepperstone Group in Melbourne:

“Trump’s measures are so lightweight compared to what we’ve seen in countries like the UK – we need Trump to be a general here, and markets needed to see something bi-partisan.”

“They want measures that will go through Congress and get done within days, not after the November election. Investors will not hesitate to show what they think to the Federal Reserve and governments over the next few sessions.”

ROLLING THEIR EYES

Robert Carnell, chief economist for Asia Pacific at ING Groep in Singapore:

“Trump’s hands are tied, he can’t come up with any meaningful spending on the virus without Congressional support, and that is difficult to achieve with the current political backdrop.”

“The deferment of tax payments does help the cash flow for firms, and isn’t meaningless, but I think markets will be looking at the claim that this is ‘This is the most aggressive and comprehensive effort to confront a foreign virus in modern history,’ and rolling their eyes.”

“The travel ban for Europe will have economic consequences, both in Europe and the US, and it may help to lower the eventual peak of the virus in the US That is a highly debatable premise though without the widespread testing for the virus in the US”

NEGATIVE GROWTH

Mark Matthews, head of Asia research of Swiss wealth firm Bank Julius Baer & Co. in Singapore:

“So I guess my question is – what everybody wants to know is — how much will earnings be down? And, nobody can answer that question because we don’t know how bad the coronavirus is going to get and we don’t know how severe government reactions will be to it.

“But clearly things like shutting down travel between US and Europe has an impact on the economy, and consumer and business sentiment, so the consensus for global growth this year, which is 8 per cent. It’s not going to be that, it’s going to be negative. But, will it be -2 per cent? -3 per cent? -10 per cent? What’s it going to be? So that’s why markets are so volatile.”

MORE SEVERE

Shaun Roache, S&P’s Asia-Pacific chief economist in Singapore:

“Markets had hoped Trump would provide the circuit breaker to this vicious cycle we’ve seen in markets – but he just didn’t deliver.”

“If you’re a country that’s going to do a big fiscal stimulus, but the biggest economy in the world isn’t, what might happen is that your currency appreciates against the dollar. In this sense, we need to see a globally coordinated response.”

“The danger is risk premiums continuing to rise and the economic downturn will be more severe than thought if the US doesn’t give more concrete details.”

NO OUTSTANDING FEATURE

Jun Kato, chief market analyst at Shinkin Asset Management in Tokyo:

“Markets reacted initially by selling on the fact as details were pretty much within expectations but lacked an outstanding feature. It’s a disappointment reaction.”

MISSING TAX

Ben Emons, a managing director at Medley Global Advisors:

“What is missing is the certainty of a payroll tax cut, payroll tax holiday near-term,” he said. “I think that is what the market wants to see because such measures keep the economy afloat as the outbreak intensifies.”

STRONGER YEN

Jingyi Pan, market strategist at IG Asia:

“The key element of payroll tax relief remains missing at present and looks to be a difficult one to come by rendering the need for President Trump to make the call for a unified decision to implement it. Broadly, however, the suggestions of capital and liquidity provision for small businesses had perhaps been widely expected.”

“Dollar-yen can be seen continuing the slide past the 104 level, no surprise as risk aversion interest gathers with the travel ban announced, which is also expected to carry with it economic implications on both sides.”

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