As the impact of COVID-19 deepens across the world, government financial ministers, world banks and financial markets across the world all looked downwards.
In London today the FTSE 100 ended below 5,000 down 196 points at 4,993, its lowest level of close since October 2011.
Also in London today the FTSE 350 Travel & Leisure Index, which contains many of the best known names in hospitality and catering closed at 4,584.83, down 321.57 points or 6.55%. Caterer Compass Group was down 9.69% today, whilst Mitchells & Butlers who run 1,700 restaurants and pubs was up 6.77%, in a volatile market.
US shares fell again this afternoon after Democrats blocked the Trump Republican coronavirus economic stimulus bill for the second time. US exchanges including the Dow, which had only been moderately lower earlier in the day, fell a full 700 points on the news, the S&P 500 fell 3.6% and the Nasdaq fell 1.5%.
Also today, the managing director of the International Monetary Fund, Kristalina Georgieva has warned that COVID-19 could cause a deeper downturn than the last financial crisis in 2008.
Georgieva issued her warning shortly after a G20 conference call with finance ministers and central bank governors.
In a statement Georgieva said that three main points were discussed on the call.
a) The current outlook for global growth in 2020 is negative: “A recession will emerge at least as bad as the last global financial crisis, or worse.”
She and the IMF expect a recovery in 2021: However, and in order for that to happen, nations must prioritise containment and strengthen health systems.
The economic impact is already and will be severe moving forward, but the faster the virus is contained and stopped, the faster and more robust the recovery will be.
b) Emerging market economies are in a worse position to manage the crisis.
Emerging markets are badly affected by outward capital flows, and domestic activity will be severely impacted as countries respond to the pandemic. Investors have removed the largest capital outflow ever recorded amounting to $83bn to date from emerging markets since the start of the crisis.
c) The IMF are particularly concerned about low-income countries in debt distress—an issue on which they are now working with the World Bank on closely.The IMF has $1trillion of lending standing by, and want to use it to help.
Assuring financial markets that they will increase emergency finance further as circa 80 countries are requesting help already. The IMF are working with the other international financial institutions to provide a sustained and cohesive coordinated response.
This does all make for grim reading, but as we have written previously at earlier stages of the COVID-19 pandemic, following what the people who control the world’s money are thinking and doing does provide a barometer for a macro perspective.
Many of the world’s largest hotel and restaurant businesses are operational across the UK and particularly London. These companies are huge employers and as such are key parts of hospitality and catering in the UK, and very much worth watching.