Officials of the world’s largest economies pledged a united front in the battle against the coronavirus scare but offered no specific actions, in a statement issued Tuesday morning.
Stock futures fell immediately, as investors digested the statement, which does not include any specific call for new government expenditure or coordinated interest rate cuts by central banks.
“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 downside risks,” the G-7 statement said.
“Alongside strengthening efforts to expand health services, G-7 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. “G-7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.”
Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin led the “coordinating call” for the financial and economic response to the coronavirus.
Markets have been expecting some type of coordinated action to come from global authorities. Traders are pricing in aggressive rate cuts from the Fed, including a 50 basis point cut in short-term rates this month followed by additional easing later.
The Reserve Bank of Australia announced on Tuesday a cut in its cash rate by 25 basis points to 0.5 percent, a new record low.
In a statement announcing the decision, the Australian central bank’s governor acknowledged that the coronavirus outbreak overseas is having a “significant effect” on the country’s economy and said the move to ease monetary policy was done to “provide additional support to employment and economic activity.”
Within hours, President Donald Trump responded on Twitter at 1:34 a.m. ET, saying the U.S. central bank’s chairman had “called it wrong from day one,” calling again on the Federal Reserve to deliver some major monetary-easing measures.
Monday saw U.S. stocks snap a losing streak that had gone on for over a week. Some investors are skeptical that the rally has legs without a significant central bank response. Even if that comes to fruition, investors have their doubts the market has seen the end of its tumultuous trading of the last seven days.
Wall Street saw a historic bounce back on Monday, with the Dow gaining nearly 1,300 points. The S&P 500 gained 4.6 percent.