The markets are betting on the G7 but it could prove to be a flop. The rumors revealed by Bloomberg according to which the G7 ministers, the central banks (Fde and ECB in primis) will meet on Tuesday at 13pm Italian time in a conference call to coordinate (as far as possible, according to the words of the French minister Bruno Le Maire) intervention policies in response to the coronavirus, however, find a less euphoric response in Reuters.
Secondo a source cited by the American news agencyin fact, there will be no details on the fiscal policies to be adopted in the final document following the conference call. In practice, the draft G7 statement would outline a plan to cushion the growth effects of the coronavirus, but at least for now it would rule out direct calls to governments for more spending or coordinated interventions by central banks. If so, it would create some disappointment after Monday night's strong rebound in equity markets.
“We are still just at the beginning of the explosion. And it is not yet possible to predict how the epidemic will develop. Therefore, the impression is that it is still too early for a more detailed and explicit leap in decisions”.
Traders also wonder about the limits of expansionary monetary policy since, some observe, lowering the cost of money eases the circulation of money but cannot fix the disruption in the supply chain or get people back on the road if governments and companies continue to banish these choices.
Meanwhile, the IMF and the World Bank are committed to providing help, Boris Johnson is expected to unveil emergency measures shortly and Christine Lagarde has announced that the ECB is ready to intervene with "appropriate and targeted" measures in view of the ECB meeting on March 12th. On this last point, given the limited scope for action, many commentators have gone so far as to think about a possible TLTRO at particularly favorable conditions (short term, rate = rate on deposits, etc.).
At the end of the morning, Tuesday, the Ftse Mib rose by 2% while the other European markets also rebounded.
