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| - Can G7 leaders on Monday do what their central bankers have failed to, in arresting the pandemic panic that is gripping global financial markets? More steep falls on the world's leading stock indices have exposed the limitations of official action, despite a round of emergency steps announced by central banks on Sunday. Now it is over to crisis videoconference talks on Monday among G7 heads of government including US President Donald Trump, and separately of European Union finance ministers. Dusting off their playbook from the 2008 financial crisis, the US Federal Reserve, European Central Bank, Bank of Japan and others on Sunday announced emergency measures to try to keep cash pumping through the global economy. In addition to joining the other central banks in enhancing global liquidity swaps, the Fed slashed its key interest rate to virtually zero, and announced massive asset purchases along with more help to encourage bank lending. But unlike the banking shock of 2008, which was readily quantifiable, COVID-19 remains an invisible enemy and the world economy could get much worse as national lockdowns take hold. "A significant downturn is looming over the coming months, the only question is how deep it becomes," commented Neil Shearing, group chief economist at Capital Economics. Despite the central banks' efforts to inject some calm, markets in Asia, Europe and the United States resumed their dizzying declines on Monday. "There's an understanding in markets that a recession is almost guaranteed. Authorities throwing money at it helps but cannot stop it," said Jasper Lawler, head of research at traders LCG. "Central banks led by the US shot off a bazooka of lower interest rates and quantitative easing but it has missed (the) target. Markets are back into freefall," he noted. The scale of the crisis was laid bare as industrial production for January and February in China -- ground zero of the pandemic -- shrank 13.5 percent, the first contraction in around 30 years. Shares in airlines crashed after carriers in Europe and the United States announced dramatic cuts to their flight capacity. Analysts are looking to the G7 and EU ministers to announce concerted stimulus plans, again evoking the response to the 2008 crisis. The Europeans are expected to sign off on a raft of proposals, including waiving rules on public overspending and possibly offering emergency cash for small companies. Stephen Innes, global chief markets strategist at AxiCorp, said the G7 powers should back a temporary suspension of trading on stock markets. Unlike 2008, banks' balance sheets are healthy, he told AFP. "But this is a global economic crisis which needs swap lines to airline companies, oil companies and retailers," Innes said. "Airlines might be at the top of the list for directed fiscal help, but virtually every global industry is facing pressure without a government bailout." Above all, investors want something governments in Europe and the United States have proved unable to deliver -- a fall in new coronavirus cases similar to the trend in China. "There's a lot coming globally from central banks but of course now... it's over to governments to act more aggressively in terms of fiscal stimulus," said Derek Halpenny, head of research for global markets at MUFG. "That is going to be the key going forward, obviously along with the COVID-19 daily data, in terms of where we go (for) investor sentiment," he said in an MUFG podcast. jit/gd
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