Business activity plummets, but markets rally on Fed support

A woman walks on empty tram rails in Lyon, central France, Monday, March 23, 2020. French citizens are only allowed to leave their homes for necessary...

A woman walks on empty tram rails in Lyon, central France, Monday, March 23, 2020. French citizens are only allowed to leave their homes for necessary...

LONDON (AP) — Europe's economy could shrink by some 10% this year as efforts to contain the spread of the virus outbreak cause a collapse in commercial activity. Yet markets were up sharply on Monday - extending weeks of stunning volatility - as investors digested the extent of the financial support provided by the Federal Reserve this week.

Here's a look at the latest developments as the coronavirus outbreak tears through the world economy.

BUSINESS ACTIVITY: A closely watched measure of business activity in the 19-country eurozone has fallen at the sharpest pace since it began in 1998.

The Purchasing Managers' Index, a gauge of business executives' outlook on the economy, fell to 31.4 points in March from 51.6 in February as governments put limits on business activity.

The index, which is compiled by research firm IHS Markit, is below the trough registered during the global financial crisis in 2009. The 50-point level separates economic growth from contraction. The services sector took the biggest hit, particularly tourism and restaurants, with companies cutting jobs at the fastest pace since 2009.

Chris Williamson, chief business economist at IHS Markit, says the survey suggests a quarterly economic contraction of 2%, or over 8% in annualized terms, though that forecast is likely to worsen.

In Japan, a measure of factory activity in the country fell to its lowest level since 2009. The preliminary version of this month's Jibun Manufacturing Purchasing Managers' Index fell to 44.8 points from February's 47.8.

FINANCIAL MARKETS: Global stock markets are higher after the U.S. Federal Reserve promised economic support as Congress delayed action on a $2 trillion aid package.

Benchmarks in London and Frankfurt opened higher and Tokyo added more than 7%. Shanghai, Hong Kong and Paris also gained. Futures trading on Wall Street was halted after they rose by the maximum 5%.

The Fed said it would buy as much Treasury debt and other assets as needed to keep financial markets functioning. That helped to offset unease over the failure of an aid bill in Congress that Democrats said favors companies at the expense of workers and public health. Wall Street and other stock markets have lost as much as one-third of their value over the past month.