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Equities and oil rise as coronavirus fears lessen

By Amanda Cooper

Riskier assets climb, while safe-havens sag

European shares hit new record highs, while the oil market shrugged off a downbeat demand forecast for this year, after China reported a slowing in new cases of coronavirus, fuelling hopes the spread of the disease may be slowing.

The dollar traded steadily against other major currencies after the head of the US Federal Reserve suggested US interest rates were unlikely to rise or fall any time soon, further shoring up bullishness among investors.

China reported its lowest number of new cases of the virus since January, and the country’s medical advisor had said he expected the spread of the disease to peak in China, at least, by April.

The Stoxx50 index of the euro zone’s largest companies hit a new record high, led by gains in Finnish telecoms group Nokia and French bank Societe Generale. The index closed at 3,851.32 points, marking a 0.7-per cent rise, having hit a new all-time high of 3,853.40 points earlier in the day .

“China reporting the lowest number of new cases of the coronavirus since January keeps the prospect of a pandemic at bay,” wrote London Capital Group chief strategist Jasper Lawler.

Also feeding a degree of risk appetite among investors were comments late on Tuesday from Jerome Powell, chairman of the Fed, who indicated in remarks to US lawmakers that the central bank’s stance on US monetary policy would remain appropriate for now, barring any “persistent” and “material” impacts.

“It seems that one possible cause for the Fed to adjust its plans and lower interest rates again is the coronavirus. We would look at any US dollar weakness as a correction,” Lawler said.

The dollar index was trading roughly unchanged on the day against a basket of major currencies. Against the euro, the dollar was up 0.3 per cent at $1.089, while against sterling, the greenback was down 0.1 per cent. The dollar gained 0.3 per cent on the day against the yen.

Elsewhere, natural resources stocks were the strongest performers on the London market, Anglo American and Antofagasta were among those shares seeing the largest gains, rising by around 3 per cent on the day, while commodity producers Glencore and Rio Tinto each rose by 2.7 per cent. The FTSE 100 ended the day at 7,534.37 points, up 0.5 per cent.

In Germany, the auto sector led the main index higher, thanks to BMW and Volkswagen, which rose 2.9 and 2.7 per cent, respectively, and tyre-maker Continental, which gained 3.6 per cent. The DAX closed at 13,744.73 points, up 0.86 per cent.

With investors appearing to give riskier assets a degree of respite, the oil price was set for its biggest one-day percentage gain since early January, thanks to a degree of relief over the slowing in the spread of the coronavirus.

The crude price has fallen almost unrelentingly so far this year, having lost nearly 20 per cent in value since early January, when the severity of the disease first became apparent.

Market watchers estimate that Chinese oil demand has already been affected to the tune of around 20 per cent so far, as factories and shops struggle to reopen and many major cities remain on effective lock-down.

Indeed, the Organization of the Petroleum Exporting Countries cut its forecast for oil demand growth this year because of the impact of the virus on global consumption.

Brent crude futures were last up 3.0 per cent on the day around $55.68 a barrel, rising for a second day, having touched 13-month lows on Monday.

With oil and other industrial commodities such as copper and gasoline rising, safe-havens such as gold came under pressure. Spot gold, which has risen by 4 per cent so far this year, was last down 0.2 per cent at $1,565 an ounce.

FURTHER READING: Coronavirus prompts OPEC to cut forecast for 2020 oil demand growth

https://currency.com/news/2020/02/12/opec-cuts-2020-oil-demand-growth-forecast-on-coronavirus

FURTHER READING: China gradually returns to work amid coronavirus disruptions

https://currency.com/news/2020/02/10/china-gradually-returns-to-work-amid-virus-disruption

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