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Market round-up: gold at seven-year peak and stocks tumble as Covid-19 hits Europe

By Amanda Cooper

Safe havens rally, while airline stocks and oil crash

Gold hit its highest in seven years and stock markets tumbled, as an outbreak of the deadly coronavirus in Italy sent investors scrambling for safe-haven assets.

Italian authorities locked down 12 towns after more than 150 people tested positive for Covid-19, which is caused by coronavirus, and six people died, sending European equity markets into freefall.

The virus, which broke out in the city of Wuhan in Hubei province in central China late last year, has killed more than 1,000 and infected almost 80,000. While most cases have been in China, the disease has spread to at least 29 other countries. On Monday, Iran also reported 50 had died from the illness

Gold, which often acts as a safe haven for investors in times of extreme financial market or geopolitical stress, rose by nearly 2 per cent on the day to $1,673 an ounce, around its highest since early 2013.

“A lockdown of around 50,000 people near Milan and Austria blocking trains from Italy is scaring investors,” said Brown Brothers Harriman's head of currency strategy Marc Chandler.

On the European equity markets, Italy’s FTSE MIB index suffered the heaviest losses, falling by more than 5 per cent on the day. The FTSE 100 closed down 3.3 per cent at 7,156.83 points. The Stoxx50 index of the top eurozone blue-chip stocks finished the day down 4.04 per cent at 3,647.00 points, led lower by luxury stocks, such as Daimler, LVMH, Adidas and high-end eyewear maker Essilor Luxottica.

Airline stocks around the world were hammered. In London, budget airline EasyJet closed down 16.67 per cent, while British Airways owner IAG was down by over 9 per cent. On Wall Street, American Airlines and rival Delta were among the biggest losers in morning trade, dropping by 9.2 per cent and 7 per cent respectively.

The oil price fell by nearly 4 per cent, rattled by concern over the impact to global energy demand from the rapid spread of the virus. Brent crude futures, which have already lost more than 15 per cent in value so far this year, were last down 5.3 per cent on the day at $54.88 a barrel.

Jet fuel consumption in Asia has collapsed, as countries have restricted travel and movement in order to contain the spread of the virus. According to pricing agency S&P Global Platts, refining margins for jet fuel – a key measure of profitability – have fallen this month to their lowest since August 2015.

Meanwhile, another measure of investor risk aversion flashed red. The CBOE VIX volatility index, also known as the “fear index”, shot up by more than 43 per cent to its highest in well over a year. The index tracks volatility of options on the S&P 500.

On the currency market, investor jitters hit the likes of the euro, sterling and various commodity-sensitive currencies such as the Australian dollar. The yen rallied by around 0.2 per cent against the dollar to 111.31 yen and by 0.6 per cent against sterling to 143.69 yen.

The euro was down 0.3 per cent at $1.0814, skimming last week’s near-three-year lows, while the pound fell 0.5 per cent to $1.2907. The Australian dollar, which was already under pressure from a devastating wildfire season, fell to its lowest against the greenback in over a decade. The Aussie was last down 0.2 per cent on the day at $0.6613

FURTHER READING: Gold soars to seven-year high as coronavirus panic hits risk appetite

FURTHER READING: US is confident coronavirus won't impact China trade deal

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