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Investors go bargain hunting despite coronavirus fears

By Marianne Curphey

Copper and silver prices hit, with luxury goods provider Burberry pushed lower

Investors returned to the market today, with many on the hunt for bargains after yesterday's sharp mark-down in equity prices. Yet while buyers came in looking for cheap stocks to snap up, the threat of China's rapidly spreading coronavirus lingered on in the background.

So far 106 have died from the coronavirus, with the number of infections almost doubling in a day to more than 4,500.

The oil price stabilised at £53.66, a slight rise from earlier in the week but down from its recent peak of £64.26 on January 7, 2020. Copper prices, regarded as a indicator of the health of the global economy as a whole, also fell amid fears that demand from China's manufacturing industry would be muted. Silver was down nearly three per cent to $17,527. The Chinese government has extended the new year holiday, shut down manufacturing until next week, and limited travel routes to Hong Kong.

Japan and Singapore were lower overnight, but the Nikkei only fell 0.55 per cent, although this was a three week low. In the US, the Dow Jones was at 28,721 in midday trading, a rise of 0.65 per cent, while the S&P 500 was up 0.9 per cent at 3,273 as traders tried to gauge the potential impact of the coronavirus on the global economy, and make up for some of yesterday's losses.

After the panic of Monday 27 January trading, the FTSE 100 rebounded somewhat , rising 0.93 per cent to 7,480.69. The FTSE 250 rose by 0.61 per cent to 21,433.06. The Vix volatility index had fallen almost 13 per cent to 15.88 at the time of writing, indicating that some of the panic seen yesterday had dissipated.

However, some individual stocks took a pasting. Diageo was down 1.75 per cent. Burberry was also hit by expectations that the luxury goods retailer would be badly affected by a lack of trade from China, closing down 1.66 per cent. In the FTSE All Share index, the beleaguered clothing retailer Ted Baker suffered further losses, down 3.47 per cent.

Bitcoin continued its upward run, rising to $8969, an increase of 1.1 per cent. Gold, regarded as a safe haven, marked time at 1,576.10, a very slight decrease of 0.08 per cent.

In the US, the Federal Open Market Committee is meeting to debate the economy and decide interest rates, although the announcement won't be released until tomorrow. Observers expect interest rates in the US to remain unchanged.

Also in the US, traders were awaiting earnings figures from Apple for the quarter ending December 2019. Zacks Investment Research put the consensus EPS forecast for the quarter at $4.53. The figures are due after market close in the US, as are those from Starbucks and Advanced Micro Devices.

More tech news will come after market close tomorrow, when Facebook, Microsoft and Tesla all report quarterly earnings.

With the continuing spread of the coronavirus affecting oil global oil demand, Bjarne Schieldrop, chief commodities analyst at SEB, the Nordic corporate bank, believes OPEC is ready to intervene and tactically cut supply.

“The University of Hong Kong estimates that at least 25,630 people in Wuhan have symptoms of the virus with 44,000 infected with no symptoms yet," he said. "This should imply that the sell-off in Brent crude is still not yet over, as the crisis is still intensifying.

"OPEC is also following the coronavirus situation closely. It will most likely step in and reduce supply for a month or two in order to prevent an inventory build-up which the market would have to struggle with for an extended period. Tactical cuts are OPEC’s strongest card. Inventories are already high, and the group does not want to see it higher if it can avoid it.”

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