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European equities hit all-time highs as some coronavirus fears ebb

By Amanda Cooper

Stoxx 50 hits record after China health advisor says virus may be peaking

European shares hit all-time highs, after China’s top health advisor said the spread of the coronavirus that has killed over 1,000 may have peaked, while safe-haven assets such as gold and the Japanese yen eased in price.

Zhong Nanshan, an epidemiologist who helped fight the SARS epidemic in 2003, told Reuters in an interview the situation in some parts of the country was already improving.

“The peak time may be reached at ... maybe middle or late this month,” Zhong was quoted by Reuters as saying. China’s factories and shops are struggling to re-open after the virus erupted just ahead of the Lunar New Year holiday in January.

Goldman Sachs said in a research note that it believed the virus, which has infected more than 40,000 around the world, would not impact global economic growth as severely as some feared.

“The impact of the lower global and US economic activity on 2020 S&P 500 earnings per share will be limited,” Goldman analysts said.

In Europe, there was notably more optimism, with the Stoxx 50 index of the largest euro zone shares having hit a record 3,832.06 points earlier in the day.

In London, the FTSE 100 closed up 0.71 per cent at 7,499.44 points points, led by a 10-per cent leap in shares of travel company Tui. Tui earlier said strong demand for holidays would help make up for losses stemming from the delays to deliveries of Boeing’s grounded 737 MAX jet.

Despite the uncertainty around Brexit and the future relationship of the UK with the European Union, British shoppers have remained resilient. Data from credit card provider Barclaycard on Tuesday showed consumer spending rose by nearly 4 per cent in January, as shoppers splashed out on the cinema and booking flights and holidays.

Germany’s DAX closed up 0.99 per cent at 13,627.84 points, having also reached an all-time high earlier in the day. Deutsche Telekom was the biggest gainer, rising by more than 4 per cent ahead of a US judge approving its plans to merge its T-Mobile US subsidiary with rival Sprint.

On the currency markets, the dollar traded roughly flat on the day, around its highest since mid-October. With risk appetite on the up, the yen, which can serve at times as a safe-haven, came under broad pressure, dropping 0.1 per cent against the dollar, and 0.4 per cent against sterling.

The pound was last up 0.4 per cent on the day against the dollar, in spite of a report earlier that showed the UK economy stagnated in the final few months of the year.

Investors shrugged off news that GDP remained flat in the fourth quarter, largely thanks to a a series of data points over the course of January that have pointed to a modest recovery in growth in the early weeks of the year.

“The bottom line is that we aren’t expecting economic growth to speed up dramatically this year. However it is important to remember that the Bank of England isn’t either,” said analysts at ING. “Its forecasts pencil in 0.2 per cent growth in the first quarter, and 0.3 per cent in the second. Barring a more material deterioration, we think policymakers will remain reluctant to cut interest rates. We currently forecast rates on hold through the rest of 2020,” they said.

On the commodities market, gold was last down 0.25 per cent at $1,568 an ounce, still near its highest for a week. Oil gained some much-needed reprieve. Brent crude futures were last up around 2 per cent at $54.49 a barrel.

With the coronavirus shuttering factories and shops in China, there has been serious concern about the effect on energy consumption this year in the world’s second largest economy. Crude has slid by nearly 18 per cent so far this year, making it one of the worst-performing commodities, after coffee, with a 22-per cent dive and US heating oil, a proxy for diesel, with a drop of more than 19 per cent.

In crypto, Ethereum and Litecoin were among the major gainers, rising by 2 per cent, while Bitcoin was up 1.6 per cent. After badly underperforming in 2019, Ethereum has rallied solidly since the start of the year and is now around its highest since last August.

FURTHER READING: UK financial sector will not be a rule taker post Brexit - UK chancellor

FURTHER READING: China gradually returns to work amid coronavirus disruptions

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