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Market round-up: European shares set for worst February in 10 years as coronavirus spreads

By Amanda Cooper

Stoxx50 is set for biggest monthly drop since 2009

German health minister Jens Spahn, left, and interior minister Horst Seehofer API

European equity markets buckled, as the coronavirus claimed more victims. Germany’s health minister said the country was on the verge of an epidemic, which pounded consumer and retail shares.

Gold rallied, while the dollar declined against most other major currencies, after US president Donald Trump failed to reassure investors that his government was capable of handling a bigger outbreak.

For the first time since the disease broke out in the central Chinese city of Wuhan, the number of new cases outside China outstripped the number inside, based on figures from the World Health Organisation. This heaped yet more pressure on European stock markets, which was compounded by the strength of the euro.

“Yesterday was the first time that the number of new cases in the world surpassed the number of new cases China acknowledged. This confirms what we have known, namely that the battle for containing it in China has been lost,” said Brown Brothers Harriman global head of currency strategy, Marc Chandler.

With investors jittery over how the spread of the disease might develop in the United States, the dollar index was last down 0.7 per cent at a three-week low of 98.44. The euro rose by more than 1 per cent and was on track for its biggest one-day rally against the dollar since January 2018.

On the stock markets, the Stoxx50 index of the biggest blue-chip shares finished the day down 3.3 per cent around a five-month low of 3,459.63.

Budweiser owner Anheuser Busch-Inbev was the biggest loser on the Stoxx50 after reporting the coronavirus had already cost it some $285m in lost revenue and another $170m drop in operating profits in China in the first two months of this year alone. Shares in the beer and spirits maker dropped by 11 per cent.

The Stoxx 50 is on track for a 5.6 per cent fall so far in February, making this its worst one-month decline since May 2019. This is also the worst February performance for the index since 2009, when the world was still emerging from the worst financial crisis since the Great Depression of 1929.

In Frankfurt, the DAX was dragged lower by steep declines in transport stocks, such as Lufthansa, Volkswagen and BMW, which fell between 7.7 and 4.2 per cent. The German index fell by 3.19 per cent to 12,367.46 points.

According to the WHO, the number of new cases of Covid-19 in Germany rose by two to 18, making it the worst-affected European country after Italy, where there have been 322 cases and 11 deaths. German health minister Jens Spahn said the country was facing "the beginning of a coronavirus epidemic”.

In London, the FTSE 100 fell 3.49 per cent to 6,796.40 points, led lower by transport shares such as EasyJet, British Airways owner IAG and travel company TUI.

Gold rallied by more than 1 per cent on the day to $1,657.46 an ounce, within sight of Monday’s seven-year high of nearly $1,690, driven higher by rising investor risk aversion.

Oil meanwhile dropped by more than 4 per cent to a new two-year low. Brent crude futures, which have lost almost a quarter in value so far this year, were last down 4.3 per cent at $50.51 a barrel.

The virus, which has claimed most of its victims in China, has ignited serious concern about global energy demand. Consumption in China has fallen by a fifth so far, as refineries run at slower rates in response to factories around the country closing and entire cities being on lockdown.

In crypto, Bitcoin gained some much-needed respite, rising around 1.7 per cent to $8,842. Bitcoin has fallen by around 17 per cent in the past two weeks alone, swept lower by heightened risk aversion. The price is still up by more than 20 per cent so far this year and is within sight of six-month highs. Ethereum was up around 3.6 per cent at $231.

FURTHER READING: China gradually returns to work amid coronavirus disruptions

FURTHER READING: Bitcoin prices take a hit after $150m liquidation on BitMEX, losing February gains

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