Stocks stabilise as China moves on virus but glum forecast dents oil

Equities dip slightly after Tuesday’s nosedive as Beijing tightens screening of travellers in wake of coronavirus outbreak

Stocks pared back some of their previous losses as relief set in that China has taken steps to contain the spread of the coronavirus that has killed nine people. Meanwhile the dollar recovered some ground and oil fell after a pessimistic supply forecast.

The Chinese government said it had tightened screening of air travellers and isolation of suspected cases of the fast-spreading virus that has been detected beyond mainland China, in Hong Kong, Thailand, Japan, South Korea, Taiwan and the United States.

There are now nearly 500 cases of the disease, according to Chinese health authorities.

European stocks closed mostly unchanged on the day, having slid sharply on Tuesday. Germany’s DAX ended the session down 0.3 per cent (-40.12pts) at 13,515.75 points, having hit a new record high of 13,640.06 earlier in the session.

Frankfurt blue-chips, led by sportswear company Adidas, chipmaker Infineon and Deutsche Boerse, got a boost from the strongest reading of investor sentiment in over four years this week.

The FTSE 100 meanwhile fell 0.51 per cent to 7,571.92 (-38.78), driven lower by declines in the resources sector. Chilean-focused copper miner Antofagasta fell 4.35 per cent after reporting a slump in output in the final quarter of the year, while a drop in the oil price weighed on shares in BP and Shell, which dropped 1.3 per cent and 2 per cent, respectively.

Crude prices fell by nearly 1 per cent to around $64.59 a barrel following a downbeat assessment of supply and demand from the International Energy Agency.

In its annual World Energy Outlook, the IEA foresaw a surplus in the first half of this year, as booming US shale oil production continues to dim the efforts of other major producers to reduce excess output.

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Meanwhile, with the immediate concern over the spread of the coronavirus easing, the dollar stabilised against a basket of currencies, denting the gold price.

With the dollar holding steady, above the lows for the day, gold was down 0.1 per cent on the day at $1,556 an ounce.

London Capital Group strategist Jasper Lawler said: “What we have observed is that in the current environment, gold will get a knee-jerk positive reaction to geopolitical uncertainty but give it back equally quickly.”

At the World Economic Forum in Davos, US Treasury Secretary Steve Mnuchin told a panel Washington would keep the pressure up on Beijing as the two thrash out the next stage in their trade negotiations.

"There's no question that the President's tariffs have been a big incentive in all these trade agreements," Mnuchin said. "We could easily have 2a, 2b and 2c. It doesn't need to be a big bang … [the tariffs] are a big incentive for the Chinese to continue to negotiate and conclude various parts of the agreement.”

FURTHER READING: Antofagasta says Q4 copper production slumped

FURTHER READING: US has no deadlines for phase-two China deal

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