Finally, the FTSE 100 index has closed 68 points higher at 7480, up almost 1% today.
That still means it has lost 100 points over the last two sessions, amid coronavirus worries.
David Madden of CMC Markets says traders have been snapping up potential bargains after Monday’s rout, and hoping Beijing gets a grip on the crisis:
Stock markets in Europe have pulled back some of the ground that was lost yesterday. In relation to the coronavirus, the situation has deteriorated in the past 24 hours as the number of confirmed infections has risen, and so has the number of fatalities. The positive move in equities is probably down to short covering plus bargain hunting as the health crisis has deepened. The longer the news story hangs around, traders might build up a tolerance to it.
The Chinese central bank has made it clear it is willing to use monetary tools in a bid to lift economic sentiment, should they feel it is required. The message from Beijing reassured traders somewhat, but the acid test will be whether the rebound lasts or not.
Here’s an interesting thread on the implications of the coronavirus, from Canada’s Toronto-Dominion Bank (TD).
1/6 TD: We are only 1 month into the New Year & investor questions have never been higher on a flurry of events. So far, we’ve seen a China-US trade deal, signing of USMCA, the sudden escalation of US tensions w Iran & most recently, growing concerns over a #coronavirus outbreak
2/6 TD: It’s reasonable to assume that mainland #China#growth will absorb significant #economic loss in the current quarter and potentially the next. Estimates guided by SARS place the annual impact at 1% or more (cont)#coronaviruspic.twitter.com/3o9unQn16d
3/6 TD: "It is early days and estimating #economic impacts (outside China) would be purely an exercise in speculation. What we can say is that if this #coronavirus does follow a similar path as SARS, impact on #Canada & the #US would be limited to 0.1 percentage points or less"
4/6 TD: So far #marketsentiment it has been shaken, but not stirred. #Bond, #equity & #volatility measures have moved in the direction of risk & uncertainty, but with some restraint. #Markets will always fear what they cannot see and accurately measure." (cont)#coronoavirus
5/6 TD: During peak #SARS period, #VIX moved higher by roughly 10 points & remained elevated, but this also coincided with military mobilization and subsequent commencement of the Iraq war. Even with this toxic combination, the VIX upward shift lacked duration and depth. pic.twitter.com/pfvKkdajM6
6/6 TD: Today it has risen by less than 10 points. Interestingly, this #fear-based metric captures a more tempered response by #financial#market participants relative to periods when trade tensions flared up between the US and China in the spring and summer of 2019#coronoaviruspic.twitter.com/ORluhtp0a1
The pick-up in American consumer confidence is also lifting equities, as it bodes well for US economic growth this year.
But... the main indices have still only recovered a third of Monday’s losses.
FTSE 100: up 61 points or 0.9% at 7,475
German DAX: up 87 points or 0.66% at 13,292
French CAC: up 48 points or 0.8% at 5,911
Wall Street has also opened higher, with the Dow Jones industrial average gaining 129 points or 0.45% (it lost 450 points on Monday).
Chris Towner, Director at risk advisor JCRA, says investors are trying to get to grips with the Wuhan virus.
“With the death toll rising above 100, financial markets are still trying to gauge the potential reach of this deadly virus. By comparison, the SARS virus impacted 8098 people with 774 fatalities. The question now is how quickly can this virus be contained and, in the meantime, how many countries and economies will be impacted? In times of risk aversion money normally floods into the Japanese yen and the Swiss franc.
Due to the proximity of Japan to China the risk of the virus penetrating Japan is high, with one confirmed case so far. Therefore, the Swiss franc is currently seen as the ultimate safe haven and has strengthened by over 3% against the Euro from its pre-Christmas level of 1.10 CHF to the Euro in the 1.06’s, the strongest level since April 2017.
Markets will now be focusing on the pace of the spread of the virus and whether there are signs of acceleration or deceleration.”
Just in: US consumer confidence has rallied this month, by more than expected.
The Confidence Board’s survey of consumer morale has spiked to 131.6, up from 128.2 last month.
Americans interviewed for the survey said their current financial situation had improved, adding that they were more optimistic about their future prospects.
“It is very difficult to definitely estimate when the outbreak reaches its peak. But I think in one week or about 10 days, it will reach the climax and then there will be no large-scale increases,” Zhong said.
Zhong is the head of a national team of experts set up for the control and prevention of the novel coronavirus-caused pneumonia and an academician of the Chinese Academy of Engineering.
For anyone not following every twist in the Wuhan virus story, Zhong Nanshan is the expert who first sounded the alarm. Now saying it will peak in 7-10 days and "then there will be no large-scale increases". Far more positive than other recent predictions. https://t.co/sRIppMcyMU
Despite the slump in demand for aircraft, overall US durable goods rose by 2.4% in December.
But if you strip out defence kit, demand was slightly lower. That’s a disappointing sign, says Chad Moutray, chief economist at the National Association of Manufacturers:
New durable goods orders rose 2.4% in Dec., bouncing back after falling 3.1% in Nov. The latest figures are boosted by very strong defense aircraft & parts orders. Excluding transportation equip., new durable goods orders edged down 0.1%, extending the 0.4% decline seen in Nov. pic.twitter.com/Q6ERpxu86u
New durable goods orders have fallen 3.7% over the past 12 months, with a decline of 1.0% with trans. equip. excluded. New orders for core capital goods—a proxy for capital spending—decreased 0.9% in Dec., but on a year-over-year basis, this figure has increased by 0.9%. pic.twitter.com/Y5sC3DvgaU
Durable goods sales ended the year on a disappointing note, despite the stronger headline number, with global economic headwinds and trade uncertainties challenging the sector. Look for signs of improvement in the coming months considering recent stabilization in some measures.
737 Max crisis: Ryanair jobs at risk as orders slump
A Boeing 737 Max aircraft at Boeing’s 737 Max production facility in Renton, Washington. Photograph: Lindsey Wasson/Reuters
Ouch. We have fresh evidence today that Boeing’s 737 Max crisis is causing economic harm.
First up, US aircraft orders plunged by almost 75% in December, according to the latest durable goods orders report just released.
That’s the biggest slump in non-defence aircraft orders since 2009, as airline hold off buying 7373 Max jets until the problems that caused two fatal crashes are fixed.
This delay is hurting Boeing (which sacked its CEO last month), and also harming its customers. It currently hopes to get the plane flying by this July.
Ryanair has warned pilots that it could be forced to close some bases, resulting in job cuts, because of the persistent delays.
In a memo, the budget airline told staff it won’t receive its first 737 Max jets until September or October at the earliest, as Ryanair does not take deliveries during its peak summer months of June, July and August. It had originally hoped to take delivery last April, boosting capacity on its routes.
Back in the UK, some of the investors caught up in Neil Woodford savings scandal have learned how much of their money has been lost.
And, as feared, it’s a very heavy blow.
Link Fund Solutions, which has been winding up the Equity Income fund, says investors will receive an initial payment of 46.3p and 58.9p for each share they owned in the fund, compared to 100p when it was launched.
They should receive a second payment, once the less-liquid assets held by the fund are sold off (although that will be a trickier task).
Chinese video games giant Tencent and online retail giant Alibaba are also trying to keep staff out of the office, CNBC flags up:
Chinese tech companies like Tencent and Alibaba are telling their workers to stay home through February 10 because of the coronavirus in Wuhan. @onlyyoontv has the latest on the #coronavirus spooking markets and investors: pic.twitter.com/4tqesYcZcP
An oil installation on the outskirts of In Amenas, deep in the Sahara near Algeria’s border with Libya. Photograph: Farouk Batiche/AFP via Getty Images
The oil price would probably be even lower, but for ongoing supply disruption in Libya.
Libya’s crude output has tumbled in recent days, as the Libyan National Army (based in Benghazi) have blockaded ports as part of their campaign against the Libya’s Tripoli-based Government of National Accord.
This has pulled Libya’s oil production down from 1.2m barrels a day to 260,000 barrels and it could soon all-but run out.
Bjarne Schieldrop, chief commodities analyst at SEB, predicts that Opec (the oil cartel) could soon step in and cut supplies, to prop prices up.
“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. This should imply that the sell-off in Brent crude is still not yet over, as the crisis is still intensifying....
On the supply side however, we see that Libya’s oil production will likely be down to zero (from 1.1 m bl/day) within days. 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.
The oil price is also suffering today, with Brent crude down 1% at $58.88 per barrel.
At one stage it touched $58.88, the joint-lowest since October.
Analysts at SP Angel Oil and Gas blame the ‘panic’ around the escalating coronavirus, telling clients:
The number of casualties in China continues to climb, as do cases of the virus elsewhere in the world
The Chinese government has tried to quarantine Wuhan and other cities, affecting tens of millions of people. Multinational businesses in China are also implementing lockdown procedures.
Oil demand growth is the biggest factor weighing on prices, China’s oil demand has been growing at an annual rate of 5.5%, while comparatively, US oil demand has been growing by 0.5%
Most of the demand loss will come from jet fuel as the risk of disease discourages travellers
Back in the UK, retail sales remain flat this month despite the so-called Boris Bounce.
Retailers are evenly split between those enjoying stronger sales this month, and those suffering weaker demand.
That’s according to the CBI’s monthly ‘distributive trades’ survey, which has come in at zero for January, the same as December.
That’s better than November’s -3, and a sharp improvement on the -49 suffered last August (when most shops reported declining volumes).
Retailers also reported that sales were poor for the time of year, undermining the theory that December’s general election has brought much cheer.
Anna Leach, CBI Deputy Chief Economist, says:
“Both official data and business surveys are painting a picture of subdued activity for retailers. A challenging Christmas has extended into the New Year, with little expectation of any improvement soon.
“2020 looks set to be another tough year for the sector as growth in households’ disposable income is set to remain modest and retailers continue to battle longer-term issues such as digital disruption and the cumulative burden of policy costs. The upcoming Budget provides an opportunity for the Chancellor to support retailers, primarily by fixing the broken business rates system.”
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