Desperate for an excuse to enter the market at a discount price, investors clung onto the weekend’s stimulus statements as the Western indices surged higher on Monday, only to be cut down by an axe-wielding OECD.
The Organisation for Economic Co-operation and Development wasn’t shy about highlighting the impact of the coronavirus on China. The institute is now expecting the superpower to post growth of 4.9% in 2020, against its previous forecasts of 5.7% (remember, anything under 6% has historically caused investors to panic).
The US came out best, its revision from 2.0% to 1.9%, though that could change if the country sees its own outbreak accelerate in the coming weeks. The Eurozone was down from 1.1% to 0.8%; one imagines that’s conditional on the region’s major coronavirus issues remaining localised to Italy. As for the UK, the OECD is pencilling in GDP of 0.8% against its previous estimates of 1.0%.
Overall this was a confidence blow to the giddily rebounding markets. However, the reaction wasn’t uniform. The DAX and CAC swung from a 1.7% rise to losses of 0.9% and 0.6% respectively, keeping both at 6-month-plus lows. The Dow Jones was a mixed bag, initially pushing 200-odd points higher, before settling into a 40 point increase.
The FTSE was alone in maintaining any significant growth on Monday, and even then its 0.9% increase paled in comparison to the near 3% rise it saw during the morning session. The UK index – which is now back above 6600 – for once actually benefited from its commodity-heavy make-up. With oil and copper holding rising 0.8% and 1%, the likes of Rio Tinto (LON:RIO), Shell (LON:RDSa) and BP (LON:BP) climbed between 2.1% and 2.8%.
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