The coronavirus fears have gripped the markets this morning as all the major European equity benchmarks are nursing big losses. The situation in China is particularly bad as at least 80 people have passed away from the virus and there have been more than 2,700 confirmed infections. Stocks that are connected to China are feeling the pain this morning as traders are afraid the health crisis will curtail economic activity. Beijing have extended the Lunar New Year holiday in a bid to help tackle the problem.
Iron ore and copper prices tumbled on fears that China’s demand would be dampened in light of the current events, and in turn mining stocks likeAnglo American (LON:AAL), Antofagasta PLC (LON:ANTO), and BHP (LON:BHPB) have been hit hard. The underlying oil market is under pressure too seeing as China is the largest importer of the commodity in the world. The big players in the oil sector are faring better than the smaller firms. BP (LON:BP) as well as Royal Dutch Shell (LON:RDSa) are showing minor losses, while Tullow Oil (LON:TLW) is down over 3%.
Long-haul airlines like Air France KLM (PA:AIRF), Lufthansa (LON:0H4A) and International Consolidated Airlines Group (LON:ICAG), are all down at least 4% on the back of concerns that air travel to and from the Far East will be hit.
Many luxury European brands such as Remy Cointreau (LON:0MGU), LVMH (PA:LVMH) plus Burberry (LON:BRBY) have sizeable exposure to China in terms of revenue, so they are in the red too.
Sthree (LON:STEMS) announced respectable full-year figures as reported profit before tax increased by 11% to £59.1 million. The reported revenue figure slipped by 1% to £1.345 billion. The international operation helped off-set the UK and Ireland division – which was hit by Brexit related uncertainty. Continental Europe, the US and Asia Pacific and the Middle East saw nets fees rise by 8%, 9% and 12% respectively, while the UK and Ireland unit posted a 9% fall in fees. Sthree is highly diversified as 86% its fees come from the international division, while last year that metric was 83%. Political uncertainty connected to the UK’s impending departure from the EU is likely to continue, but given Sthree’s structure in terms of revenue it is in a relatively good position to withstand the uncertainty. The stock is largely flat on the day, which is impressive when you consider the wider sentiment.
Petra Diamonds (LON:PDL) posted a 6% fall in first-half revenue to $193.9 million. The company cited the US-China trade dispute as well as the unrest in Hong Kong for lower diamond prices. The group confirmed that demand ticked up in the second-quarter, and it is on track to achieve its full-year production target. It is unfortunate that external factors are hurting Petra, but at least their production seems to be under control.
Rolls-Royce (LON:RR) shares have been hit by a downgrade as Citigroup (NYSE:C) have cut their price target to 1,080p from 1,212p.
EUR/USD was pushed lower by the German Ifo business climate report as the reading slipped to 95.9 from 96.3 ,while economists were expected it to tick up to 97.
We are expecting the Dow Jones to open 409 points lower at 28,580 and we are calling the S&P 500 down 47 points at 3,348.
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