The European market kept its collective head on Monday morning, avoiding another plunge despite the alarming losses in China.
One of the more curious aspects of the coronavirus situation is that, while the rest of the world’s indices suffered, the Shanghai Composite was side-lined by the Lunar New Year holidays. Well, Monday saw it play catch-up. The Chinese index lost close to 8%, investors bailing at the first chance they got – this as the death toll jumped by 57, the single one-day increase since the virus was detected.
Instead of treating this as another chance to sell, Europe was level-headed after the bell. The DAX rose 0.2%, while the CAC eked out a 0.1% increase. The FTSE was a bit more energetic, adding 0.3%, though that’s because of the pound’s early February retreat. As for the Dow Jones, the futures are currently pencilling in a 100 point bounce later this afternoon.
Sterling started the month by unwinding a good chunk of the growth posted after the Bank of England voted not to cut interest rates last Thursday. Down half a percent against the dollar, and 0.4% against the euro, it would appear that the currency has taken a look at what comes next Brexit-wise – i.e. the long, arduous, and, you know, pretty damn important trade negotiations between the UK and EU – and had a bit of a wobble.
Its fears aren’t unfounded. They are based on the details of a speech Boris Johnson is set to deliver to businesspeople and ambassadors, one stating that the UK will refuse close alignment with EU rules and reject the jurisdiction of European courts. In other words, exactly the kind of tactic that is going to give sterling palpitations over the coming months.
Some of its losses could be eased if the morning’s UK manufacturing PMI goes its way. However, analysts are expecting little change, the figure forecast to hold steady at 49.8.
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