Markets across the globe were in free-fall on Monday as Chinese authorities’ attempt to slow the speed of the spread of coronavirus appear to be failing. 80 mortalities have been recorded at the time of writing and 2744 are infected in China alone, with 30,000 under observation.
The bottom is falling out of this market as traders attempt to gauge the potential impact that the deadly, aggressively spreading coronavirus could have. On the FTSE traveller firms are the biggest fallers, with miners and luxury fashion retailer Burberry also dominating the loser board.
The coronavirus inspired selloff in oil, which saw the black stuff shed over 7% across the previous week was showing signs of stabilising on Monday. Whilst gapping lower on the open crude oil has rebounded off support at just above $52.1 and had pushed back over $53 by mid-afternoon.
Dax Slumps 2.5%
Whilst the FTSE was down 2.2% the DAX was the biggest drag in Europe as Investors sold out of riskier assets amid growing concerns over the impact that coronavirus will have on Q1 growth and global trade.
Adding to Germany’s woes was IFO business confidence data which undershot in January, printing at 95.9 vs expectations of 97. The IFO executives outlook index unexpectedly fell to 92.9, driven by dwindling prospects in the service sector and construction sector, sectors which had supported Europe’s largest economy in recent quarters. Perhaps the only positive from the report was that manufacturing continues on show signs of stabilisation; whilst the sector is still shrinking it is doing so at a slower pace.
All in all, the data has dashed hopes that rising optimism among companies would lead to a broader economic recovery. Instead the data sounds a warning bell for those expecting a solid rebound in German economic growth.
Outlook
This week is a busy week in the markets with 2 central bank announcements, significant US and Eurozone macro data releases and US tech stocks reporting. However, should the spread of coronavirus continue at its current pace, it looks likely to overshadow other event-based risk events.
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