Equity sell-off deepens and oil falls below $59 as death toll from coronavirus rises, sparking fears over economic impact
- Stock markets in UK, Germany and France fall more than 2%
Cailin Birch, global economist at The Economist Intelligence Unit in London, has sent us her thoughts on the decline in oil prices.
Global markets have been rocked by the spread of the deadly coronavirus, which originated at a sea food market in Wuhan in southern China and has claimed the lives of 81 people so far, with thousands more infected. Cases have been confirmed in more than 10 other countries, including the US, France and Japan.
Many Asian stock markets were closed for the lunar new year holiday (which has been extended to Sunday in China), but Japan’s Nikkei index shed 2%, its biggest one-day drop in five months.
However, consumer credit was relatively weak, according to the UK Finance figures. It grew by 4% year-on-year in December, the joint-weakest pace since April. Within this, credit card lending rose 2.4%, the second-weakest performance since late 2014.
The Bank of England’s monetary policy committee meets on Thursday and will discuss whether to cut interest rates in response to the economic slowdown at the end of 2019 –– or to stay put amid signs of recovery since December’s election.
Separate figures from UK Finance, which represents UK banks and building societies, show that lenders approved the highest number of mortgages in more than four years in December. Mortgage approvals for house purchase hit 46,815, the most since August 2015.
The value of mortgage lending rose the most since March 2016, up a net £3.77bn. House price surveys are also pointing to a pick-up in the housing market since the general election in mid-December.
December’s jump in mortgage approvals adds to a growing amount of firmer data and survey evidence suggesting that the housing market could well be changing up a gear after a lacklustre 2019.
Ouch! Ifo casts doubt on German economic turnaround. Business climate fall from Dec and came in at 95.9 below consensus of 97. More worryingly: Forward-looking expectations component slid even more markedly to 92.9 counter to forecasts that it would rise to 94.8. pic.twitter.com/zcQTb15UC0
In other news…
Business morale in Germany worsened unexpectedly this month, after the economy narrowly avoided slipping into recession last year. Europe’s largest economy expanded 0.6% in 2019, the weakest growth since 2013.
The German economy is starting the year in a cautious mood.
How will Hong Kong be affected? Its economy dipped into recession last year as the pro-democracy protests took their toll.
Hong Kong has six confirmed cases of the coronavirus, and has banned residents of China’s Hubei province from entering.
Hong Kong’s economy was among the worst hit by SARS in the early 2000s. Now fears are rising over the spread of a new coronavirus—and the city is already in recession. https://t.co/QvsfByziAY
According to Reuters, the death toll from the coronavirus outbreak in China has climbed to 81 and the virus has spread to more than 10 countries, including France, Japan, Canada and the United States.
On the stock markets, shares of mining companies have been hit, as they are hugely dependent on demand from China. Evraz is the biggest faller on the FTSE 100 index in London, down 5.6%, and fellow miners Anglo American, Antofogasta and Rio Tinto have also tumbled.
The sell-off on stock markets is gathering pace. London’s FTSE 100 index has tumbled more than 2%, or 154 points, to 7431.77.
The Saudi energy minister mentioned the Sars outbreak. Severe acute respiratory syndrome (Sars) first appeared in November 2002 in southern China and killed more than 750 people in 37 countries. It was contained by placing patients in quarantine. The outbreak ended in 2004 and the disease has never resurfaced.
The diseases are similar –– Sars and the new virus are from the same coronavirus family, and both attack the lungs –– but China has responded differently to the latest outbreak, which originated at a seafood market in Wuhan. Sars was traced back to virus-infected bats.
In 2002, China was in denial and concealed the existence of Sars not merely from the outside world but from its own people. Newspapers were forbidden from reporting the disease, except for occasional statements from government officials assuring the public that there was nothing to worry about …
The fallout from China’s handling of Sars forced a move towards greater openness that has been apparent in other outbreaks of disease. In the case of the Wuhan flu, the World Health Organization as well as the public were informed on 31 December about the new disease.
Saudi Arabia, the world’s biggest oil producer, is closely monitoring developments in global oil markets as the deadly coronavirus spreads, amid “gloomy expectations” for the impact on the Chinese and global economy, the country’s energy minister said on Monday.
Prince Abdulaziz bin Salman said the Opec oil cartel and its allies could act to restore the stability of the oil market if needed –– but added he was confident that the Chinese government and international community would be able to contain the spread of the virus and eradicate it.
Such extreme pessimism occurred back in 2003 during the Sars outbreak, though it did not cause a significant reduction in oil demand.
have the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires.
The FTSE 100 index in London has fallen more than 110 points in early trading, losing 1.49% to 7473.29.
Over on the continent, stocks have also tumbled. France’s CAC has slid 1.7% while Germany’s Dax and Spain’s Ibex are both down 1.5%.
You can follow the latest news about the spread of the deadly virus on our main news blog.
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The year of the rat has not got off to a good start. Shares tumbled in the Asian markets that were open on Monday, as the death toll due to the coronavirus rose to at least 80 and the virus continued to spread. China extended its week-long lunar new year holiday by three days to 2 February and widened the restrictions that have curbed the movement of tens of millions of people.
Link : Stocks and oil slump on fears over China virus outbreak – business live