Morning Bid Europe: Markets remain on edge as virus spreads beyond China

Draegerwerk AG & Co KGaA

27/02/2020 09:11

* A look at the day ahead from EMEA markets editor Mike
Dolan. The
views expressed are his own.

    By Mike Dolan
    LONDON, Feb 27 (Reuters) - World markets remain on edge as
the coronavirus spreads beyond China. Several countries in
Europe recorded cases, which apparently spread from Italy, but
U.S. authorities reported a case in California that had no known
connections with countries or other persons already infected.
U.S. President Donald Trump claiming the risk to Americans from
the conoravirus was "very low" as he put Vice President Mike
Pence in charge of the official response. Australia initiated
emergency measures and Taiwan raised its epidemic response level
to its highest.  Markets stabilized to some degree on Wednesday,
but Wall Street’s S&P 500 ended lower again, implied volatility
measured by the VIX fear gauge remained above 27% and 10-year
U.S. yields set a record low of 1.2940% overnight. The yield
curve from three months to 10 years was inverted by 21 basis
points. 
    Asia trading saw a split in sentiment. China, the origin of
the COVID-19 virus, now hopes the outbreak is under control.
South Korea, on the other hand, continued to report a rising
infection rate, and there was some disappointment its central
bank did not cut interest rates today. Shanghai and Hong Kong
stocks closed higher, but Seoul’s Kospi lost another 1%. Japan’s
Nikkei and Jakarta’s main market both lost more than 2%.
Australia’s benchmark was down 0.75%. 
    With several European countries beyond Italy now reporting
rising cases, European stock futures were down 2%, reversing
Wednesday’s modest gains. In addition, German Chancellor Angela
Merkel's conservatives said they would not support a proposal by
Finance Minister Olaf Scholz to ease strict debt limit rules and
help indebted municipalities increase spending on local
infrastructure. Reports of the move to ease fiscal policy had
lifted European stocks and bond yields briefly on Wednesday.
Wall Street futures were down 0.5% first thing. Brent crude oil
prices fell to $52.50, their lowest since January 2019. Gold
prices, Switzerland’s franc and Japan’s yen gained. The dollar
was down amid rising speculation the Federal Reserve will soon
cut interest rates, and euro/dollar recaptured $1.09. Sterling
rose against the dollar as the UK government prepared to publish
its mandate on EU-UK trade negotiations. Sterling fell on
Wednesday amid reports the coronavirus outbreak and the economic
outlook were likely to put off greater UK government spending.
    In European corporate news, Standard Chartered fell 2% after
warning it would take longer to meet a key earnings target. AB
InBev fell 5% after it forecast muted growth in 2020, partly
because of the coronavirus outbreak. Frontline warned of a near-
term hit and jet engine maker Safran  said its "high single
digits" growth forecast depended on disruption not extending
beyond the end of March. Travel restrictions in China have
clouded Apple's timeline for new iPhones; it's not yet clear
whether the virus has affected production. Microsoft said it
would miss a quarterly revenue forecast for its Windows and
personal computing business.
    Germany's Qiagen rose 0.3% after said it shipped a new test
kit for coronavirus to four hospitals in China for evaluation.
Its shares gained 4% in extended U.S. trade. In early Frankfurt
trade, breathing protection equipment maker Draegerwerk rose 4%.
JP Morgan upgraded Wolters Kluwer saying that the information,
software and services provider offers a safe haven against virus
uncertainty.
    Bloomberg reported Nokia Oyj is exploring strategic options,
such as asset sales and mergers. Other stock movers: NMC Health
removed its CEO amid an investigation of its finances; its
shares were seen down 20% premarket.
    * Europe corp events: Saint Gobain, Ferrovial, EVRAZ, St
James’
Place, Hikma Pharma, RSA, Inchape, Howden Joinery, Rentokil,
Dassault, Carrefour, TAG Immobilien, Engie, Getlink, WPP,
Persimmon, Reckitt Beckinser, BAT, Bayer, Zalando, Safran
Anheuser Busch Inbev, Standard Chartered, Flutter, Lafarge
Holcim 

    * Spain, Belgium Feb flash inflation

    * Italy Feb consumer/business confidence

    * Italy sells government bonds

    * EZ Feb business/consumer confidence; Jan lending, M3 data 

    * European Central Bank chief Lagarde and Bank of England
chief
Carney speak on climate finance strategy in London

    * European Central Bank board member Schnabel speaks in
London;
ECB chief economist Lane speaks in London and Paris, ECB Vice
President de Guindos speaks in Seville

    * UK government to publish its mandate for trade talks with
the
European Union

    * U.S. trade representative Lighthizer visits UK 

    * Italy’s PM Conte and French President Macron meet in
Naples

    * Sweden Feb consumer/manufacturing confidence, Jan retail
sale,
household lending, trade balance, PPI

    * US Q4 GDP revision, core PCE estimate, corporate profits;
Jan
durable goods orders, pending home sales; weekly jobless claims

    * Canada Q4 current account

    * Mexico Jan jobless

    * Cleveland Fed chief Mester speaks in Cleveland

    * US Treasury sells 7-year notes                          


 (by Mike Dolan, Twitter: @reutersMikeD)
 ((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))