FTSE struggles in the face of spreading coronavirus
Fiona Cincotta February 21, 2020 6:58 AM
The coronavirus has just become less predictable as it took hold in South Korea and the number of cases there tripled in the last few days. This is dragging on risk sentiment
The coronavirus has just become less predictable as it took hold in South Korea and the number of cases there tripled in the last few days. The faster spread of the virus in Korea comes on top of the still rising numbers of infected in China, now around 75,000, and a higher number of cases across Asia and Europe.
Euro bounces on PMI data
Ironically, before the virus, Europe may have been on the cusp of improvement. The region’s purchasing managers index hit a 12 month high of 49.1 this month, up from 47.9 in January, in a development that might have been caused by changes to the supply chain after some Chinese factories closed down in January. Next month’s reading is unlikely to show the same kind of improvements given that the German economy, the region’s largest, is heavily exposed to China, particularly in the car and parts industry. Still, the euro perked up after the unexpectedly positive PMI data, trading up 0.30% against the dollar but nearly flat against the pound.
EU meets to consider budget after Brexit
And sterling and Britain would have been among the talking points for EU heads of states last night while they were discussing the bloc’s next joint budget and how to plug the whole in financing left by Brexit. Frictions are high as member states are in a deadlock over who should contribute more and what the new budget, which is due to be published today, should be spent on: the environment, immigration or farm aid.
Virus drags commodity firms and miners lower
On the FTSE Pearson was the hardest hit stock after the firm reported a 50% drop in operating profit and then followed this up with a profit warning for 2020. Commodity companies, miners, luxury goods group Burberry and hotel chains continue to carry the burden of the infection in Asia and are all trading lower. A global airlines trade group now estimates that COVID-19 will cost the industry around $29 billion in lost revenue.
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