The cruse of the coronavirus in China is clobbering the FTSE 100 as some of the biggest fallers on the index are connected to the country in question.

Europe

China’s the world’s largest importer of oil so the renewed fears about the health crisis have hit stocks like BP and Royal Dutch Shell. Mining stocks such as BHP, Rio Tinto as well as Anglo American are lower too. It has been a double whammy for the FTSE 100 as the drive higher in sterling has dented internationally focused stocks like GlaxoSmithKline, AstraZeneca, plus Unilever. Firms that derive a large portion of their total revenue in a collection of foreign currencies often get hit when the pound jumps.

Things have gone from bad to worse at Centrica as the stock has been in decline for years on account of a falling customer base as well as weaker energy prices. Today’s full-year update was much of the same as the group posted a pre-tax loss of £1.1 billion. The firm had exceptional items of £1.75 billion, and a large portion of that were write-downs on assets. British Gas, a subsidiary of the group, saw its client base fall by 286,000. The energy provider is losing out to smaller, more nimble firms.

Barclays announced pretty good full-year figures today as profit before tax was £6.2 billion – topping forecasts. Trading income from fixed income, currencies, and commodities (FICC) rose by 17%. The depressed interest rate environment caused interest income to fall by 2%. The numbers took a backseat to the news the Bank’s CEO, Jes Staley, is being investigated for his connection with disgraced businessman Jeffery Epstein. Mr Staley is cooperating with the regulator. Staley knew Epstein from his time at JPMorgan – where Epstein was a client.           

US

Stocks in the US are in the red on the back of fresh fears about the health situation in China. The Chinese authorities reassessed the way they determine a new confirmed infection, and that showed a jump in the number of cases. US indices were on a roll this week so the spike in health woes has acted as an excuse to exit stocks. Demand is the US is clearly in good shape seeing as the headline CPI rate jumped from 2.3% to 2.5%, while the core CPI reading held steady at 2.3%.   

Tesla shares are lower on the back of the announcement the group plans to raise $2 billion via an equity offering. The CEO, Elon Musk, confirmed he will be purchasing $10 million worth of stock. The funds raised will be used to strengthen the company’s balance sheet. The story may or may not be connected but prior the equity raising story, Tesla announced plans to recall 15,000 Model X vehicles over a possible issue with the steering. If the two stories are unrelated, the intention to raise funds might be just be Tesla cashing in on the recent bullish sentiment, and it’s easier to attract fresh investment when times are good.

TripAdvisorshares have been hit by the wider negative sentiment. The quarterly numbers there posted last night received positive comments from market participants, but it seems the broader bearish mood today has dented the stock price. In the final-quarter the firm saw a slide in revenue to $335 million, which just about topped the consensus estimate. EPS for the period came in at 38 cents, topping the 33 cents forecast. The group’s outlook is largely optimistic as it expects full-year profit to be at least the same as the year just gone.       

FX

GBP/USD saw a jump in volatility on the back of the surprise announcement that Sajid Javid resigned as the UK Chancellor of the Exchequer. There was talk that Mr Javid stepped down as he was unwilling to dismiss his aides. Rishi Sunak, will the over as Chancellor. Sterling rallied as traders took the view that Prime Minister Johnson will find it easier to convince Mr Sunak to get on board with his pro-business polices. There is chatter that Mr Johnson would like to go on a spending spree as a way to boost the economy and try shake-off the Brexit-related malaise that is hanging over the UK economy.

EUR/USD is in the red again as the single currency seems to be getting hit across the board. Yesterday the euro fell to a 33 month low versus the US dollar, and today the bearish sentiment in the euro continues. Earlier in the session, the German CPI report showed the cost of living held steady at 1.6%, but it wasn’t enough to hold entice euro buyers.   

Commodities

Gold has been lifted by the change in sentiment whereby traders are dumping stocks, and they are funnelling cash into assets that are deemed to be lower risk like gold. The upward move in gold has been proportionate to the downside percentage move in global stock markets. The metal’s broadly positive trend continues, and should the bullish move continue it might target the $1593 area.    

WTI as well as Brent crude are higher on the session despite the deepening health crisis in China. The change in methodology to determine new case of coronavirus has shown a jump in the rate of infections. In the past 24 hours both OPEC as well as IEA have cut oil demand forecast to reflect the fallout from the health emergency. Despite the bleaker outlook for the energy’s demand, oil is up on the session.            

 

 

 


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