Investors will be watching European stocks today, with markets continuing to witness a week of high volatility amid coronavirus fears.
Context: European shares closed lower on Thursday after a strong rally following the IMF’s announcement of a $50 billion package for low-income and emerging markets countries to fight the coronavirus. Investor sentiment was also buoyed by US Federal Reserve’s emergency interest rate cut.
Details: European markets plunged, as investors were again gripped by fears of the coronavirus impact on the global economy. Various central banks eased their monetary policies during the week. The US, Australian and Canadian central banks cut interest rates in a bid to trigger the economy amid coronavirus risks. The Bank of England is expected to follow suit soon.
The Stoxx Europe 600 index, which had gained for three consecutive sessions, dropped 1.43% on Thursday, with basic resources and autos leading the decline. The German 30 index fell 1.51%, after rising 1.2% in the previous session. The French 40 index was down 1.9%, with foods & drugs and general financial sectors being the worst performing.
HSBC announced a positive case of COVID-19 on Thursday, while the US confirmed two more cases in New York City. With coronavirus spreading around the world, countries have been forced to take various measures to contain the virus. California has declared a state of emergency after its first virus-related death and Italy has closed schools and some offices until mid-March.
According to the WHO, there were at least 95,200 coronavirus cases globally, with the total death toll at around 3,270.
In corporate news, shares of Hugo Boss gained 3% after the company reported earnings for 2019, increased its dividend and issued a solid 2020 forecast. Norwegian Air Shuttle’s shares fell as the company withdrew its profit outlook for 2020, with the virus outbreak wreaking havoc in the airline industry. Struggling with profitability, airlines have announced asset sales, terminating flights on some routes, delaying aircraft deliveries and trying to change loan terms.
In other news, the OPEC announced plans to reduce oil production by 1.5 million bpd (barrels per day) in the second quarter, pending approval from Russia.
Why it matters: After a dismal performance in Thursday’s session, all eyes are on the basket of economic reports from the European countries scheduled for release today. These include Germany’s factory orders, France’s balance of trade, Spain’s industrial production and Italy’s retail sales. Strong data readings are likely to push the markets higher.
What to watch: Investors are closely monitoring reports from countries around coronavirus numbers. Industrial production in Spain, which rose 0.8% in December, is expected to decline 1.3% in January. Analysts are expecting Italy’s retail sales to drop 1% in January, versus a 0.5% rise in December. Germany's industrial orders are expected to rise 1.4% in January, versus a 2.1% drop in December.
Other Markets: Most European indices closed lower on Thursday, with the FTSE 100, German 30 and French 40 down 1.62%, 1.51% and 1.90%, respectively.