LONDON: European stock markets rallied strongly on Tuesday (Feb 4), as trading floors assessed the early impact of China's deadly novel coronavirus on the economy.
Gains overnight on Wall Street saw Asia follow suit while leading European indices all closed with strong gains of around 1.5 per cent. The Dow had likewise risen 1.6 per cent some two hours into Wall Street trading.
The dollar largely firmed while the pound recovered, after heavy falls on Monday triggered by Britain and the European Union offering very different ideas regarding their future trade deal following Brexit.
Markets' main focus remained on authorities' efforts to contain an outbreak that has now infected over 20,400 people and killed more than 420 people, more than the SARS epidemic that hammered Asian economies in 2003.
Cautioning that "news is hardly uplifting on the virus front," Edward Moya, senior market analyst at OANDA said "today's bounce may not go much further." With swathes of China in lockdown "the world's second largest economy is shut down and it will be tough to see US stocks recapture record high territories until the virus peaks," Moya forecast.
'PICKING AND CHOOSING'
Connor Campbell, analyst at Spreadex trading group, noted that "investors find themselves at an interesting, slightly difficult point in the coronavirus outbreak timeline," ensuring investors are "picking and choosing what developments they are willing to pay attention to.
"Further complicating matters is the fact ... the impact on the Chinese economy won't really be known until the next batch of data out of the country," Campbell added.
Investors "are still hoping that the Chinese government's measures against the growing spread of the virus will be effective" (and that) Beijing provides more economic support in the near future," said Milan Cutkovic, analyst with AxiTrader.
Oil prices were meanwhile bouncing back from tumbles since the deadly virus outbreak after Iraq's oil ministry said OPEC members and their ally Russia were discussing a further cut to crude oil output because of the epidemic.
The Organisation of the Petroleum Exporting Countries is holding a meeting of a "joint technical committee" in Vienna on Tuesday and Wednesday to discuss the virus's impact and whether an output reduction is needed, it said.
Benchmark oil contract, Brent North Sea crude, recovered to US$55.13 per barrel having earlier touched a 13-month low US$53.95.
The WTI oil contract was similarly back off a 13-month-low of US$49.66 per barrel at US$50.98.
The virus has spread to more than 20 countries, while several have imposed tough travel rules including banning flights to and from China.
Meanwhile, the World Health Organisation has declared a global health emergency.
The virus was "inflicting a heavy blow" to China's economy, said National Australia Bank's David de Garis, who warned growth would suffer unless the health scare passed off within weeks.
Shanghai's main stocks index rose 1.3 per cent on Tuesday - boosted by China's central bank injecting around another US$60 billion into the financial markets.
It had dived 8.0 per cent on Monday, with Chinese traders catching up with losses elsewhere while away for the long Lunar New Year break.
Key figures around 1650 GMT:
London - FTSE 100: UP 1.6 per cent at 7,439.82 points (close)
Frankfurt - DAX 30: UP 1.8 per cent at 13,281.74 (close)
Paris - CAC 40: UP 1.8 per cent at 5,935.05 (close)
EURO STOXX 50: UP 1.6 per cent at 3,720.65
Shanghai - Composite: UP 1.3 per cent at 2,783.29 (close)
Hong Kong - Hang Seng: UP 1.2 per cent at 26,675.98 (close)
Tokyo - Nikkei 225: UP 0.5 per cent at 23,084.59 (close)
Euro/dollar: DOWN at US$1.1044 from US$1.1060 at 2200 GMT
Pound/dollar: UP at US$1.3026 from US$1.2995
Euro/pound: DOWN at 84.76 pence from 85.11 pence
Dollar/yen: UP at 109.41 yen from 108.69 yen
Brent Crude: UP 1.1 per cent at US$55.07 per barrel
West Texas Intermediate: UP 1.1 per cent at US$50.65 per barrel