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Thursday, 6 February 2020 00:47 - - {{hitsCtrl.values.hits}}
London (Reuters): Expectations of more central bank stimulus lifted world stocks to their highest in more than a week on Wednesday, helping investors look past a mounting coronavirus death toll and policymakers’ concerns for the disease’s economic impact.
Stringent containment measures, alongside the billions of dollars pumped in by Chinese authorities, boosted mainland China indexes more than 1%. The bourses have already clawed back half the $700 billion market cap wiped out during Monday’s selloff.
A pan-European equity index and Wall Street futures were up 1%, reversing early losses.
MSCI’s global benchmark rose 0.3%.
Traders attributed the turnaround also to a Chinese TV report saying a Zhejiang University team had found some drugs that could inhibit the coronavirus in vitro cell experiments. Reuters has not confirmed the veracity of the report.
“Traders have taken the view that the situation is now more likely to be under control and hopefully the spread of the health crisis will be stemmed,” said David Madden, market analysts at CMC Markets.
The report and the stimulus expectations offset at least partly the news that the virus’s death toll had killed 500 and sickened 25,000.
Data also showed euro zone and UK business activity accelerated last month, though the figures were mostly collected before the coronavirus spread much beyond China.
The concerns for economic growth were reflected in signals from the Bank of Japan and the Monetary Authority of Singapore that they were ready to ease policy. BOJ Deputy Governor Masazumi Wakatabe pledged not to rule out any option, including lowering already-negative interest rates.
The Singapore dollar hit a near-four-month low after authorities said the currency had room to weaken to offset the virus impact. Markets responded by pricing in policy easing at the April meeting.
China (PBOC) is also likely to lower its key rate on 20 February, sources told Reuters, while Thailand unexpectedly cut interest rates.
“Clearly ... all central banks are ready to act if necessary,” said Justin Onuekwusi, a portfolio manager at Legal & General Investment Management.
“Lessons from the (2003) SARS outbreak also show the shock to the real economy tends to be temporary and markets do recover very quickly from such outbreaks.”
The treatment breakthrough reported also boosted the Australian dollar 0.4% to a one-week high while the Swedish and Norwegian currencies also strengthened.
