Europe open: Shares race higher despite coronavirus spreading
By Alexander Bueso
Date: Friday 24 Jan 2020
(Sharecast News) - Stocks are racing higher at the end of the week after the world's health watchdog refrained from labelling the new Chinese coronavirus a global health emergency and on the back of a much better than expected reading on euro area manufacturing.
Jasper Lawler, Head of Research at LCG, said that the World Health Organisation's judgement that the so-called Wuhan virus was only - at least for the time being - a local emergency in China, had taken "the fear gauge down a few notches".
"The travel restrictions and cutback Lunar New Year celebrations will have some kind of dampening effect on Chinese growth. Only, based on what the WHO is saying, the same problem will not be felt globally," he added.
Overnight, Chinese authorities extended travel curbs to 10 cities with an approximate population of 40.0m people, with cases having reportedly been detected in 32 of 34 of the country's provinces.
As of 0911 GMT, the benchmkark Stoxx 600 was jumping 1.21% to 425.10, alongside a gain of 1.38% for the German Dax to 13,573.29, while the French Cac-40 was 1.49% higher to 6,060.96.
Travel&Leisure stocks were pacing gains on the heels of the WHO's decision, with the Stoxx 600 sector sub-index up by 1.79% to 261.74.
Basic Resources shares on the other hand, which had fallen sharply the day before due to concern that the so-called Wuhan virus might spread further over the Lunar New Year, appeared to only be putting in a half-hearted bounce, adding 1.47%.
As an aside, in a research note sent to clients on Friday morning, strategists at Bank of America-Merill Lynch said that if the US Federal Reserve signalled "carry on liquidity" at its policy meeting during the following week, then " irrational bullish phase continues in Q1".
"What level of irrational exuberance on Wall St causes Fed to tighten [...] Nasdaq 10,600. Sell-side all "melt-up bullish", buy-side all "it's a bit toppy"," they said.
On the economic side of things, survey compiler IHS Markit's euro area composite Purchasing Managers' Index for output printed at 50.9 for January, unchanged from the month before and below economists' forecasts for a reading of 50.2.
Despite the weaker-than-expected print on the composite measure, which tracks both Eurozone manufacturing and services, the former came in well ahead of what was anticipated, and in the case of Germany PMIs for both sectors rebounded.
The euro area factory PMI rose from 46.1 in December to 47.5 for January (consensus: 46.8) and that for Germany from 43.7 to 45.2.
"It's still early to be sure, but it looks a little bit like a tepid rebound in the making now," said Claus Vistesen at Pantheon Macroeconomics, who also called attention to the signs in survey responses of stabilisation in export demand.
Shares of Carrefour were near the top of the leaderboard after the French grocer posted an acceleration in like-for-like sales to 3.1% in fourth quarter, helped by a return to growth in Spain and bumber sales in Brazil. Carrefour also guided towards a 7.4% rise in full-year recurring operating income to €2.09bn, with double-digit growth expected in its home market.
Elsewhere on the Paris bourse however, shares of Ipsen went into reverse on the back of local reports that it had stopped recruiting patients for phase III clinical trials of Palovarotene, a treatment for fibrodysplasia ossificans progressiva.
Sweden's Ericsson was another top faller on the Stoxx 600 despite posting a sharp turnaround in fourth quarter profitability versus the year before.
Scandinavia's largest tiremaker, Nokian Renkaat Oyj was also rolling lower following its latest update to investors and weighing on stock of sector peer Pirelli.
Remy Cointreau was near the bottom of the pile after the spirits maker posted a 9.7% fall in in third quarter sales to €290.2m and suspended its financial guidance, telling shareholders that it would outline a new strategic roadmap later in 2020.
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