FTSE 100 edges higher after coronavirus sell-off
The FTSE 100 has climbed higher in early-afternoon trading, making up lost ground after stock markets crumbled yesterday amid fears over the spread of coronavirus.
The UK’s benchmark index had risen 0.5 per cent by 1.45pm to stand at 7,449. France’s CAC 40, Germany’s Dax and the Euronext 100 each also gained around 0.5 per cent as investors returned to equities.
The mild market growth came despite the fact that coronavirus today claimed its first life in Beijing. The death toll has now hit 106 – all in China and all but six from the city of Wuhan, where the outbreak started – and the number of cases has surged to 4,515.
Today, China’s President Xi Jinping met World Health Organisation (WHO) chief Tedros Adhanom Ghebreyesus and said Beijing “is confident of winning the battle against the virus”.
Chris Beauchamp, chief market analyst at online trading platform IG, said: “I think the news out of China has been sufficiently ‘not too bad’ to allow some to think about rejoining the rally.”
He added: “After all, if you’ve watched it surge since October, you are likely desperate to get on board.”
Kit Juckes of Societe Generale said the ultra-low interest rates of central banks around the world were a factor. “The belief that low rates can and will smooth over in the deepest potholes in the road ahead for financial markets is deeply-ingrained.”
“But there will be an economic impact from the virus outbreak, even if we don’t yet know how long it will last and therefore how big the economic hit will be.”
In a sign of risk appetite, the yield on the safe-haven US 10-year Treasury rose one basis point (0.01 percentage point) to 1.62. Yields move inversely to price.
Various analysts warned that the historically high valuations of global stocks made them vulnerable to a change in mood.
Jim Reid of Deutsche Bank said: “The reality is that positioning and valuations are stretched and the data still has a lot to prove.”
Analysts at asset manager Unigestion said: “The outbreak of the Coronavirus ahead of the Chinese new year could act as a trigger to a broader sentiment shift which would only be accelerated by high valuations across the board.”