The FTSE 100 and global stock markets have risen after China cut tariffs on US goods in a bid to boost market sentiment amid the coronavirus outbreak, with an all-Europe index hitting a record high.
The FTSE 100 was 0.3 per cent higher by 3pm, despite the third case of coronavirus being reported in the UK.
In the US, the Dow Jones and S&P 500 indices opened at record highs before slipping back slightly.
The Eurostoxx 600 index, which includes big firms from the UK and Europe, rose as much as 0.7 per cent to a new record high. It then slipped back somewhat to stand 0.3 per cent higher.
China’s finance ministry said that from 14 February it would lower tariffs on some US goods from 10 per cent to five per cent and on others from five per cent to 2.5 per cent.
Beijing did not give a value of the goods affected, but markets were cheered by the news.
Overnight in Asia, China’s Shanghai composite index rose 1.7 per cent, while Japan’s Nikkei and Hong Kong’s Hang Seng soared 2.4 per cent and 2.6 per cent respectively.
“While that announcement might have been aimed at supporting sentiment and easing somewhat the supply-side hit impact of the epidemic, it is also simply likely to be satisfying the commitments made in the first-phase trade agreement,” said Chris Scicluna of Daiwa Capital Markets.
Last month, the US and China reached a “phase one” trade agreement, which saw both sides pledge to lower tariffs after more than a year of growing protectionism.
But analysts said Beijing timed its tariffs announcement to inject some confidence into the markets amid a coronavirus outbreak that has rattled investors.
The death toll from the virus rose sharply yesterday. It has now claimed more than 560 lives, while the number of infections in China has risen to 28,000.
A rocky fortnight for investors
Markets have been shaken by the outbreak of the virus, which analysts fear will damage the economy.
Yet a recent rally continued today, and Britain’s stocks continued to rise despite the third case of coronavirus being reported in the UK.
The patient, who did not acquire the virus in the UK, has been transferred to a specialist NHS centre.
Ian Williams, economics analyst at broker Peel Hunt, said the rebound in markets may be viewed by some as complacency, “given that the outbreak is bound to have an impact on global growth in the first quarter”.
Yet he said: “The majority of investors still have faith that the ample supply of liquidity provided by central banks can underpin further gains for equity markets.”
The Chinese central bank, in particular, has injected billions of dollars into its economy and lowered key lending rates.
Neil Wilson of trading platform Markets.com said: “News may be bad, but investors are always looking – whether it’s to the US Federal Reserve or the People’s Bank of China – to the stimulus response. Investors are conditioned to buy dips.”