What to Watch: Coronavirus threatens global growth and UK factories, central banks lift markets

Tom Belger
Finance and policy reporter
A trader on the New York Stock Exchange floor on Friday, before markets recovered on Monday amid stimulus hopes. (Scott Heins/Getty Images)

Here are the top business, market and economic stories you should be watching today in the UK, Europe, and abroad:

Markets recover on stimulus hopes

European stocks rebounded on Monday as central banks around the world vowed to step in to stabilise economies as the coronavirus continues to spread.

The Bank of England said that it would take “all necessary steps” to fight the economic fallout of virus, adding it continued to monitor global developments.

That came after the Bank of Japan issued an emergency statement. It said it would provide “ample” liquidity to the country’s financial markets through short-term loans and asset purchases.

But the uplift in sentiment appears fragile, with stocks rallying on the open before shedding much of their gains in morning trading on Monday.

The pan-European STOXX 600 index (^STOXX), which had its worst week since the 2008 financial crisis last week, climbed by more than 2.2% as markets opened. It was trading only 0.4% higher at around 10am in London.

Read more: Coronavirus panic drives European stocks to worst week since 2008 crisis

The FTSE 100 (^FTSE) was up by around 2.2% on the open, but had slipped to 0.9% by 10am. France’s CAC 40 (^FCHI) was only 0.1% higher in mid-morning trading.

Germany’s DAX (^GDAXI) lost all its early gains and was trading 0.1% lower. It comes as Germany confirmed coronavirus had reached its capital, Berlin, and with cases reported in 10 of the country’s 16 states.

The gains followed a strong trading session in Asia. China’s SSE Composite Index (^SSEC) climbed by 3.15%, while the Hang Seng (^HSI) was up 0.62% in Hong Kong at market close.

Japan’s Nikkei (^N225) rose by over 0.9%. The KOSPI Composite Index (^KOSPI) in South Korea, where there have been almost 4,000 cases of coronavirus, closed almost 0.8% in the green.

OECD: coronavirus marks biggest threat since financial crisis

South Korean soldiers wearing protective gear sanitize a city in South Korea. (REUTERS/Kim Kyung-Hoon)

Global growth is likely to slow to its lowest levels since 2009 as the coronavirus hits countries’ economies, according to a new forecast.

The Organisation for Economic Cooperation and Development (OECD) released updated growth forecasts on Monday. It expects the world’s economic output will grow 2.4% this year, down from a previous November forecast of 2.9% and its lowest in more than a decade.

The OECD said the spread of coronavirus “presents the global economy with its greatest danger since the financial crisis.”

Countries could fall into recession if the virus spreads significantly throughout North America, Europe and Asia, the OECD’s chief economist Laurence Boone told Reuters.

UK manufacturers recover but warn virus hitting supply chains

The UK manufacturing sector expanded at its fastest pace since April 2019 in February, even as the sector warned of “rapidly emerging” supply chain disruptions related to the spread of coronavirus.

A closely watched survey by IHS Markit found that the growth of manufacturing output accelerated to a ten-month high last month, with the sector’s purchasing managers’ index reading coming in at 51.7, just slightly below analyst expectations.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

IHS Markit said that the outbreak of coronavirus, which has shuttered factories in China, has led to “sizeable raw material delivery delays, rising input costs and increased pressure on stocks of purchases.”

Major firms’ emergency plans to contain virus

Major corporations around the world are putting in place extraordinary measures to try and limit the spread of novel coronavirus.

Travel bans and remote working policies have been introduced in recent days and offices have been closed, as companies to try and protect employees from COVID-19. Twitter (TWTR), Amazon (AMZN), Google (GOOG), Goldman Sachs (GS), and Nike (NKE) are among the businesses that have introduced extra measures.

Twitter said in a blog on Sunday it was “suspending all non-critical business travel and events” as part of efforts to ensure “the health and safety of our employees and partners is not compromised”.

Johnson vows to drive ‘hard bargain’ in US trade talks

Prime minister Boris Johnson has vowed to drive a “hard bargain” in talks with the US over a trade deal due to start this month.

The UK government is set to publish its negotiating objectives for the trade negotiations later on Monday. It unveiled a similar document over EU negotiations last week, with the talks set to run in parallel. Negotiations in Brussels also begin on Monday afternoon.

Greater trade opportunities with the US could boost the UK economy by £3.4bn, the department for international trade said in a press release late on Sunday.

Officials say UK exporters and investors could secure greater access to US markets, with fewer tariffs and less paperwork. But a union leader warned a trade deal could allow US firms into the NHS, and risk undermining food and other UK standards.

What to expect in the US

Futures are pointing to a higher open for US stocks. S&P 500 futures (ES=F) were up 0.5%, while Dow Jones Industrial Average futures (YM=F), and Nasdaq futures (NQ=F) were both 0.7% higher.

The number of worldwide coronavirus cases is now close to 90,000. But the US Federal Reserve on Friday also signalled a strong policy response to the coronavirus fallout with an emergency statement.

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