Europe open: Stocks reel after increase in coronavirus cases in Italy
Stocks across the Continent were sent reeling at the start of the week by news of increasing numbers of coronavirus cases across South Korea and - closer to home - Italy.
Amid news that Austria had blocked various passenger trains from Italy at the Brenner Pass and that Turkey was closing its border with Iran, Michael Hewson at CMC Markets UK said that financial markets "could well have to get used to an extended period of uncertainty, as consumer behaviour globally starts to change."
"There is already evidence that this is happening, with Chinese tourist numbers down across the world, while the French finance minister said that tourist numbers in France were already down over 30% at this weekend’s G20 finance ministers meeting," he said.
By Sunday, the number of cases in the Mediterranean country climbed to 140, forcing authorities to deploy the military to control movements into and out of some virus hit areas and to ban public events for a week, including the Venice Carnival and possibly also the Milan Fashion week.
Against that backdrop, as of 1100 GM, the pan-European Stoxx 600 was down by 3.68% at 402.33, alongside a 4.74% fall for the FTSE Mibtel to 23,601.51, alongside a 3.69% fall for the German Dax to 13,077.45, while the Cac-40 had given back 3.80% to trade at 5,800.66.
Euro/dollar on the other hand was down only 0.28% to 1.08197, but front month Brent crude oil futures were skidding 4.02% to $56.24 a barrel on the ICE.
April gold futures on COMEX meanwhile were going the other way, jumping 2.43% to $1,688.70/oz..
News of the virus's spread came even as China moved to lift some of its quarantine measures, with six provinces downgrading their threat level, albeit not at the virus's epicentre in the city of Wuhan - after authorities there backtracked on an earlier announcement.
To take note of, according to Bloomberg, millions of Chinese firms were in financial straits following the containment measures put in place in China, with the risk that the negative impact from a wave of bankruptcies could cascade through the economy.
Somewhat ironically, the IFO institute's business confidence index for Germany edged up from a reading of 95.9 for January to 96.0 in February (consensus: 95.2), led by an improvement in a gauge for companies's expectations.
Claus Vistesen at Pantheon Macroeconomics said rising expectations were a bullish sign, even as he cautioned that it was especially difficult to interpret the data at the moment.
"News over the weekend that several towns in Northern Italy have been effectively shut down—and air and rail traffic suspended between Italy and Austria—seems to have been the straw that broke the camel’s back," Vistesen said.
"In short, financial markets are now starting to price-in an increasingly nasty economic shock at the start of 2020."