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Global shares hit record amid virus spread

Global shares hit record amid virus spread

Business Desk Stock markets across the world ticked higher on Friday, even as investors debated whether China's coronavirus outbreak would cause long-lasting damage to the global economy. Europe's broad Euro STOXX 600 hit a record high, gaining 0.2 per cent to mirror gains in Asia after a choppy start to the day. Indexes in London .FTSE and Frankfurt gained 0.2 per cent and 0.3 per cent respectively, with the former moving higher after AstraZeneca shares turned positive. The drugmaker had earlier fallen 5 per cent after it said it would take a hit from the coronavirus outbreak. It was a similar picture in Paris .FCHI, which clawed back some early losses as Renault (RENA.PA) shares turned positive. It was last down 0.2 per cent. Renault had dropped over 4 per cent on its first loss in 10 years as the car company set a lower operating margin goal for 2020, a crunch year for its planned reboot alongside partner Nissan after a scandal surrounding former boss Carlos Ghosn. Wall Street futures EScv1 pointed to a slightly higher open. The Chinese virus outbreak has showed no sign of peaking, with health authorities reporting more than 5,000 new cases. China's National Health Commission said it had recorded 121 new deaths on the mainland on Feb. 13, taking the accumulated total infected to 63,851 people. Yet some investors are betting that the economic impact of the outbreak will not be long-lasting, finding succour in a spread beyond China that is not as rapid as feared. Others have latched on to the possibility of further central bank stimulus measures in response to any slowdown. China's central bank, for example, has already pumped liquidity into its economy. But some investors said they were dialling down bets on equities amid the uncertainty over what economic toll the coronavirus would take. "We have actually taken some money out of equities this week," said Rory McPherson, head of investment strategy at Psigma Investment Management, adding that it was temporarily holding cash instead. "Markets have been overly focused on the good, and not giving a balanced view on whether the stimulus from China isn't effective, and if the coronavirus spreads and impacts the economy more." MSCI world equity index, which tracks shares in 49 countries, was flat. Earlier, Asian shares had earlier risen towards their second straight week of gains, helped by hopes governments will make provisions to soften the impact on their economies from the coronavirus epidemic. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 per cent for a weekly gain of almost 2 per cent. China's blue-chip CSI300 shares, meanwhile, rose 0.7 per cent, having staged a stunning recovery to claw back 95 per cent of their losses made after the outbreak. "China is already easing its monetary policy and providing more liquidity while more stimulus is likely," said Yukino Yamada, senior strategist at Daiwa Securities. In its weekly number crunch of markets, analysts at BofA said there had been a record $23.6 billion pumped into bond funds over the last week and big inflows into almost everything else as well. They also spotted that an interest rate cut in Mexico on Thursday had chalked up the 800th cut by global central banks since the collapse of Lehman Brothers in September 2008. That works out roughly one every five days on average. In currency markets, traders had other matters than the cornoavirus on their minds. The euro EUR=EBS slumped to another near-three-year low, with worries lingering about slowing growth in the euro zone and rising political uncertainties in Germany. Euro zone growth slowed as expected in the last quarter of 2019 as French and Italian GDP shrank but employment growth picked up more than expected, official estimates showed. The euro did not waver on the numbers, having earlier fallen to as low as $1.0827. The single currency last stood flat at $1.08390. It has lost 1 per cent so far this week and is on track for its worst two-weekly performance since mid-2018. Others market players noted growing demand for the US dollar. "Investors will surely avoid Asia for the time being and will shift funds to the US, geographically the most separated from the region," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. Against a basket of currencies, the dollar hit a four-month high and was last at 99.115. It has risen 1.8 per cent so far this month. The US currency has been trampling everything in its path, including emerging market currencies. Brazil's real has hit a record low forcing its central bank to intervene to prop it up, while Turkey's lira has crumpled to a near nine-month low. Oil edged higher and was on track for its first weekly gain in six weeks, backed by expectations that producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic. Brent crude futures LCOc1 were up 85 cents at $57.19 a barrel. US stock index futures rose on Friday, lifted by a handful of positive earnings reports, while investors kept a close watch on retail sales data and assessed the economic fallout of the coronavirus outbreak. Nvidia Corp jumped 6.4 per cent in premarket trading as it forecast first-quarter revenue that topped analysts' expectations, reinforcing expectations of a rebound in chip demand. Shares of rival Intel Corp rose 0.6 per cent, while Advanced Micro Devices Inc gained 1.6 per cent. Wall Street is on course for a second straight weekly rise after hitting a series of record highs as a largely positive fourth-quarter earnings season and confidence in the US economy helped investors look past conflicting headlines on the virus. A recent Reuters poll showed the virus-hit Chinese economy will grow at its slowest rate since the financial crisis in the current quarter but the downturn will be short-lived if the outbreak is contained. Chinese health authorities reported more than 5,000 new cases on Friday, suggesting that the epidemic was showing no signs of easing. At 7:26 a.m. ET, Dow e-minis 1YMcv1 were up 29 points, or 0.1 per cent. S&P 500 e-minis EScv1 were up 6 points, or 0.18 per cent and Nasdaq 100 e-minis NQcv1 were up 31 points, or 0.32 per cent. Among stocks, Expedia Inc rose 11.8 per cent as analysts were impressed by the online travel services company's strong core quarterly earnings forecast in the face of the coronavirus uncertainty. EBay Inc advanced 2.2 per cent as the ecommerce company added $3 billion to its 2020 share buyback plan and forecast current-quarter profit above analysts' expectations. Markets participants will focus on the retail sales data for January, due at 8:30 a.m. ET, and industrial production report scheduled for release at 9:15 a.m. Earlier, a sharp rise in the number of coronavirus deaths and infections unnerved world markets on Thursday, as traders halted the rally in stocks and retreated to the safety of government bonds and gold. China's Hubei province, where the virus is believed to have originated, reported 242 new deaths, double the previous day's toll and the fastest rise since the pathogen was identified in December. It also confirmed 14,840 new cases, though it was amplified significantly by a switch to using quicker computerized tomography (CT) scans - which reveal lung infections - to confirm virus cases. Excluding cases confirmed using the new methods, the number of new cases rose by only 1,508, the official data showed, though for markets the net result was more uncertainty about how long problems are likely to persist. Europe quickly followed Asia into red with London FTSE, Frankfurt's DAX and Paris' CAC 40 down 0.3 per cent to 0.9 per cent, and the euro slumped near a three-year low against the dollar after a torrid couple of weeks. AXA Investment Management's chief economist Gilles Moec said the impact of virus could be part of a "perfect storm" for Europe that hurts the economy for months and then gets compounded by a heated trade battle with the United States. "We started with the premise that this virus would be worse that SARS and that has become consensus," Moec said. "So attention turns to who is hit the hardest and Europe is among the usual suspects and Germany in particular give China is its biggest export market. So the reaction of the exchange rate is probably rational," he added. E-mini S&P 500 futures ESc1 were also down 0.5 per cent, pointing to a fade in Wall Street's strong rally. With investors seeking safety, 10-year US Treasuries fell below 1.6 per cent, European yields fell around 3 basis points, the yen strengthened past 110 per dollar and a rally in oil prices halted. MSCI's broadest index of Asia-Pacific shares outside Japan had snapped two days of 1 per cent gains to end 0.1 per cent lower as most markets across the region posted modest declines. "There is no panic on this," said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong, since the dramatic rise seems so far to be contained to Hubei. The new methodology effectively lowers the bar for classifying new infections, contributing to the spike in cases. Chinese officials said the method is only being used in Hubei, though it was expected to be gradually extended to other regions. Markets had taken comfort from the World Health Organization's (WHO) emergency program head describing the apparent slowdown in the epidemic's spread as "very reassuring". Yet WHO chief Tedros Adhanom Ghebreyesus had also warned that it should be viewed with extreme caution. "This outbreak could still go in any direction," he said. More than 1,300 people have died from the epidemic in China and the total number of cases in Hubei province now stands at 48,206. Across mainland China, the total number was almost 60,000. Even before the rise in cases, economists were turning more bearish on the likely hit to China's growth as factories idle and supply chains are upended. Citi on Wednesday again downgraded its 2020 GDP forecast for China to 5.3 per cent. The bank had forecast it to be 5.8 per cent in its January outlook, before cutting it to 5.5 per cent two weeks ago. Morgan Stanley believes a gradual, rather than sharp recovery is the most likely scenario. That all bodes ill for regional economies and has weighed on Asian currencies and commodities. The Australian dollar, a liquid proxy for China's economic health because of Australia's export exposure, retraced its recent rally and traded 0.3 per cent softer at $0.6716. Asian markets fell on Thursday after a dramatic spike in the number of coronavirus deaths and cases in mainland China, with traders concerned about the economic impact of the epidemic. Chinese authorities have changed the way they count infections from the virus - officially named COVID-19 - and the latest reports propelled the nationwide death toll to 1,355 and the infection count to nearly 60,000. Tokyo's benchmark Nikkei 225 index closed 0.1 percent down, Hong Kong lost 0.3 percent, and Shanghai ended the day 0.7 percent lower. Seoul dropped 0.2 percent, and Singapore lost 0.3 percent. But Sydney and Taipei were higher. The new virus numbers dampened the positive cue from Wall Street overnight, where the three main indexes all set fresh records. The jump in China coronavirus numbers "initially hit like a ton of bricks given this is one of the market's biggest fears", Stephen Innes, chief market strategist at AxiCorp, wrote. But he added that despite the "gnarly" headlines, the rise could be the result of a testing backlog being cleared over the weekend in Hubei province, where the virus emerged late last year. In early European trade, London was down 1.0 percent, while Paris and Frankfurt both lost 0.4 percent.

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