Global Markets Update Monday, 24 February 2020

Posted on 24 Feb 2020

Global stocks retreated as the coronavirus continued to spread beyond China and evidence started to emerge of its impact on company profits: airlines warning they stand to lose $29.3bn of revenue this year due to the coronavirus outbreak, car manufacturers facing closure due to parts shortages and tech companies also worried about the impact on their supply chains.

Global Market Update


The FTSE 100 eased 0.1% over the week.

The new Chancellor of the Exchequer confirmed the UK budget would go ahead as planned on 11 March.

UK retail sales rebounded 0.9% in January, ending two months of falling sales at the end of 2019.

UK inflation, as measured by the consumer prices index, rose to 1.8% in January compared to the same month in 2019 and up from a rate of 1.3% in December.


The S&P 500 fell 1.0% over the week.

The IHS Markit/CIPS composite purchasing managers' index sank to its lowest level since 2013 in February due to the impact of the coronavirus outbreak. The index of services activity fell to a 76-month low of 49.4, compared to 53.4 the previous month, while manufacturing activity slowed to a six-month low of 50.8, compared to 51.9 in January, due to delivery delays from China.

Minutes of the Federal Reserve’s latest meeting showed policymakers thought the outlook was “somewhat more favourable” since the last meeting in December, with some recommending letting inflation rise above the Fed’s target rate of 2% cent “for a period”.

Apple warned that disruption in China from the coronavirus will cause its revenues to fall short in the current quarter because disruption from the disease had “constrained” production.


The FTSEurofirst 300 slid 0.7% over the week.

EU leaders met in Brussels to discuss how to tackle the hole left in the EU budget by the UK’s departure from the EU.

Italy placed around a dozen towns in Lombardy and Veneto into lockdown after the number of coronavirus cases topped 100.

The flash estimate of the IHS Markit eurozone manufacturing purchasing managers’ index rose to 49.1 in February, up from 47.9 in the previous month, and the highest level since February 2019. The improvement comes despite the impact of the coronavirus outbreak. Eurozone services sector activity rose to a six-month high of 52.8 in February, pushing the composite index up to 51.6.

Germany’s flash manufacturing purchasing managers’ index (PMI) rose to 47.8 in February, up from 45.3 in January. However, factory activity deteriorated in France, with the flash manufacturing PMI dropping more than expected to 49.7 in February, from 51.1 in the previous month, reflecting the dip in aeroplane production and supply chain issues as a result of coronavirus.

Minutes of the European Central Bank’s latest meeting indicated that policymakers were modestly upbeat on the eurozone’s growth outlook, as incoming data suggested the worst could be over for the bloc’s economy. However, the meeting took place before the coronavirus outbreak escalated.

Germany’s Zew economic sentiment survey dropped 18 points to 8.7 in February, compared to 26.7 in January, highlighting the negative impact that the virus is having on exporters and the global economy.

Fiat Chrysler warned the impact of the coronavirus epidemic could halt production at one of its European car plants within four weeks.


The Nikkei 225 lost 1.3% over the week.

Japan’s economy shrank at an annualised rate of 6.3% in the final quarter of 2019 due in part to the raising on the country’s Sales Tax, with consumption falling sharply over the quarter. The news prompted warnings that Japan may be on course for a technical recession given the impact of the coronavirus outbreak on growth in early 2020.

Pacific Basin

The People’s Bank of China cut interest rates on its medium-term lending facility and also reduced the MLF rate, a benchmark for interbank lending in the country.

Car sales in China fell 92% in the first half of February as the coronavirus shutdown took its toll.

As the country’s number of cases of coronavirus rose sharply, South Korea’s president warned that “emergency steps” were needed to prevent a growing crisis in South Korea’s economy. President Moon Jae-in called for “all possible measures” to support the South Korean economy, as Singapore also unveiled a S$6.4bn ($4.6bn) stimulus package to offset the impact of the virus.

Emerging Markets

Turkey’s central bank cut interest rates by 50bps to 10.75%. This is its sixth consecutive cut and comes despite growing currency volatility and geopolitical risks. The move pushed real rates further into negative territory.

The South African rand fell after Moody’s lowered its forecasts for the country’s economic growth, prompting speculation that the move would precede a downgrade of its rating to junk, in line with Standard & Poor’s and Fitch, the other big ratings groups.


Growing demand for safe-haven assets caused the yield on the 30-year US Treasury bond to touch a record low of 1.89% while the yield on the 10-year bond sank below 1.5%, its lowest level since September.

The yield on the 10-year German Bund closed the week at -0.43%.

10-year Chinese sovereign bond yields dropped to four-year lows of 2.84% amid hopes that the authorities will deploy stimulus to counter the impact of the coronavirus outbreak.

Following the news that Macy’s and Kraft Heinz had been downgraded to junk status, Renault’s credit rating was also cut to below investment grade after poor results in 2019 meant eradicated almost all its profits.


Gold rallied to $1,645 an ounce, its highest level since February 2013.

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