Stocks - Europe to Edge Higher; Virus 'Not Global Emergency'

Stocks - Europe to Edge Higher; Virus 'Not Global Emergency'  | Jan 24, 2020 07:40

Stocks - Europe to Edge Higher; Virus 'Not Global Emergency'

By Peter Nurse - European stock markets are set to edge higher Friday, helped by an easing of tensions surrounding the deadly coronavirus in Asia overnight coupled with a more positive tone at the close on Wall Street.

At 02:15 ET (0715 GMT), France's CAC 40 futures were up 3 points, or 0.1%, while the FTSE 100 futures contract in the U.K. rose 2 points, or 0.1%. The DAX futures contract traded 3 points, or 0.1%, lower, and the futures on the pan-eurozone index, the Euro Stoxx 50, were flat.

The number of cases of patients infected with the new virus as of January 23 has gone up to 830 in China, while the death toll from the virus has risen to 25, the National Health Commission announced on Friday.

Yet, on Thursday, the World Health Organization stopped short of calling the outbreak a global health emergency.

“Make no mistake, this is an emergency in China, but it has not yet become a global health emergency,” Tedros Adhanom Ghebreyesus, the WHO’s director-general, said at a briefing in Geneva Thursday. “It may yet become one.”

Markets in mainland China and South Korea are shut, while Hong Kong closed early, for lunar new year holidays, with the Hang Seng Index down just 8 points, or 0.1%. Japan’s Nikkei 225 gained 13 points, or 0.1%.

It’s important to put this disease into context, stated Robert Carnell, Chief Economist Asia-Pacific at ING, in a research note, with reports of the fatalities showing them to be largely amongst the elderly, and those with pre-existing chronic conditions.

This doesn’t mean that older, or less healthy members of the population are more expendable, he added, and that there won't be an economic or market response to this. “But it does suggest that the response will be manageable, and hopefully fairly short-lived, weeks and months, not quarters or years.“

On Wall Street on Thursday, the major equity indices bounced off session lows, as a mixed bag of earnings provided no convincing reason to doubt the current strength of the U.S. economy.

The S&P 500 rose 0.1%, the Nasdaq Composite climbed 0.2%, while the Dow Jones Industrial Average fell 0.1%.

American Airlines (NASDAQ:AAL) rallied 4% as its fourth-quarter earnings topped estimates despite a rise in costs from the grounding of the 737 MAX. Southwest Airlines (NYSE:LUV) rose about 3% shrugging off a quarterly earnings miss.

As well as airlines, General Electric (NYSE:GE) also powered industrials to a strong day on Wall Street, closing 3% higher after Morgan Stanley (NYSE:MS) upgraded its investment recommendation on the stock to buy.

Attention will now turn to corporate news in Europe, where Swedish telecoms equipment group Ericsson (BS:ERICAs) is likely to be in focus Friday after reporting a sharp rise in fourth-quarter core earnings on Friday despite a slowdown in its previously surging U.S. business.

German chemicals giant Bayer (DE:BAYGN), meanwhile, is reported to be in talks to settle claims related to its Roundup weedkiller for $10 billion, according to Bloomberg.

Looking at the economic calendar, the focus in Europe will be on the various PMI data, leading indicators to the strength of the region. Probably the most watched is the German manufacturing PMI release, due at 3:30 AM ET (0830 GMT).

Elsewhere, the price of oil rebounded slightly after hefty recent losses following the news late Thursday from the EIA that U.S. oil inventories fell by 405,000 barrels last week. After sharp increases over the last two weeks, as well as another jump from the American Petroleum Institute's inventory report earlier this week, the figures pleased oil bulls.

At 2:10 AM ET (0710 GMT), U.S. crude futures traded 0.4% higher at $55.81 and the international benchmark Brent contract rose 0.4% to $62.31. Gold futures for February delivery on New York’s COMEX were 0.3% lower at $1,560.25.

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