European stocks claw back after Monday coronavirus panic

European stock markets have begun to claw back some of the big losses felt on Monday. A surge of new cases of coronavirus, particularly in Italy, prompted a sell-off across the continent.

European stocks rebounded in early Tuesday trading after Monday’s battering on the back of renewed coronavirus fears.

The regional Stoxx 600 index rose 0.5% in the early minutes of European trading. Italy, where the vast majority of European cases of the virus have been detected, saw its FTSE MIB move 0.5% higher having lost 5% of its value on Monday.

Those gains have been repeated in London, Frankfurt and Paris with the FTSE 100, DAX 30 and CAC 40 all rising by around 0.5%.

Asian stock markets also stabilised somewhat on Tuesday. A wave of early selling caused some tremors but South Korea’s stocks edged to a 0.6% rise. Shanghai’s blue-chip index also clawed back losses while Hong Kong snapped its three-day losing streak with a small gain of 0.3 percent.

The one exception in Asia was Japan. Tokyo’s Nikkei index plunged by 3.4% after a government panel in the country warned that the country was on the brink of a rapid expansion in coronavirus cases.

Tuesday’s modest recovery follows a severe day of losses on Monday. Global stocks took a pounding after a wave of new coronavirus cases were detected, dampening hopes that the outbreak was being contained.

Stock prices in Frankfurt and Madrid fell by 4.0 percent, Paris shed 3.9 percent and London lost 3.3 percent in the continent’s worst day of trading since the aftermath of the Brexit vote in June 2016.

Airlines take a big hit

European investors rushed out of equities and into safe havens such as gold and US government bonds. The European sell-off on Monday mirrored similar firesales in Asian markets, sent into a frenzy by a surge in cases in South Korea.

Airline stocks took a particular battering, with international transport an obvious casualty in the event of a global pandemic. European airlines EasyJet and Ryanair plunged by 12% and 10% respectively, while a host of others also tumbled.

As well as travel, stocks in tourism and luxury concerns are also down sharply. Sectors reliant on China for their supply chains, in particular the car industry, also continue to lag badly.

Many investors expect the fall to continue now that coronavirus fears appear to have moved beyond China and the Asia-Pacific region. “Markets [are] likely to show extreme caution in the face of [the] global spread of the coronavirus — this is no longer solely an Asia issue,” Robert Carnell, chief Asia-Pacific economist at ING, told the Financial Times.

Italian lockdown

Away from the markets, the sharp rise in coronavirus cases is having a very real and practical impact on economic activity in Italy.

The government there has imposed a strict quarantine across more than 10 towns in the northern region, where officials are trying to limit the spread of the biggest outbreak of the virus outside Asia.

The Italian outbreak is centred around the regions of Lombardy and Veneto, where Venice and the Italian industrial and financial hub of Milan is located. Those two regions account for around one-third of Italy’s entire economc activity. Many of the cases suddenly emerges in the small town of Codogno, 65 kilometers (40 miles) south-east of Milan.

Schools and universities in the region have been closed while several major public events have been affected. Milan Fashion Week, the major clothing trade show, has been disrupted while the Venice Carnival was cut short by two days on Sunday.

Aside from the quarantined towns, travel into Italy has been hit. Austria, which shares a 404-kilometer (251-mile) border with Italy, is considering border controls.On Sunday night, Austria refused entry to a train coming from Italy after the Italian State Railways told the Austrian train operator OBB that two people on board had fever symptoms.

All train traffic between the countries was briefly suspended but that was lifted within a few hours.

In the wake of the developments in Italy, the European Commission has announced a €232 million ($251 million) aid package to help member states fight the outbreak.

China still the center

While the outbreak in Italy has brought the coronavirus firmly onto European soil, the epicenter of the problem remains firmly in China, both in health and economic terms.

There are now just under 80,000 confirmed cases worldwide and of these, more than 77,000 are in China.

Despite the new European fears, China has actually eased restrictions in several places, including in Beijing, as the rate of new infections fell back.

Nonetheless, economic activity in China has been hit dramatically by the coronavirus outbreakand that had already been felt globally before the rise in new cases outside China over the weekend.

China is the EU’s second-largest trade partner. with combined trade of €559 billion between the two in 2019. The EU Chamber of Commerce in China’s President Jörg Wuttke has already spoken of the fact that foreign businesses’ operations have been so seriously disrupted in China that they may have to look elsewhere for supplies.

He said that while the Chinese market is “always a lure, people have now woken up to the fact that you must have a backup plan.”

Source:dw.com