Following the devastating fires across Australia, and severe storms across Europe, markets globally woke to news last Monday of a deadly virus in China. Anyone would be forgiven for thinking that this was the ‘beginning of the end’. Spreading rapidly, and apparently stemming from the rather exotic eating habits of the Chinese, Coronavirus is thought to be from bats, with a city called Wuhan, which is about 650 miles south of Beijing as the epicentre, and where the first cases were reported. Wuhan has now been quarantined, but cases are being reported globally and the death toll stands at 80, with more than 2,000 confirmed cases.

Airlines and hotels took the brunt of it, and the FTSE 100 closed the week down 1.2%, and that is despite a 78 point gain on Friday after WHO (World Health Organisation) failed to declare a ‘global health emergency’. The Dow Jones closed the week down 1.3%.

The search is now on for a vaccine, and all eyes will be on how quickly the virus is spreading, and whether action taken so far is having any effect.

Japan continued to make progress when on Tuesday the BOJ upgraded the country’s growth forecast for 2020 from 0.7% to 0.9% as further confirmation that the stimulus package Prime Minister Abe introduced last year was having the desired effect. The Nikkei is 1.58% up on the year already, following an 18.2% rise in 2019.

Davos kicked off on Tuesday as world leaders gathered to discuss pressing issues such as global warming and International conflicts. President Trump however took the opportunity to remind those gathered how well he had done securing the (initial) trade deal with China. Trump also stated that he had set his sights on the EU declaring them ‘as bad as China’, and vowing to take action. His main target would be the German car manufacturers where he would slap tariffs of up to 25% on cars and car parts, despite already being in trade talks with the bloc. This is no doubt Trump’s negotiating style, but the comments still knocked the Euro which briefly traded through 1.19 against pound and 1.3150 against the US dollar.

While President Trump was in Switzerland, impeachment proceedings against him began on Wednesday, but are unlikely to come to much as the Republicans will have the final say, and none of which seems to faze the President.

The pound continued its run on Wednesday impacting the export laden FTSE 100 index, following stronger than expected jobs data, and a greater rise in employment in November suggesting the MPC may not need to cut rates next week. Indeed, following further good news on Friday, in the shape of the fastest increase in consumer prices rising .7% year on year, Lloyds reduced its probability of a rate cut in the UK from 70% to 50%.

China and Hong Kong markets were closed yesterday for Chinese New Year, but celebrations were muted and nervous, as they see in the ‘year of the rat’. Despite the initial shock and associated market volatility, events such as Coronavirus, as tragic as they are, can provide opportunities, to valuations, and more specifically to the pharmaceutical companies tasked with developing a cure.

Looking at some of last week’s company news, EasyJet updated with a better than expected H1, and was promptly upgraded by a number of brokers. RBG (formerly Rosenblatt Group) also reiterated earlier guidance and expects to report 2019 performance ‘significantly ahead of 2018’.

Lloyds hit the headlines for the wrong reasons on Friday, this time as a result of legacy issues at its much maligned HBOS Reading branch where two former executives (now jailed) colluded to defraud customers, and as a result the bank will write off ‘tens of millions of pounds in debt’.

Finally IG Group, which also updated last week ahead of consensus, and following two years of industry changes and regulation, now looks set to benefit from a more settled backdrop, and will no doubt benefit from the current volatility.

Enjoy the week, which will finally see Brexit happen on Friday!

Sources: Yahoo Finance

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