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Stocks and oil rebound, US dollar firm

By AFP - Feb 04,2020 - Last updated at Feb 04,2020

Traders work during the opening bell at the New York Stock Exchange on Monday at Wall Street in New York City (AFP photo)

LONDON — Stock markets rallied strongly on Tuesday, as trading floors assessed the early impact of China’s deadly novel coronavirus on the economy.

Gains overnight on Wall Street saw Asia follow suit and leading European indices and Wall Street were all around 1.5 per cent ahead shortly after the US open.

The dollar largely firmed while the pound recovered, after heavy falls on Monday triggered by Britain and the European Union offering very different ideas regarding their new trade deal following Brexit.

Markets’ main focus remained on authorities’ efforts to contain an outbreak that has now infected over 20,400 people and killed more than 420 people, more than the SARS epidemic that hammered Asian economies in 2003.

Cautioning that “news is hardly uplifting on the virus front”, Edward Moya, senior market analyst at OANDA said “today’s bounce may not go much further.” With swathes of China in lockdown “the world’s second largest economy is shut down and it will be tough to see US stocks recapture record high territories until the virus peaks,” Moya forecast. 

Connor Campbell, analyst at Spreadex trading group, noted that “investors find themselves at an interesting, slightly difficult point in the coronavirus outbreak timeline”, ensuring investors are “picking and choosing what developments they are willing to pay attention to”.

“Further complicating matters is the fact... the impact on the Chinese economy won’t really be known until the next batch of data out of the country,” Campbell added.

Oil prices were meanwhile bouncing back from tumbles since the deadly virus outbreak after Iraq’s oil ministry said members of the Organisation of the Petroleum Exporting Countries (OPEC) and their ally Russia were discussing a further cut to crude oil output because of the epidemic.

OPEC is holding a meeting of a “joint technical committee” in Vienna on Tuesday and Wednesday to discuss the virus’s impact and whether an output reduction is needed, it said.

Benchmark oil contract, Brent North Sea crude, recovered to $55.13 per barrel having earlier touched a 13-month low $53.95.

The WTI oil contract was similarly back off a 13-month-low of $49.66 per barrel at $50.98.

Shanghai’s main stocks index rose 1.3 per cent on Tuesday — boosted by China’s central bank injecting around another $60 billion into the financial markets.

It had dived 8 per cent on Monday, with Chinese traders catching up with losses elsewhere while away for the long Lunar New Year break.

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