European stocks slide on growth and coronavirus fears

Global equities slid further on Friday after the UK registered its first two cases of coronavirus and gloomy economic data soured investor sentiment in Europe.

The Stoxx Europe 600 index, the continent-wide benchmark, is down 0.3 per cent, following the release of economic data that showed the eurozone’s fourth-quarter growth in 2019 was only 0.1 per cent, below expectations of 0.2 per cent.

Bourses in Paris and Frankfurt are both down 0.4 per cent while London’s FTSE 100 index has slipped 0.6 per cent.

Eurorstat data revealed the eurozone ended last year with a whimper, as the French and Italian economies both shrank unexpectedly, denting hopes that the region was poised to rebound from its recent sluggish performance.

“The main question now is whether the looming threat of a sudden stop in Q1 global activity — due to disruptions over the coronavirus — will drag eurozone GDP growth down even further,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

Government bonds in the eurozone extended their gains this week following the disappointing growth data, pushing yields to fresh lows for the year. The yields on the 10-year German Bunds and UK gilts are down 2 basis point to minus 0.42 per cent and 0.53 per cent, respectively.

Bonds have already rallied significantly in recent days as fear over the spread of coronavirus has fuelled demand for haven assets.

“The market impact of the coronavirus outbreak in China . . . increasingly resembles last year’s trade-war-driven turmoil in May and August,” said Jonas Goltermann at Capital Economics. “But unless the fallout from the epidemic escalates significantly, it is hard to see the sharp falls in bond yields persisting.”

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Meanwhile, worries surrounding the coronavirus continued to hamper markets around the world following the World Health Organisation’s declaration on Thursday that its spread now constitutes a public health emergency. Hong Kong’s Hang Seng closed down 0.5 per cent while South Korea’s Kospi ended its session 1.33 per cent lower.

Goldman Sachs estimates that the epidemic will lower annual average Chinese GDP by 0.4 per cent, which will have a spillover effect on US growth in the first quarter of the year. “The drag on growth operates mostly through lower tourism from China and lower US goods exports to China,” its analysts wrote.

The rout in Brent crude, triggered by concerns surrounding weaker oil demand, continues. The international benchmark is down 0.2 per cent to $58.20 a barrel while WTI, the US marker, is 0.9 per cent lower at $52.20 a barrel.



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