Time for a recap

Investors are driving global stock markets higher on hopes that the coronavirus will ease soon.

Europe’s Stoxx 600 has hit a fresh record high today, as has Germany’s DAX, and Wall Street is also at a fresh peak. The rally follows signs that the infection fate for Covid-19 may be slowing.

In London, the FTSE 100 is up 28 points or 0.4% in late trading, at 7527 points.

The oil price has also been lifted today; Brent crude is now 3% higher on expectations of higher demand (if China can get a firm grip on the outbreak).

But there are also fresh signs that the infection is hitting economic growth and corporate profits.

S&P Global has predicted that growth in the UK and the Eurozone will be hit, perhaps 0.2% lower than expected this year. Manufacturing will bear the brunt, they say, due to disruption as Chinese factories.

Deutsche Bank has suggested that Germany’s economy could be pulled into recession by the crisis.

Cruise operator Carnival has warned that its profits will suffer this year, as it cancels voyages from China and across Asia.

Mobile World Congress, one of the world’s biggest business conferences, is also in doubt. A string of top exhibitors have withdrawn, including BT and Nokia today.

Newsflash: Cruise company Carnival has warned that the coronavirus crisis will hit its earnings this year.

In a statement to the City, Carnival says that it has suspended sailings from ports in China. This is now resulting in voyages from other parts of Asia also being cancelled.

And while Carnival can’t see the full impact yet, it expects a “material” impact on results this year.

It told shareholders:

Travel restrictions as a result of Coronavirus necessitated the suspension of cruise operations from ports in China, as was previously announced, and are now resulting in the cancellation of voyages in other parts of Asia. Significant events affecting travel typically have an impact on booking patterns, with the full extent of the impact generally determined by the length of time the event influences travel decisions.

As a result of Coronavirus, the company believes the impact on its global bookings and cancelled voyages will have a material impact on its financial results which was not anticipated in the company’s previous 2020 earnings guidance.

Carnival adds that profits would take a larger hit if it was forced to suspend all Asian operations until the spring (this isn’t planned, yet).

Since the situation continues to evolve, the company is currently unable to determine the full financial impact on its fiscal year 2020. However, while not currently planned, if the company had to suspend all of its operations in Asia through the end of April, this would impact its fiscal 2020 financial performance by $0.55 to $0.65 per share, which includes guest compensation.

In addition, the impact on global bookings will further affect the company’s financial performance. The company is currently evaluating contingency plans to mitigate the impact and will provide an update with its first quarter 2020 earnings release in late March.

Back in December, Carnival predicted it would earn between $4.30 and $4.60 per share this year, so it’s now suggesting they could be more than 10% lower.

The organisers of the Mobile World Congress (MWC) have just said that are monitoring “the fast-changing” development of the coronavirus.

In a statement issued after a string of attendees pulled out, the GSMA telecoms industry group said:

“The novel coronavirus is a fast-changing situation, which GSMA is monitoring closely. This includes regularly meeting with global and Spanish health experts – as well as our partners – to ensure the wellbeing of attendees.

“We have already implemented additional health measures ahead of MWC 2020 and will continue to seek expert medical advice on a frequent basis.

Uh oh.... Deutsche Bank has predicted that the coronavirus could drive Germany’s economy into a recession this year.

Bloomberg has the story:

“We expect the coronavirus to dampen gross domestic product by 0.2 percentage points in the first quarter, making a technical recession highly possible in the winter half-year,” a study published by Deutsche Bank Research says.

The economists said that the coronavirus “poses a risk to the global recovery, as hopes rest on a recovery in the Chinese economy.”

Germany’s export-driven economy is heavily reliant on China, its most important trading partner. Germany’s exporters already felt the effects of the cooling Chinese economy in 2019, and its car manufacturing industry is particularly vulnerable to any weakening demand from the enormous Chinese automotive market.

Germany’s GDP report for the fourth quarter of 2019 is published on Friday. Economists predict growth of just 0.1%, but a negative reading would put it half-way into recession.

Deutsche Bank’s warning chimes with S&P’s forecast this morning that the UK and the eurozone will suffer a growth hit.

Breaking away from coronavirus and the markets.. oil giant BP has just announced plans to become a net zero carbon emitter within 30 years.

BP is promising to reorganise its structure, and to “play its part” in helping the world transition to net zero. Its plans will cover the greenhouse gases it creates itself, and the carbon dioxide emissions in the oil and gas it produces.

The move follows sustained pressure from activists, who have targeted the company as a major cause of rising temperatures (and who have blasted its efforts to ‘greenwash’ its image through sponsorship deals).

Here’s some details:

Five aims to get BP to net zero:

1. Net zero across BP’s operations on an absolute basis by 2050 or sooner.
2. Net zero on carbon in BP’s oil and gas production on an absolute basis by 2050 or sooner.
3. 50% cut in the carbon intensity of products BP sells by 2050 or sooner.
4. Install methane measurement at all BP’s major oil and gas processing sites by 2023 and reduce methane intensity of operations by 50%.
5. Increase the proportion of investment into non-oil and gas businesses over time.

Five aims to help the world get to net zero:

1. More active advocacy for policies that support net zero, including carbon pricing.
2. Further incentivise BP’s workforce to deliver aims and mobilise them to advocate for net zero.
3. Set new expectations for relationships with trade associations.
4. Aim to be recognised as a leader for transparency of reporting, including supporting the recommendations of the TCFD.
5. Launch a new team to help countries, cities and large companies decarbonise.

However, BP is also promising to remain financially strong, generating cash and paying dividends -- doing that while moving to clean energy will be tough.....

European stocks are holding firm at record levels today, despite disagreement over whether the coronavirus outbreak is actually easing.

The Stoxx 600 (made up of Europe’s 600 largest companies) is still trading at a new peak, up 0.44% or 1.87 points at 430.

The basic materials sector is leading the way, up 1%, followed by consumer stocks (+0.9%), and energy (+0.85%).

It’s quite a rally, given the global economy had already slowed last year before the coronavirus struck.

Craig Erlam, senior market analyst at OANDA Europe, suggests investors are gripped by a Fear Of Missing Out (FOMO):

There’s no stopping these markets, it seems, with Europe back in record territory on the tiniest sliver of good news in regard to the, newly-named, COVID-19.

Stock market investors are relentless, their ability to see the bull in any situation rivals only that of bitcoin enthusiasts, who can, it seems, make a bullish crypto argument for any and every newsworthy event. Yesterday saw the first deceleration in new COVID-19 cases in China, apparently a clear sign that the dawn is upon us.

While I desperately hope that this is the case, one day of fewer reported cases is not exactly cause for celebration. The last weeks have been brutal and the number of cases and death toll have accelerated at a frightening rate. It’s far too early to declare victory, but in the era of FOMO trading, investors are doing just that.

It’s now hoped that, as far as the economy is concerned, we’re just facing a bad quarter that could wipe around 1% of full year Chinese growth. I’m sure the data over the coming , weeks will enlighten us further on this but, should that turn out to be true, that seems perfectly manageable. Although companies in the country may not be so fortunate.

The coronavirus crisis is likely cut 0.1 to 0.2 percentage points off growth in the UK economy, and in the eurozone, this year, according to analysts at S&P Global Ratings.

They predict that growth will suffer, due to lower exports to China and weaker business investment.

Britain’s economy only grew by 1.4% in 2019, while the eurozone expanded by just 1.2%, so a 0.2 percentage point cut could hurt.

But while some sectors, such as carmaking, will be hit, the wider economy could be more resilient.

Sylvain Broyer, S&P Global Ratings chief economist for EMEA, explains:

“The coronavirus, which has triggered lockdowns in some parts of China, poses a risk of disruption to the European value chain, amplified by the current low levels of European inventories especially in the car sector, following four consecutive quarters of contraction.”

German manufacturing sector is particularly vulnerable, the report says. Production of computers and electronics, electrical equipment, machinery equipment, and car could all be hit by weaker demand from China.

However, the eurozone is in better shape to ride out Covid-19 than it was 17 years ago when Sars hit, Broyer argues:

“In 2003, the unemployment rate was on the rise across the continent. Today, European unemployment is close to an all-time low.

Moreover, by lowering global growth expectations, the coronavirus has weighed on the oil price, which will lend support to households’ purchasing power in Europe.

The oil price is also rallying today, reflecting optimism that Covid-19 will not derail the global economy.

Brent crude has jumped by almost 2.5% to $55.30 per barrel, from $54/barrel last night.

It had been worth around $66/barrel three weeks ago, before falling steadily as the coronavirus crisis deepened.

There’s also some chatter in the markets that oil producers could implement an emergency supply cut to cushion the impact of the outbreak.

Opec members such as Saudi Arabia are keen to curb production to prop up prices, but Russia (which isn’t part of the cartel) aren’t yet convinced....

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Stock markets on both sides of the Atlantic are touching record highs today, as optimism grows that the coronavirus crisis won’t badly hurt the global economy.

The EU-wide Stoxx 600 index of top European shares has just opened at a new record high, with Germany’s DAX leading the charge higher.

On Wall Street, the S&P 500 and the Nasdaq also hit record levels, and we’re expecting further gains today.

The rally comes as the number of new cases of Covid-19 (as it’s now known) slowed. Some 2,105 new cases were reported in China today, the lowest daily increase since 30 January, lifting the total to 44,670.

Perhaps significantly, the number of new cases in Hubei (where the outbreak began) also dipped.

One government epidemiologist, Zhong Nanshan, has suggested that the outbreak could be over by April - a claim other experts fear is too optimistic.

But even though new suspected cases are cropping up every around the world (from cruise ships to an Oxfordshire prison), investors are increasingly confident that the virus will be contained.

There’s lots of talk about “V-shaped” recoveries today, and optimism that global supply chains will bounce back from the mass closure of factories seen across China in recent weeks.

Kyle Rodda, analyst at IG, explains:

The newly termed ‘COVID-19’ virus continues to keep the market and central bankers vigilant.

Wall Street charged on to record, running by the same theme from the start of the week on expectations that the coronavirus containment efforts could keep odds of a pandemic at bay.

But.... are investors simply too complacent?

Neil Wilson of Markets.com advises caution, especially as Beijing has tweaked how it reports new cases of the virus.

The hope is airlines and industry will be back online soon. I’d be cautious about this. We’re also mindful of secondary and tertiary outbreaks in Europe and North America even as new cases slow in China.

The rally is also being driven by confidence that central banks will maintain loose monetary policy.

Yesterday, Fed chair Jerome Powell told Congress that the US economy was in a good place, without suggesting rate rises were on the cards. Even that wasn’t enough for Donald Trump, who gave Powell another Twitter blast for making the dollar too pricey.

Also coming up today

The latest eurozone factory data is likely to show a big fall in output in December, given we’ve already seen weak surveys from Germany, France and Italy.

The agenda

• 10am GMT: Eurozone industrial production data for December; output expected to shrink by 1.9% year-on-year
• 3pm GMT: Fed chair Jerome Powell testifies to the Senate banking committee