Finally, European stock markets have closed for the day, and it’s a rather mixed picture.

Britain’s FTSE 100 ended 82 points lower, or over 1%. Stocks were hit by the stronger pound, as traders anticipate a splurge of growth-friendly measures in next month’s budget.

David Madden, market analyst at CMC Markets, says:

The cruse of the coronavirus in China is clobbering the FTSE 100 as some of the biggest fallers on the index are connected to the country in question.

China’s the world’s largest importer of oil so the renewed fears about the health crisis have hit stocks like BP and Royal Dutch Shell. Mining stocks such as BHP, Rio Tinto as well as Anglo American are lower too. It has been a double whammy for the FTSE 100 as the drive higher in sterling has dented internationally focused stocks like GlaxoSmithKline, AstraZeneca, plus Unilever.

Firms that derive a large portion of their total revenue in a collection of foreign currencies often get hit when the pound jumps.

Other markets did better, though, with France only slightly lower, Germany flat, and Italy up slightly.

But it’s been another day dogged by coronavirus worries again, as companies count the cost of the ongoing disruption in China.

Fears that the eurozone could be dragged into recession have dragged the euro to its lowest level since May 2017. The EC’s latest economic forecasts added to the gloom, with coronavirus labelled a major downside threat to the already-weak recovery.

The IEA send a shiver through the markets too, by predicting the biggest drop in oil demand since the financial crisis.

E-commerce giant Alibaba revealed that the disruption in China is hurting its business. With shops and factories closed, many deliveries simply aren’t happening.

American fashion Ralph Lauren warned its profits will be hit, as it has closed many of it stores in China for weeks.

And in the UK, JCB is cutting production levels as it can’t get enough parts from China.

JCB, the UK maker of yellow diggers, is cutting production and working hours at its UK factories as it faces component shortages from China.

JCB is planning to cut working hours for around 4,000 employees from 39 hours to just 34 from next Monday. Overtime has also been suspended. Staff won’t take a pay cut, though - they’ll have to work the hours back later this year.

The problem is that a quarter of JCB’s suppliers in China are still closed, due to virus-related restrictions, so they can’t ship enough components to Britain.

I think this makes JCB the first major UK manufacturer to cut output because of Covid-19 -- airlines such as British Airways have already cut flights to China.

JCB chief operating officer Mark Turner explains:

“The disruption to the component supply chain in the UK comes at a time when demand for JCB products is very strong, so while this course of action is very unfortunate, it is absolutely necessary to protect the business and our skill base.

“Production in the UK has so far been unaffected by the situation in China. However, more than 25% of JCB’s suppliers in China remain closed and those that have reopened are working at reduced capacity and are struggling to make shipments.

“It is therefore clear that the inbound supply of certain components from Chinese partners will be disrupted in the coming weeks as they seek to replenish their stocks.

“This inevitably means we will not have the required amount of parts needed to build our forecast number of machines in the short-term.

“These measures will ensure that, while we will produce machines in lower than anticipated numbers, we will do so with the same number of employees, whose skills we will need to fulfil customers’ orders when the situation returns to normal.”

The New York stock market has opened in the red, as traders respond to today’s jump in coronavirus cases and deaths.

• Dow: Down 133 points or 0.45% at 29,417
• S&P 500: Down 11 points or 0.33% at 3,368
• Nasdaq: down 47 points or 0.5% at 9,678

Newsflash: The coronavirus outbreak is a “Black Swan event’ which is having a ‘significant impact’ on China’s economy, according to its biggest company.

Daniel Zhang, CEO of e-commerce giant Alibaba, has warned that the outbreak poses near-term challenges to its business.

Speaking on a conference call to discuss Alibaba’s latest results, Zhang is explaining how operations have been hurt by the virus, which has forced factories and offices to stay closed for longer after the Lunar New Year.

He says:

• Chinese merchants and logistic companies have been prevented from resuming work after the Lunar New Year.
• A “significant number of packages” have not been delivered on time over the last two weeks.
• Orders to restaurants, food delivery firms and other local services have “declined noticeably”

Zhang adds that it is too soon to quantify the full impact of the outbreak on Alibaba, and that the company is “closely monitoring the challenge”.

This is a useful insight into the impact on the Chinese economy, and helps explain why the IEA has slashed its oil demand forecasts today.

Newsflash: US fashion group Ralph Lauren has warned that its profits will be hurt by the coronavirus crisis.

It says that approximately two thirds of the Company’s stores in the Chinese mainland have been temporarily closed over the past week, and is bracing for further lost sales as travel is restricted in Asia and parts of China.

This will knock up to $70m off its sales in the current quarter, and up to $45m of operating profits from Asia.

Supply chain disruptions in China could also hit orders globally, it warns.

Executive chairman Ralph Lauren, which founded the firm, says:

“Our hearts are with the many impacted by this virus. Our number one priority is keeping our teams, partners and consumers safe.”

The City has responded to Sajid Javid’s shock resignation by driving sterling to a two month high.

The pound has hit €1.20 against the euro for the first time since December’s election.

Why? Because Boris Johnson’s team may now have a tighter grip on the Treasury, letting them drive through infrastructure spending projects, slash taxes and raise borrowing.

That could result in higher growth -- good for the pound, and making interest rate cuts less likely.

Paul Dales of Capital Economics says:

We already thought that the Budget on 11th March would involve an extra loosening in fiscal policy worth 0.5% of GDP, which coming on top of the extra government spending announced in September 2019 would mean a fiscal boost of 1.0% is in the pipeline.

It’s now possible that the Budget will provide a bigger bang.

Back in the City, investors are digesting the shock news that Sajid Javid has resigned as Britain’s finance minister.

Javid has quit, it seems, after refusing to sack his officials and work with a team from number 10.

It means a sudden promotion to chancellor for Rishi Sunak (previously chief secretary to the Treasury), with less than a month until the budget!

Sunak has previously worked for Goldman Sachs, and the Children’s Investment Fund (a hedge fund).

The move has pushed government bond yields up, as the City anticipates that the Number 10 may push through more infrastructure spending by overriding Treasury concerns about borrowing.

Andy Sparrow’s Politics Live blog has all the action on a dramatic reshuffle day in Westminster.

NEWSFLASH: The EU has warned that the coronavirus crisis is a “key downside risk” to the European economy.

In its new Winter Forecast, the EU warns that the Covid-19 outbreak could hurt growth this year.

The outbreak and spread of the ‘2019-nCoV’ coronavirus and its impact on public health, human lives and economic activity has been a source of mounting concern.

It has spurred uncertainty about the short-term prospects of the Chinese economy and about the degree of disruption across borders at a moment in which global manufacturing activity remains at a cyclical low. The baseline assumption is that the outbreak peaks in the first quarter, with relatively limited global spillovers. The duration of the outbreak, and of the containment measures enacted, are a key downside risk. The longer it lasts, the higher the likelihood of knock-on effects on economic sentiment and global financing conditions.

The EU adds that economic sentiment and global financing conditions could suffer from a prolonged outbreak. This would hurt the supply side of the economy, if workers are kept at home, and the demand side, as travel bans and shop closures will hurt spending.

Despite this risk, the EU is still forecasting growth of 1.2% in 2020 and 2021, as in 2019.

NEWSFLASH: Global oil demand will fall this quarter for the first time in a decade due to the coronavirus, according to the International Energy Agency (IEA).

The IEA has just slashed its forecasts for oil demand, which it says has already been “hit hard” by Covid-19 and the “widespread shutdown of China’s economy”.

Demand is now expected to fall by 435,000 barrels per day year-on-year in the first quarter, the first quarterly contraction in more than 10 years.

Global oil demand was around 100.7 million barrels per day at the end of 2019, for comparison.

The IEA has also cut its forecast for oil demand growth during 2020 by 365,000 barrels per day to 825,000,. That would be the lowest annual increase since 2011.

In its latest oil market report, the IEA says:

The novel coronavirus (Covid-19) is a major global public health emergency that has brought tragedy to many lives. Its impact is still unfolding globally. There is already a major slowdown in oil consumption and the wider economy in China. While the SARS epidemic of 2003 is widely used as a reference point for analysis of Covid-19, China has changed enormously since then. Today, it is central to global supply chains and there has been an enormous increase in travel to and from the country, thus heightening the risk of the virus spreading. In 2003, China’s oil demand was 5.7 mb/d and by 2019 it had more than doubled to 13.7 mb/d (14% of the global total). Moreover, last year China accounted for more than three-quarters of global oil demand growth.

The consequences of Covid-19 for global oil demand will be significant. Demand is now expected to contract by 435 kb/d in 1Q20, the first quarterly decrease in more than a decade. For 2020 as a whole, we have reduced our global growth forecast by 365 kb/d to 825 kb/d, the lowest since 2011. Growth in 2019 has been trimmed by 80 kb/d to 885 kb/d on lower-than-expected consumption in the OECD.

The report is online here.

Renewed worries about the coronavirus are hitting European markets this morning.

The Stoxx 600 index of EU-listed companies has lost 0.5%, dropping back from Wednesday’s record high.

London’s FTSE 100 has been particularly badly hit, shedding 70 points or almost 1%, to 7463.

The energy sector is the biggest faller, with Royal Dutch Shell and BP losing 2.5%. Mining companies are also among the fallers, reflecting concerns that global growth is going to take a hit this year.

Cruise operator Carnival are down 3.5% -- yesterday it warned that the virus will have a material impact on its earnings this year.

French spirits group Pernod Ricard has cut its profit forecasts, due to the coronavirus outbreak.

The maker of Martell cognac, Glenlivet whiskey, Absolut vodka and Perrier-Jouët champagne now expects operating profits to only grow by 2% to 4%, down from 5-7% previously.

China is a growing market for Pernod Ricard, so the clampdown on movement is going to hurt demand for drinks in the weeks ahead.

Pernod Ricard warned shareholders that “the environment remains particularly uncertain from a geopolitical standpoint, with the additional pressure related to the Covid-19 outbreak.”

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

The euro is under pressure. Fears of a eurozone recession this year have driven the single currency down to its lowest level since May 2017.

With factories already hit by trade war tensions, the disruption caused by the coronavirus crisis is threatening to wipe out growth altogether. European airlines have already been hit by the Covid-19, and supply chains around the world are already feeling the strain.

The cancellation last night of Mobile World Congress, the huge business conference in Barcelona, has shown that business leaders are more jittery.

This has pushed the euro down to just $1.086 against the US dollar, as traders rush into safe haven assets.

Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered, says the markets are concerned about the European economy.

The eurozone economy almost stalled in the last quarter, with GDP rising by just 0.1% in October-December. Hopes of a pick-up in Q1 2020 are fading...

...especially after data yesterday showed eurozone industrial production slumped 4.1% in December, its weakest performance since the 2012 sovereign debt crisis.

Englander says (via the FT) that:

“The main impact of coronavirus for Europe is growth.

“The euro area started the year with low growth and an ECB largely out of policy options. The hope was that . . . fiscal expansion would begin.

However, the negative growth shock has reduced this hope.”

Deutsche Bank warned earlier this week that the coronavirus crisis could drive Germany into recession this year, as its manufacturing sector will be hurt by slowing demand from China.

It’s a headache for the European Central Bank, where new chief Christine Lagarde is reviewing the bank’s strategy.

European stock markets have shrugged off these concerns, hitting record highs yesterday. But they’re going to drop back today, after a sharp jump in coronavirus cases and deaths.

Later today the European Commission will publish its new winter forecasts, which may show that Brussels policymakers are getting gloomier.

The agenda

• 10am GMT: European Commission presents its winter forecasts
• 1.30pm GMT: US inflation for January; expected to rise to 2.5% year on year, from 2.3%
• 1.30pm GMT: US weekly jobless numbers; expected to show a rise of 210k, up from 202k