Frankfurt (Reuters) – The corona virus, which is rampant in more and more countries, is fueling the fear of an economic downturn on Europe’s stock exchanges.
The leading German index Dax fell on Wednesday by 3.3 percent to 12,368 points – the lowest level in more than four and a half months. Compared to the previous week’s closing, he has already sold more than seven and a half percent. “The Dax falls like a stone, the nerves are bare,” commented market strategist Jochen Stanzl from the CMC Markets trading company. The other European equity markets also continued to decline: the EuroStoxx50 plummeted by up to 2.9 percent to 3,467 points and was lower than it had been since mid-October.
The virus has now reached Germany with several infected people. Italy is particularly badly affected. In total, 2,715 people in China have died as a result of the lung disease. “With the global spread of the virus, the economic burdens would reach a new dimension,” said investment strategist Ulrich Stephan from Deutsche Bank. Rabobank analyst Michael Every said: “The impact is likely to be more like the global financial crisis in 2008-2009 than the impact of the SARS epidemic in 2003.”
Many investors fled to “safe havens”. The price for the “crisis currency” gold rose by more than one percent to $ 1,651 per troy ounce (31.1 grams). Unsettled investors also took refuge in government bonds, which depressed returns. At minus 0.52 percent, the ten-year stocks returned as low as they did four and a half months ago.
INVESTORS CALCULATE FIXED WITH ECB INTEREST RATE 2020
The fear of a setback for the global economy was also reflected in the raw materials market. Oil prices fell for the fourth day in a row. A barrel of the North Sea Brent bred 1.2 percent to $ 54.28. “The reality is that the corona virus has not been contained and is now spreading like wildfire across the world and you can’t put that spirit back in the bottle,” said strategist Stephen Innes of the AxiTrader trading house. The price of the important industrial metal copper fell by up to 0.5 percent to $ 5656 per ton.
More and more investors are guessing that the central banks will counteract this with interest rate cuts. It is now priced 100 percent on the money markets that the European Central Bank will further tighten its penalty rates for banks by December. Until then, it is expected that the monetary authorities will further reduce their deposit interest rate from the current minus 0.5 percent to minus 0.6 percent. A negative sentence means that commercial banks have to pay penalty interest if they park excess funds with the central bank. However, some experts do not see it as a cure. “To put it bluntly, the ECB will not cure anyone of the disease. There may even be doubts as to how rate cuts would contribute to economic growth,” said ING rate strategist Antoine Bouvet.
AIRLINES UNDER PRESSURE
In the stock markets, the airlines that were severely affected by the virus effects were on the sales lists. The titles of Lufthansa, Air France and British Airways parent IAG lost up to 3.5 percent. The low-cost airlines Ryanair and EasyJet, which specialize in intra-European connections, fell by up to 5.3 percent.
The sectors of automobile manufacturers, chip stocks, banks and luxury goods manufacturers, which are considered to be particularly dependent on the economy, also had to give up again. Wirecard shares were the biggest DAX losers with a loss of almost five percent. According to a trader, meager numbers from a French competitor clouded the mood. Payment processor Ingenico fell short of expectations with sales and earnings in 2019.