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Europe close: Stock selloff abates

By Alexander Bueso

Date: Wednesday 26 Feb 2020

Europe close: Stock selloff abates

(Sharecast News) - Stocks on the Continent stabilised following another bout of selling in the first half of the session in the wake of warnings from global health officials of the risk of a coronavirus pandemic.
Overnight, the US Centers for Disease Control told Americans that an outbreak in the country was only a matter of time and the World Health Organisation urged countries to make preparations now.

Dr. Bruce Aylward, the head of a joint WHO-Chinese mission, said on Wednesday evening that: "You have to be ready to manage this at a larger scale [...] and it has to be done fast."

All countries must "be ready as if this hits us tomorrow", he added.

Against that backdrop, by the end of trading the benchmark pan-European Stoxx 600 was exactly flat at 404.62, alongside a 0.12% gain for the German Dax to 12,774.88, while the Cac-40 was ahead by 0.09% to 5,684.55.

Italy's FTSE Mibtel meanwhile was 1.44% higher to 23,422.54.

To take note of, the warning from the CDC in Atlanta had not only sent shares on Wall Street sharply lower again on Tuesday, it also pushed yields on 10-year US Treasuries to a record low - even if only by a little.

Office services firm ISS A/S was the worst performer on the Stoxx 600 after posting a 23.2% drop in full-year profits to 1,750m Danish crowns and guiding towards a slowdown in organic sales growth from 7.1% to 4.0%.

French biotech outfit Biomerieux was right behind despite posting higher full-year sales, operating profits and net income.

Finance Minister Olaf Scholz plans to modify the debt brake provision in the German constitution so that the federal government can assume some of the obligations of heavily indebted municipalities, Die Zeit newspaper reported.

The debt relief plan, proposed by the finance ministry some months ago, would see the federal government assume some of the debts already built up by the municipalities. Currently, however, the constitution sets strict limits on debt accumulation by the government.

Commenting on the correction in stockmarkets around the world, IG chief market analyst, Chris Beauchamp, said: "Against such a backdrop, 2019's concerns about Brexit and trade wars fade into insignificance. The economic impact clearly cannot be contained now to China alone, and both monetary and fiscal stimulus will be needed to help economies recover from this."

As if on cue, German deputy finance minister Olaf Scholz proposed modifying the debt brake provision in the country's constitution so that the federal government could assume some of the obligations of heavily indebted municipalities.

According to China's National Health Commission, the number of new infections in the country had fallen further, from 508 on Tuesday to 406 on Wednesday.

In South Korea meanwhile, the caseload increased by 169 to reach 1,146 and in Italy there were now 320 cases, up from 283 in the day before.

Analysts at ShoreCap said that, whether or not the COVID-19 coronavirus became a full-fledged pandemic would hinge on the virus's behaviour in new countries and the kind of containment measures those countries adopted.


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