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Oil slides as virus circles globe, stocks seek relief

Oil slides as virus circles globe, stocks seek relief

AFP
London
Oil prices fell further Wednesday as investors worried about the economic impact of the spreading new coronavirus.
While Asian Stocks had declined early in the day, Stocks in London and Paris pushed higher as Wall Street rebounded following two days of steep losses.
The Dow was up 1.0 percent in midday trading after giving up around three percent on Tuesday when officials said COVID-19 would likely take hold in the United States.
“Wall Street showed a resilience lacking in Europe earlier in the session,” remarked Neil Wilson at Markets.com.
“Optimism right now may be misplaced but there are several reasons for this bounce, which on first inspect looks decidedly feline and rather deceased,” he quipped.
With cases being reported in more countries -- and lockdowns in nations including Austria, Italy and Spain -- traders had been pretty gloomy about what the crisis could do to the global economy.
Several big companies commented Wednesday on the impact of the virus on their operations.
British drinks group Diageo, the maker of Guinness stout and Smirnoff vodka, on Wednesday said the coronavirus would slash its annual sales by up to £325 million ($422 million, 388 million euros).
Diageo, which produces also Baileys liqueur and Johnnie Walker whisky, said sales for the group’s financial year ending June 30 would be impacted by between £225 million and £325 million.
French food giant Danone said it expected to take a hit of 100 million euros ($109 million) in first-quarter sales.
“What we appear to be seeing is the realisation that global economic growth could well come to a halt as the combined effects of a flu virus and belated attempts to stem the spread of it across the globe, raise the prospect of an economic sneeze,” said CMC Markets UK analyst Michael Hewson.
The death toll is now at more than 2,700, while the number of infected has surpassed 80,000, even if the numbr of new cases in China, the epicentre, are falling.
With panicked investors seeking safe havens, the yield on both 10-year and 30-year US Treasury bills are at record lows, while the Japanese yen is gaining.
However, the dollar was being kept in check by speculation that the Federal Reserve could cut interest rates to support markets, although for now officials are saying the US economy remains in rude health.
The VIX “fear” index is at its highest level in more than a year, but gold, usually a main target for those seeking shelter from the turmoil, was subdued.
“To suggest the market is a tad skittish over the coronavirus becoming a pandemic could very well be the understatement of the century with the virus morphing into the market’s biggest macro worry of the decade,” said AxiCorp’s Stephen Innes.
However, Gorilla Trades strategist Ken Berman said that “in light of the quick spreading of the virus, the global economy is likely to suffer, at least, a short-term shock, but should the outbreak slow down during the spring, we could see a swift economic recovery.”

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