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Markets drop on US-China trade war fears

European stock markets and oil prices fell this morning as a spat between top U.S. officials and China over the origin of the coronavirus fuelled fears of a new trade war, derailing a rebound in global markets.

European shares opened down 2.5% with U.S. stockfutures trading close to 1% in the red.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.5%, pulled down by Hong Kong where the Hang Seng returned from a two-session holiday with its biggest drop in six weeks.

U.S. Secretary of State Mike Pompeo said on Sunday there was “a significant amount of evidence” that the virus emerged from a laboratory in the central Chinese city of Wuhan.

Pompeo did not provide evidence or dispute an earlier U.S. intelligence conclusion that the virus was not man-made.

An editorial in China’s Global Times said he was “bluffing”and called on the United States to present its evidence.

“Concern on the potential for another flare up between theUS and China is dominating price action”, commented RBCstrategist Adam Cole in a morning note.

Simon Black, head of investment management at wealth management firm Dolfin said investors were also adjusting their forecasts over the depth of the economic damage inflicted by the pandemic.

“It’s also the economic reality sinking in”, he said, adding that the rebound of over 20% from lows hit in March by global equities was likely not sustainable.

Companies listed on the pan-European STOXX 600 are currently expected to report a 40% decline in earnings in the second quarter.

Manufacturing activity in the euro zone collapsed last month as government-imposed lockdowns to stop the spread of the new coronavirus forced factories to close and consumers to stay indoors, a survey showed.

“We’ve just come off a rally of hopes, not a rally on fundamentals”, Black said, pointing to the massive monetary and fiscal stimulus pledged by governments and central banks around the world.

Recent economic data paints a dire picture of the global economy after weeks of lockdowns.

In the United States, manufacturing plunged to an 11-year low last month, consumer spending collapsed, and some 30.3 million Americans have filed claims for unemployment.

Oil prices fell again, paring last week’s gains, on worries a global oil glut may persist even as coronavirus pandemic lockdowns start to ease.

U.S. West Texas Intermediate (WTI) crude futures fell to $18.66 a barrel while Brent crude futures were down 1.7% at $26, after touching a low of $25.50.

Brent rose about 23% last week following three consecutive weeks of losses.

In currency markets, the dollar rose 0.1% to 99.38 against a basket of currencies while the euro was down 0.48%at $1.0930.

The safe-haven yen fell 0.2% to 106.72 per dollar.

Global coronavirus cases have surpassed 3.5 million and deaths have neared a quarter of a million, according to a Reuters tally.

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World markets rally as US agrees $2 trillion stimulus package

After earlier strong gains, European shares were mixed today after an enormous $2 trillion US stimulus package and evidence of moves by companies to deal with the financial effects of the Covid-19~crisis failed to offset the impact on markets of a surge in cases around the world. 

After jumping as much as 5.1% in earlier trade, London’s FTSE index had gained 0.5% by lunchtime.

The Paris CAC was up 0.7%, but the Frankfurt DAX was down 1.6%. Markets in Paris and Frankfurt had traded over 4% higher earlier this morning. 

Dublin’s ISEQ index was up 1.4% this lunchtime after gaining as much as 5% in earlier trade. Shares in Dalata Hotel Group had jumped over 12%, while ICG sailed 7.4% higher. 

The Irish banks also managed to make back some of their recent losses.

US officials last night agreed on a whopping $2 trillion stimulus package.

Asian markets also soared in earlier trade after US lawmakers agreed that massive stimulus package to support the world’s number one economy as the coronavirus spreads.

Tokyo’s Nikkei index surged 8% while the Hang Seng index in Hong Kong closed with gains of 3.8%.

Wall Street posted its best performance in nearly 90 years last night, as indices rallied on hopes that lawmakers would agree on a massive $2 trillion stimulus package to blunt the coronavirus’ economic impact.  

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World market emerge from rout as stimulus hopes calm panic

Europe’s main stocks indices opened higher this morning, a day after markets suffered their biggest losses in more than a decade on crashing oil prices and coronavirus fears.

Shares in London and Paris had gained 1.5% in early trade, while the Frankfurt market was up 0.8%.

Shares in Dublin also rallied with the ISEQ index up 0.9% in early trade. 

Asian stocks also bounced today on hopes that global policymakers would introduce co-ordinated stimulus to cushion the economic impact of a coronavirus outbreak. 

Oil similarly clawed back some of its massive losses from yesterday, rallying 7% and offering hope that markets had found a floor, although sentiment was still fragile a day after prices plunged. 

Supporting the mood was a pledge from President Donald Trump to take “major” steps to protect the economy and float the idea of a payroll tax cut with congressional Republicans. 

“Talk of coordinated fiscal and monetary support is getting louder,” said Rodrigo Catril, a senior foreign exchange strategist at National Australia Bank. 

The gains in the US and European futures come on the back of a 1.36% rise in MSCI’s broadest index of Asia-Pacific shares outside Japan, having dropped more than 5% on Monday. 

But despite the bounce, analysts warned it was too early to call a trough in equity markets.

Japan’s Nikkei index ended the day up 0.85%, after touching its lowest level since April 2017 earlier in the day.

Japan will unveil a second stimulus package later today to offset the impact of the outbreak. 

The Australian market closed up 3.1% as some went hunting for bargains in beaten down stocks. 

China’s benchmark Shanghai Composite Index was trading up 1.7% as new domestic coronavirus cases tumbled and President Xi Jinping’s visit to the epicentre of the epidemic lifted sentiment. Shares in Hong Kong closed 1.4% higher.

Headlines on the coronavirus, however, were still no brighter with Italy ordering everyone across the country not to move around other than for work and emergencies, while banning all public gatherings. 

“Although uncertainty is very high, we now expect similar restrictions will be put in place across Europe in the coming weeks,” warned economists at JPMorgan. 

Such has been the conflagration of market wealth that analysts assumed policy makers would have to react aggressively to prevent a self-fulfilling economic crisis. 

The US Federal Reserve yesterday sharply stepped up the size of its fund injections into markets to head off stress. 

Having delivered an emergency rate cut only last week, investors are fully pricing an easing of at least 75 basis points at the next Fed meeting on March 18, while a cut to near zero was now seen as likely by April. 

Britain’s finance minister is due to deliver his annual budget tomorrow and there is much talk of coordinated stimulus with the Bank of England. 

The European Central Bank meets on Thursday and will be under intense pressure to act, even though rates there are already deeply negative. 

“Italy’s decision to quarantine the whole country will affect 15% of Europe’s GDP, putting thee ECB at the forefront of efforts to cushion the escalating economic deterioration,” said Brian Martin, a senior international economist at ANZ.

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World market emerge from rout as stimulus hopes calm panic

Europe’s main stocks indices opened higher this morning, a day after markets suffered their biggest losses in more than a decade on crashing oil prices and coronavirus fears.

Shares in London and Paris had gained 1.5% in early trade, while the Frankfurt market was up 0.8%.

Shares in Dublin also rallied with the ISEQ index up 0.9% in early trade. 

Asian stocks also bounced today on hopes that global policymakers would introduce co-ordinated stimulus to cushion the economic impact of a coronavirus outbreak. 

Oil similarly clawed back some of its massive losses from yesterday, rallying 7% and offering hope that markets had found a floor, although sentiment was still fragile a day after prices plunged. 

Supporting the mood was a pledge from President Donald Trump to take “major” steps to protect the economy and float the idea of a payroll tax cut with congressional Republicans. 

“Talk of coordinated fiscal and monetary support is getting louder,” said Rodrigo Catril, a senior foreign exchange strategist at National Australia Bank. 

The gains in the US and European futures come on the back of a 1.36% rise in MSCI’s broadest index of Asia-Pacific shares outside Japan, having dropped more than 5% on Monday. 

But despite the bounce, analysts warned it was too early to call a trough in equity markets.

Japan’s Nikkei index ended the day up 0.85%, after touching its lowest level since April 2017 earlier in the day.

Japan will unveil a second stimulus package later today to offset the impact of the outbreak. 

The Australian market closed up 3.1% as some went hunting for bargains in beaten down stocks. 

China’s benchmark Shanghai Composite Index was trading up 1.7% as new domestic coronavirus cases tumbled and President Xi Jinping’s visit to the epicentre of the epidemic lifted sentiment. Shares in Hong Kong closed 1.4% higher.

Headlines on the coronavirus, however, were still no brighter with Italy ordering everyone across the country not to move around other than for work and emergencies, while banning all public gatherings. 

“Although uncertainty is very high, we now expect similar restrictions will be put in place across Europe in the coming weeks,” warned economists at JPMorgan. 

Such has been the conflagration of market wealth that analysts assumed policy makers would have to react aggressively to prevent a self-fulfilling economic crisis. 

The US Federal Reserve yesterday sharply stepped up the size of its fund injections into markets to head off stress. 

Having delivered an emergency rate cut only last week, investors are fully pricing an easing of at least 75 basis points at the next Fed meeting on March 18, while a cut to near zero was now seen as likely by April. 

Britain’s finance minister is due to deliver his annual budget tomorrow and there is much talk of coordinated stimulus with the Bank of England. 

The European Central Bank meets on Thursday and will be under intense pressure to act, even though rates there are already deeply negative. 

“Italy’s decision to quarantine the whole country will affect 15% of Europe’s GDP, putting thee ECB at the forefront of efforts to cushion the escalating economic deterioration,” said Brian Martin, a senior international economist at ANZ.

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Virus pandemic fears knock European markets

A jump in number of coronavirus cases outside China hit European shares this morning, as investors feared the outbreak will take a bigger toll on global growth than anticipated.

The pan-European STOXX 600 tumbled 2.5% in early trade, on pace for its biggest percentage loss since October, with all the major regional indexes down over 2%. 

Milan shares tumbled 3.7% to its lowest in nearly three weeks as Italy saw the biggest flare-up of coronavirus cases in Europe, with three people dying of the illness since Friday and more than 150 cases reported.

Shares on London’s FTSE index were down 2.1%, while the Paris CAC slumped 2.9% and the Frankfurt DAX shed 2.8%. 

Dublin shares were also much weaker this morning, falling by 3%. Shares in Bank of Ireland were down 3.1% as it reported a fall in operating profits for 2019. 

Among the worst performers on the STOXX 600 were airline stocks, with EasyJet, Ryanair, Air France and Lufthansa down between 7% and 11%. Europe’s travel & leisure index tumbled 4%.

Ryanair’s shares tumbled almost 9% in Dublin trade.

Europe’s travel and leisure index was also down 4% this morning. 

Luxury goods makers, miners, automakers, technology and banking shares all sensitive to global growth sentiment were down more than 3%.

Primark-owner Associated British Foods slid 3% as it warned of potential supply shortages on some lines later in the 2019-20 financial year if delays in factory production in China are prolonged due to coronavirus.

In Asia, Seoul led a sharp drop across the region’s equity markets after South Korea announced a surge in virus infections. 

Traders had been broadly optimistic that the virus – which has killed nearly 2,600 and infected 80,000 – was being contained outside China but a spurt of infections and deaths in other countries including South Korea, Italy and Iran has fanned fears of a wider outbreak.

With the outbreak showing little sign of easing, investors are increasingly concerned it could have a much longer-term impact on the world economy.

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Markets braced for increased volatility as Brexit and US-China trade row ramps up

Markets braced for increased volatility as Brexit and US-China trade row ramps up

Traders are preparing for a period of increased market volatility in the coming weeks, as the Brexit deadline approaches and the US-China trade dispute heats up.

Speaking on RTÉ’s Morning Ireland Neil Wilson, chief market analyst with Markets.com, said the potential disruption to global trade – and the response to that by regulators – would lead to an uncertain third quarter.

“In particular we’ve seen central banks coming out and cutting interest rates a fair bit, so we’re going to see some movement there,” he said. “We’re probably going to see some of the more safe haven-type currencies – the yen and the Swiss franc, as well as assets like gold, do better than the riskier assets.

“In particular with Brexit there’s going to be some real volatility around sterling in the coming months.”

Markets are also pricing in an increased likelihood of Britain leaving the European Union without a deal at the end of October, he said.

Mr Wilson said this was not yet seen as the most likely outcome – but was probably being treated as a 40:60 chance at the moment.

This, along with growing pessimism about US-China trade talks, contributed to steep dips in global market values earlier this week – losses that were extended in Europe on Tuesday.

“The US market tends to get a little bit of more support from investors because it’s a bit of a flight to quality,” Mr Wilson said. “You see Europe suffering and Asia suffering, just because they’re a little bit more exposed to a downturn in global trade.”

The devaluing of China’s yuan, followed by the US decision to officially label the country a currency manipulator, has added to fears of further trade disruption between the two sides this week.

Markets had hoped that there was some progress being made between the two sides, but Mr Wilson said the latest tit-for-tat marks a significant escalation in the dispute.

“It looks like the talks are breaking down,” he said. “We’re probably some way away from getting a trade deal done – and that’s set against what the expectations where throughout most of 2019, which has been a bit more positive.

“I think, by and large, people [now] don’t think we’re going to get a trade deal done until at least 2020.”

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Despite Brexit concerns, domestic economy doing well – SME Market Monitor

Despite Brexit concerns, domestic economy doing well – SME Market Monitor

The domestic economy is performing strongly despite a dip in consumer sentiment, according to the latest SME Market Monitor from the Banking and Payments Federation Ireland.

The BPFI said that businesses here have been boosted by improving employment, as well as a 2.1% rise in retail sales during April.

That is despite consumer sentiment falling in the first five months of the year as fears around Brexit weigh on the public.

The monitor, prepared by EY-DKM Economic Advisory Services, tracks trends across 15 different indicators which are important for the performance of the SME sector.

It reveals that despite Brexit uncertainty, Irish households continued to loosen the purse strings and retail sales reached a record high in April, increasing by 2.1% on the month.

The first quarter of the year also saw significant improvement in labour market indicators.

Annual employment growth accelerated to 3.7% in the first three months of the year – the largest increase since the third quarter of 2007 – while and unemployment fell to of 4.6% in April.

The monitor also noted that Brexit preparations boosted activity across the manufacturing sector, but the sector continues to lose momentum.

It also said that consumer sentiment decreased from 98.8 in January to 89.9 in May.

Annette Hughes, Director of EY-DKM Economic Advisory, said there is a significant mismatch evident between weaker consumer sentiment on one hand – driven in part by ongoing Brexit uncertainty – and the buoyant labour market and strong household spending on the other.

“For many, Brexit remains firmly in the background , despite the positive economic news at home. Until such a time as there is a clear outcome for Brexit, this ambiguity is likely to continue to weigh on consumer and business sentiment,” Ms Hughes said.

She said that while Brexit brings potentially severe implications for consumers and businesses here alike and is weighing on sentiment, current indicators point to a more positive story in the domestic economy.

“The labour market continues to outperform expectations – driving strong growth in consumer spending, a key indicator for SMEs,” Ms Hughes said.

“New SME lending in Q4 2018, although down 5.6% on the corresponding figure last year, was up strongly in year-on-year terms in the preceding four quarters, especially in the property and agri-food sectors,” she added.

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