Europe stocks advance on China lift; yen, gold decline

Bloomberg

European stocks rose on Monday after Chinese shares advanced with the yuan as investors took encouragement from the Asian country’s pledges to support the world’s second-biggest economy in the face of the coronavirus outbreak. The yen and gold both dipped.
Gains in the Stoxx Europe 600 Index were led by automakers and miners. US equity-index futures climbed, though Wall Street is shut for a holiday, and Treasuries weren’t trading. European bonds were steady, while the euro ticked higher, after closing on February 14 at its lowest since early 2017. The dollar steadied against a basket of its biggest peers.
With Monday’s gains China’s CSI 300 Index has now recouped its losses since trading resumed after the Lunar New Year break, after the central bank unveiled plans to reduce corporate taxes and fees. The momentum failed to buoy most Asian markets, however. Stocks dipped in Seoul and Sydney, while Japan’s Topix Index dropped after data showed the country’s economy shrank the most in five years in the last quarter.
Investors in risk assets are beginning the week on the front foot after China’s central bank also said it will let banks run up more non-performing loans. Bloomberg Economics estimated the country’s economy ran at just 40% to 50% capacity last week, underscoring the short-term damage done by the coronavirus-linked shutdowns of large swathes of the country.
Cathay Pacific Airways, which counts on China and Hong Kong for about half its revenue, gave a “significant” profit warning and blamed the pathogen.
“If the Chinese economy does recover and you’ve added all this fiscal and monetary stimulus into it as well, the situation could be that you have much stronger emerging markets into the second half,” Sunny Bangia, a fund manager at Antipodes Partners, said on Bloomberg TV.
“A lot depends on how this virus gets contained and if it can morph into something more minor.”
Hubei, the province at the epicenter of the outbreak, reported 1,933 new cases, slightly higher than a day earlier. Deaths were reported in France and Taiwan over the weekend, bringing to five the number of fatalities outside mainland China. Singapore’s government cut its growth forecasts, citing uncertainty over the length and severity of the outbreak. The country is expected to unveil a large stimulus package to mitigate the economic hit.
Elsewhere, Bitcoin fell almost 7% from February 14, slipping back below $10,000.
Earnings season rolls on with results from companies including: BHP Group Ltd on Monday; Tuesday brings Glencore Plc, HSBC Holdings Plc and Walmart Inc; Deere & Co results are set for Friday.
US celebrated Presidents’ Day on Monday, with financial markets shut.
Indonesia is expected to cut interest rates on Thursday, following emerging-market peers from Brazil to South Africa which have lowered borrowing costs already this year.
Futures on the S&P 500 Index increased 0.2% in New York. Nasdaq 100 Index futures climbed 0.4%. The Stoxx Europe 600 Index gained 0.2%. The MSCI Asia Pacific Index fell 0.2%. The MSCI World Index was little changed.
The Bloomberg Dollar Spot Index was little changed. The euro climbed 0.1% to $1.0841. The Japanese yen weakened 0.1% to 109.88 per dollar.
Germany’s 10-year yield fell less than one basis point to -0.40%. Britain’s 10-year yield decreased less than one basis point to 0.626%. France’s 10-year yield declined one basis point to -0.166%. Japan’s 10-year yield declined one basis point to -0.033%.
West Texas Intermediate crude advanced 0.1% to $52.10 a barrel. Gold weakened 0.2% to $1,581.04 an ounce.