(Alliance News) - Stocks in London were recovering at midday on Friday following the global rout in equity markets, with investors finding relief after liquidity injections by central banks.
China's central bank said Friday it would cut the reserve requirements for banks, releasing around CNY550 billion yuan in funding as the country fights to control the economic fallout of the deadly coronavirus.
The People's Bank of China said in a statement that it would cut the reserve requirement ratio on March 16 by 50 to 100 basis points for banks that meet its assessment criteria, reducing the amount of cash they must hold.
The move follows that of the New York Federal Reserve which on Thursday said it would inject USD1.5 trillion into short-term funding markets, in three tranches of USD500 billion.
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks in the US and conducts operations on behalf of the Jerome Powell-led central bank.
In addition, the Australian government on Thursday unveiled AUD17.6 billion stimulus package as the coronavirus hammered stock markets.
The FTSE 100 index was up 264.57 points, or 5.0%, at 5,502.05, but remains on track to end the week 15% lower.
The mid-cap FTSE 250 index was up 345.50 points, or 2.2%, at 16,061.04. The AIM All-Share index was up 14.12 points, or 2.0% at 749.21.
The Cboe UK 100 index was up 3.5% at 9,293.88. The Cboe 250 was up 1.5% at 14,027.29, but the Cboe Small Companies down 0.2% at 9,946.80.
In Paris the CAC 40 was up 4.6%, while the DAX 30 in Frankfurt was up 3.8%.
"After a wild week on the markets, hopes of a Fed stimulus package are boosting stocks in early trade on Friday. Europe has opened on the front foot and US futures are pointing higher. The turnaround comes as central banks from US to Australia pump liquidity in the financial markets and as investors become hopeful that US Democrats and Republicans could pass a stimulus package on Friday. Washington may be late to the party, but they are still more than welcome," said City Index analyst Fiona Cincotta.
On the London Stock Exchange, miners - which have high exposure to China - were among the blue chip risers, with BHP up 13%, Anglo American, up 12%, Rio Tinto, up 12% and Glencore up 10%.
"Chief amongst today's outperformers are those firms that have particular exposure to Chinese economic demand, with the radical decline in new cases highlighting the potential benefits of a hardline lockdown such as that seen in Wuhan. With China over the worst of this crisis, we are seeing investors scoop up mining names that have been heavily hit," said IG Group.
Royal Bank of Scotland was up 9.0% after Citigroup raised the state-backed lender to Buy from Neutral.
At the other end of the large cap index, TUI was the worst performer, down 5.2%. The Financial Times reported on Thursday that the Anglo-German travel company decided to halt pre-payments and suspend contracts with some of its hotels to survive the severe downturn in the travel industry caused by coronavirus.
"We are in close contact with our hotel partners worldwide, jointly reviewing options for capacity management, to mitigate the impact for both Tui and its partners," the company told the newspaper. TUI also stated that it had frozen recruitment and was considering cutting staff hours.
According to the FT, citing hoteliers in Spain and Greece, TUI was in talks with a number of operators to invoke "force majeure" clauses in contracts and temporarily stop payments.
Carnival was down 1.5% after the Anglo-American cruise line operator on Thursday said its Princess Cruises division will voluntarily pause its global operations in response to the "unpredictable circumstances" evolving from the spread of Covid-19 virus.
"In proactive response to the unpredictable circumstances evolving from the global spread of Covid-19 and in an abundance of caution, Princess Cruises announced that it will voluntarily pause global operations of its 18 cruise ships for two months, impacting voyages departing March 12 to May 10," the company said.
The pound was quoted at USD1.2585 at midday, up from USD1.2512 at the London equities close Thursday.
The euro stood at USD1.1155 at midday, up from USD1.1077 at the European equities close Thursday.
Against the yen, the dollar was trading at JPY106.32, up from JPY105.62 late Thursday.
Stocks in New York were set for sharply higher open on Friday, having entered bear market territory on Thursday in the wake of President Donald Trump's travel ban. The Dow lost 10% in its worst session since 1987 on Thursday.
A bear market is defined as a 20% drop in securities from the most recent peak, often occurring during times of widespread pessimism.
The DJIA was called up 5.3%, the S&P 500 index up 5.1% and the Nasdaq Composite up 5.7%.
Brent oil was quoted at USD35.12 a barrel at the midday, sharply higher from USD32.82 at the London close Thursday. However, the North Sea benchmark remains down 23% from USD46 a barrel at the end of last week.
Gold was quoted at USD1,586.50 an ounce, up from USD1,572.65 late Thursday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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