(Alliance News) - The FTSE 100 on Monday ended in the green as it staged an afternoon recovery amid a turbulent session, which saw strong gains in the morning dissipate following global forecast downgrades from the OECD.
"Equity markets have been very volatile today. At the open, stocks in Europe were given a boost by the chatter that the central banks of the US, Japan as well as Australia will loosen monetary policy in a bid to raise economic sentiment, but the bullish sentiment faded mid-session. For a good chunk of the day, all the major indices were in the red, but sentiment has switched back," said David Madden at CMC Markets.
The FTSE 100 index closed up 74.28 points, or 1.1%, at 6,654.89. The FTSE 250 ended down 29.22 points, or 0.2%, at 19,301.70, and the AIM All-Share closed up 4.80 points, or 0.6%, at 861.44.
The Cboe UK 100 ended up 1.4% at 11,271.23, the Cboe UK 250 closed down 0.5% at 17,323.32, and the Cboe Small Companies ended up 0.1% at 11,394.11.
In European equities on Monday, the CAC 40 in Paris ended up 0.4%, while the DAX 30 in Frankfurt ended down 0.3%.
European stocks had been posting substantial gains on Monday, but these were cut back by the OECD.
The OECD warned the coronavirus outbreak will have a major impact on global economic growth this year as it lowered its global GDP forecast by half a percentage point to 2.4%, the lowest rate since the 2008-09 financial crisis.
In China, where the virus dubbed covid-19 emerged in December, annual GDP growth is expected to reach just 4.9%, a 0.8 point drop from the OECD's original growth forecasts announced last November.
The OECD's update came after data showed production at Chinese factories declined at the fastest pace on record in February.
Caixin's manufacturing purchasing managers' index slumped to 40.3 points, a sharp fall from 51.1 in January, and also heavily below the 50.0 mark which separates growth from decline. It was also weaker than the 40.9 recorded in November 2008 during the global financial crisis.
The OECD's forecasts are based on the assumption that the epidemic peaks in China in the first quarter of 2020, and that outbreaks in other countries prove mild.
"A longer lasting and more intensive coronavirus outbreak, spreading widely throughout the Asia-Pacific region, Europe and North America, would weaken prospects considerably," the OECD warned.
"In this event, global growth could drop to 1.5% in 2020, half the rate projected prior to the virus outbreak," it said.
Connor Campbell at Spreadex commented: "Overall this was a confidence blow to the giddily rebounding markets."
He noted that the reaction was not uniform, with the FTSE 100 faring better than the CAC 40 and DAX 30 on account of its "commodity-heavy make-up", with oil and copper prices rising.
Oil major BP closed up 4.2%, while Royal Dutch Shell 'A' shares ended 3.2% higher and 'B' shares up 2.9%.
Brent oil was quoted at USD51.70 a barrel at the London equities close Monday from USD49.02 late Friday.
Safe haven asset gold also rose amid the cautious atmosphere. Gold was quoted at USD1,594.61 an ounce at the London equities close Monday against USD1,585.25 at the close on Friday.
Miners such as Rio Tinto, Antofagasta and Anglo American rose 3.6%, 3.0% and 3.0% respectively.
In contrast, travel stocks remained hard hit, with Ryanair the latest to update on coronavirus disruption.
British Airways parent International Consolidated Airlines ended down 8.2%, budget airline easyJet down 3.5% and cruise operator Carnival down 4.2%.
Ryanair ended 6.0% lower as it said it would reduce Italian flights in response to the covid-19 outbreak.
The Irish budget airline said it intends to cancel up to 25% of its Italian flights for a three-week period from March 17 to April 8.
Over the past week, Ryanair said it has seen a "significant" drop in bookings over that late March and early April periods amid the coronavirus. There has also been a step up in passenger no-shows on flights, particularly from and within Italy, Ryanair noted.
Looking ahead, the airline said it does not expect these cancellations to hurt its performance in its current financial year, but said it is too early to speculate about the impact of coronavirus outbreak.
Italy has been the hardest hit country in Europe with nearly 1,700 coronavirus cases.
Finablr closed down 15% after warning that a malware attack, plus coronavirus, will knock earnings by approximately GBP25 million.
Finablr's foreign currency business Travelex was attacked with a software virus on New Year's Eve. The attack led Finablr to take down its online systems to prevent a spread, forcing it to conduct business manually in branches. These systems are now fully online again, Finablr said, and the firm said the decision to take them offline immediately prevented further harm.
However, Abu Dhabi-headquartered Finablr has now warned that coronavirus is an "incremental negative" for Travelex, given the business has a large exposure to airports and travel.
Stocks in New York were significantly higher at the London equities close, with the Dow Jones up 2.1%, the S&P 500 index up 1.9%, and the Nasdaq Composite up 1.9%.
The dollar was softer on Monday after Federal Reserve Chair Jerome Powell said the US central bank stands ready to take action amid coronavirus disruption.
The Fed is "closely monitoring developments and their implications for the economic outlook," Powell said.
While that seems to rule out an emergency interest rate cut over the weekend, which former Fed board member Kevin Warsh had called for, the statement appears likely to reassure investors that the central bank will take action to lower the benchmark borrowing rate as needed.
The euro stood at USD1.1157 at the European equities close Monday, higher against USD1.1100 at the same time on Friday. Against the yen, the dollar was trading at JPY108.02 compared to JPY108.12 late Friday.
The pound was quoted at USD1.2773 at the London equities close Monday, compared to USD1.2753 at the close on Friday.
Both the UK and EU published their negotiation mandates last week, revealing that they are at odds over Boris Johnson's push for a comprehensive Canada-style free trade deal, as well as demands over fishing, state subsidies and standards. The EU's chief negotiator Michel Barnier has said a deal like Canada's, which would eliminate most import taxes but still require some border checks, was not suitable for Britain due to its close proximity and links to the continent.
Meanwhile, Johnson has pledged to "drive a hard bargain" as the UK outlined its negotiating objectives for the upcoming trade talks with the US.
In the economic calendar on Tuesday, there is eurozone inflation and unemployment at 1000 GMT. In the UK, there are the latest grocery share figures from Kantar at 0800 GMT.
In the UK corporate calendar for Tuesday, there are full-year results from safety testing firm Intertek, gold miner Fresnillo, Direct Line Insurance, baker Greggs and office workspace provider IWG. Equipment rental firm Ashtead reports third quarter results.
By Lucy Heming; lucyheming@alliancenews.com
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