Stocks and oil slump on fears over China virus outbreak – business live

In other news…

Business morale in Germany worsened unexpectedly this month, after the economy narrowly avoided slipping into recession last year. Europe’s largest economy expanded 0.6% in 2019, the weakest growth since 2013.

The closely watched business climate index from the Ifo institute fell to 95.9 from 96.1 in December.

Ifo president Clemens Fuest said companies had become more pessimistic looking ahead, while their assessment of the current situation had improved slightly.

The German economy is starting the year in a cautious mood.

Interestingly, business confidence in the service sector slumped while the struggling manufacturing sector showed signs of recovery.

How will Hong Kong be affected? Its economy dipped into recession last year as the pro-democracy protests took their toll.

Hong Kong has six confirmed cases of the coronavirus, and has banned residents of China’s Hubei province from entering.

According to Reuters, the death toll from the coronavirus outbreak in China has climbed to 81 and the virus has spread to more than 10 countries, including France, Japan, Canada and the United States.

On the stock markets, shares of mining companies have been hit, as they are hugely dependent on demand from China. Evraz is the biggest faller on the FTSE 100 index in London, down 5.6%, and fellow miners Anglo American, Antofogasta and Rio Tinto have also tumbled.

Luxury goods companies are also down again across Europe –– Burberry, LVMH, Kering and L’Oréal. London-listed Burberry has lost 5.3%, for example. Chinese consumers usually go on a spending spree during lunar new year, but this won’t happen this time as the travel bans imposed due to the coronavirus outbreak have restricted the movement of tens of millions of people.

Airline and travel stocks are in the red, including the UK cruise company Carnival. Prudential, Britain’s biggest insurer, has slid 5.2%, as it makes a large chunk of its profits in Asia.

The sell-off on stock markets is gathering pace. London’s FTSE 100 index has tumbled more than 2%, or 154 points, to 7431.77.

• Germany’s Dax down 206 points, or 1.52%, at 13,370
• France’s CAC down 100 points, or 1.68%, at 5923
• Italy’s FTSE MiB down 204 points, or 0.85%, at 23,766

The Saudi energy minister mentioned the Sars outbreak. Severe acute respiratory syndrome (Sars) first appeared in November 2002 in southern China and killed more than 750 people in 37 countries. It was contained by placing patients in quarantine. The outbreak ended in 2004 and the disease has never resurfaced.

The diseases are similar –– Sars and the new virus are from the same coronavirus family, and both attack the lungs –– but China has responded differently to the latest outbreak, which originated at a seafood market in Wuhan. Sars was traced back to virus-infected bats.

Thomas Abraham, author of Twenty-First Century Plague: The Story of Sars, wrote in the Guardian last week:

In 2002, China was in denial and concealed the existence of Sars not merely from the outside world but from its own people. Newspapers were forbidden from reporting the disease, except for occasional statements from government officials assuring the public that there was nothing to worry about …

The fallout from China’s handling of Sars forced a move towards greater openness that has been apparent in other outbreaks of disease. In the case of the Wuhan flu, the World Health Organization as well as the public were informed on 31 December about the new disease.

By early January, the virus had been identified as a coronavirus by Chinese scientists, and its genetic sequence had been shared globally. Both of these moves were essential for an effective global response to the disease.

Saudi Arabia, the world’s biggest oil producer, is closely monitoring developments in global oil markets as the deadly coronavirus spreads, amid “gloomy expectations” for the impact on the Chinese and global economy, the country’s energy minister said on Monday.

Prince Abdulaziz bin Salman said the Opec oil cartel and its allies could act to restore the stability of the oil market if needed –– but added he was confident that the Chinese government and international community would be able to contain the spread of the virus and eradicate it.

Brent crude is down $1.1, or 1.83%, at $59.58 a barrel, after hitting $58.68 earlier, the lowest level since late October. US crude slid 1.1% to $53.1 a barrel, after falling as low as $52.1, the lowest since early October.

Prince Abdulaziz said in a statement:

Such extreme pessimism occurred back in 2003 during the Sars outbreak, though it did not cause a significant reduction in oil demand.

He said the kingdom and other members of Opec, along with a group of other oil producers known as Opec+,

have the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires.

Opec+, which includes Russia, has been pumping less oil to support prices. The Saudi energy minister said all options were open when Opec+ meets in Vienna in March, but added that it was too early to say whether more cuts to supply were needed.

The FTSE 100 index in London has fallen more than 110 points in early trading, losing 1.49% to 7473.29.

Over on the continent, stocks have also tumbled. France’s CAC has slid 1.7% while Germany’s Dax and Spain’s Ibex are both down 1.5%.

You can follow the latest news about the spread of the deadly virus on our main news blog.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The year of the rat has not got off to a good start. Shares tumbled in the Asian markets that were open on Monday, as the death toll due to the coronavirus rose to at least 80 and the virus continued to spread. China extended its week-long lunar new year holiday by three days to 2 February and widened the restrictions that have curbed the movement of tens of millions of people.

The head of the World Health Organisation will hold a special meeting with officials in Beijing today to discuss how to contain the coronavirus, as more cases were confirmed outside China. More than 400 people are critically ill and over 2,700 people are known to be infected in China, although experts are warning that up to 100,000 could be infected around the world.

Japan’s Nikkei lost 2%, its biggest one-day fall in five months. Markets in China, South Korea, Singapore and Hong Kong were closed for the lunar new year holiday. A Tokyo-listed China proxy, the ChinaAMC CSI 300 index ETF, shed 2.2%.

European shares are expected to open more than 1% down, while safe-haven assets such as the Japanese yen, the Swiss franc, gold and US Treasury bonds are in demand.

Brent crude oil, the global benchmark, slumped below $59 a barrel, and later traded at $59.38, down $1.3 or 2.2%. China is the world’s biggest oil importer.

The Agenda

9am GMT: German Ifo business confidence (January)
9.30am GMT: UK mortgage lending (December)
3pm GMT: US New Home sales (December)