Coronavirus fears weigh on FTSE

The FTSE dropped sharply on the open and remained under pressure across the session, extending losses after Wall Street also opened lower. Fears over the spread of China’s coronavirus continue to knock stocks with exposure to China and weigh on risk sentiment.

Those stocks closely tied to China, such as the heavy weight miners and oil stocks were the hardest hit, along with tourism and travel firms. Burberry also extended losses for a third straight session.

Wuhan, the city with 11 million inhabitants at the centre of the outbreak under lock down. The number of people infected and the number of countries with the virus still rising, investors are growing increasing concerned that global growth could be affected. Investors are attempting to gauge the potential impact on airlines, retailers and to China’s consumption of metals and oil.

Quite simply traders are not prepared to keep risk on the table until there is more clarity over how this will develop. With 16 cases suspected in the US, 4 in Scotland and over 600 in China markets.

Euro weakens after ECB fails to acknowledge economic improvements

Today’s other big story which was incidentally a bit of a non-event was the ECB rate policy announcement and pursuant press conference with new ECB President Christine Lagarde. As was widely expected the ECB kept interest rates unchanged. Whilst Christine Large may not have wanted to rock the boat much in her second meeting at the helm of the ECB, failing to acknowledge recent improvements in economic data has disappointed euro traders, leaving the common currency exposed to downside risk.

Climate change dominated at Davos, it was also on the agenda at the EBC. Comments by self-proclaimed wise owl Christine Lagarde suggested that she was open to further monetary policy easing by saying that the central bank will take climate emergency into consideration.

EUR/USD is down 0.4% after falling through $1.1050, bringing $1.10 target into focus. Traders will now look towards the PMI readings for further clues.