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GLOBAL MARKETS-European shares hit record even as coronavirus shows no signs of peaking

Published 14/02/2020, 11:10 pm
© Reuters.  GLOBAL MARKETS-European shares hit record even as coronavirus shows no signs of peaking
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* Euro STOXX 600 hits record highs

* Scant consensus on market impact of coronavirus

* Hopes of government stimulus support shares globally

* Mainland China shares have recovered most of virus-caused losses

* Euro falls to 3-year low

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic on coronavirus https://tmsnrt.rs/3aIRuz7

(Updates prices throughout; adds BofA flows data)

By Tom Wilson

LONDON, Feb 14 (Reuters) - Stock markets across the world ticked higher on Friday, even as investors debated whether China's coronavirus outbreak would cause long-lasting damage to the global economy.

Europe's broad Euro STOXX 600 .STOXX hit a record high, gaining 0.2% to mirror gains in Asia after a choppy start to the day.

Indexes in London .FTSE and Frankfurt .GDAXI gained 0.2% and 0.3% respectively, with the former moving higher after AstraZeneca AZN.L shares turned positive. The drugmaker had earlier fallen 5% after it said it would take a hit from the coronavirus outbreak. was a similar picture in Paris .FCHI , which clawed back some early losses as Renault RENA.PA shares turned positive. It was last down 0.2%.

Renault had dropped over 4% on its first loss in 10 years as the car company set a lower operating margin goal for 2020, a crunch year for its planned reboot alongside partner Nissan after a scandal surrounding former boss Carlos Ghosn. Street futures EScv1 pointed to a slightly higher open.

The Chinese virus outbreak has showed no sign of peaking, with health authorities reporting more than 5,000 new cases. China's National Health Commission said it had recorded 121 new deaths on the mainland on Feb. 13, taking the accumulated total infected to 63,851 people. some investors are betting that the economic impact of the outbreak will not be long-lasting, finding succour in a spread beyond China that is not as rapid as feared.

Others have latched on to the possibility of further central bank stimulus measures in response to any slowdown. China's central bank, for example, has already pumped liquidity into its economy.

But some investors said they were dialling down bets on equities amid the uncertainty over what economic toll the coronavirus would take.

"We have actually taken some money out of equities this week," said Rory McPherson, head of investment strategy at Psigma Investment Management, adding that it was temporarily holding cash instead.

"Markets have been overly focused on the good, and not giving a balanced view on whether the stimulus from China isn't effective, and if the coronavirus spreads and impacts the economy more."

MSCI world equity index .MIWD00000PUS , which tracks shares in 49 countries, was flat.

Earlier, Asian shares had earlier risen towards their second straight week of gains, helped by hopes governments will make provisions to soften the impact on their economies from the coronavirus epidemic.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.1% for a weekly gain of almost 2%. China's blue-chip CSI300 shares .CSI300 , meanwhile, rose 0.7%, having staged a stunning recovery to claw back 95% of their losses made after the outbreak.

"China is already easing its monetary policy and providing more liquidity while more stimulus is likely," said Yukino Yamada, senior strategist at Daiwa Securities.

In its weekly number crunch of markets, analysts at BofA said there had been a record $23.6 billion pumped into bond funds over the last week and big inflows into almost everything else as well. also spotted that an interest rate cut in Mexico on Thursday had chalked up the 800th cut by global central banks since the collapse of Lehman Brothers in September 2008. That works out roughly one every five days on average.

EURO BLUES

In currency markets, traders had other matters than the cornoavirus on their minds.

The euro EUR=EBS slumped to another near-three-year low, with worries lingering about slowing growth in the euro zone and rising political uncertainties in Germany.

Euro zone growth slowed as expected in the last quarter of 2019 as French and Italian GDP shrank but employment growth picked up more than expected, official estimates showed.

The euro did not waver on the numbers, having earlier fallen to as low as $1.0827.

The single currency last stood flat at $1.08390. It has lost 1% so far this week and is on track for its worst two-weekly performance since mid-2018.

Others market players noted growing demand for the U.S. dollar.

"Investors will surely avoid Asia for the time being and will shift funds to the U.S., geographically the most separated from the region," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities.

Against a basket of currencies, the dollar .DXY hit a four-month high and was last at 99.115. It has risen 1.8% so far this month. The U.S. currency has been trampling everything in its path, including emerging market currencies.

Brazil's real BRL= has hit a record low forcing its central bank to intervene to prop it up, while Turkey's lira TRY= has crumpled to a near nine-month low.

Oil edged higher and was on track for its first weekly gain in six weeks, backed by expectations that producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic. Brent crude futures LCOc1 were up 85 cents at $57.19 a barrel.

For Reuters Live Markets blog on European and UK stock markets, please click on: LIVE/

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