Last week’s risk-off trading tone has clearly been confirmed on the opening bell on Monday after European markets all drifted significantly lower as traders weigh worrying developments on the Coronavirus front. The growing number of new cases in Wuhan and, more importantly, outside China has caused investors adopt a more cautious trading stance this week. The situation in South Korea, where the virus alert is set at the highest level, sparked fresh concerns about the rate of spread of the virus as well as the damage being done to Asian economies. The government has moved to reassure investors and limit the impact of the virus on the economy by announcing two extra budget plans. The measures will seek to sustain the domestic economy by boosting imports/exports and increase finance for measures to contain the virus outbreak. However, this is likely to remain insufficient in the short-term for most investors who are already proceeding with portfolio adjustments that seek to hedge the risk – especially after China announced a potential rebound in cases.
All markets are trading lower in Europe, driven down by miners and carmakers, but the worst performance is seen on the Italian FTSE-MIB index from Milan where the market opened with an 870-point bearish gap today. Prices are now trading close to 23,670 pts, one of the last support zones before 23,300 and 23,100 pts.
