Gold rose and the U.S. dollar hit a four-month high against the euro on Monday on safe-have appeal as the death toll from the coronavirus outbreak passed that of the SARS epidemic two decades ago, but North American stock markets rallied as investors took the long view.
Worries about the coronavirus kept investors on edge, as the World Health Organization warned transmission of the deadly virus among people who have not visited China could be “the spark that becomes a bigger fire.”
Deal talks and a rally in defensive sectors helped the broad pan-European STOXX 600 index close up 0.07 per cent, while Wall Street rebounded on the outlook for earnings and the economy, with the S&P 500 and the Nasdaq notching record closing highs.
Weak economic data in the eurozone made the dollar relatively more attractive than the single currency, especially considering Friday’s U.S. non-farm payrolls report showing an acceleration in job growth in January.
Data on Monday showed Italian industrial output was much weaker than expected in December, another setback for the euro after data on Friday showed German industrial output suffered its biggest fall since recession-hit 2009.
A gauge of global equity markets traded little changed, paring most losses after Wall Street rebounded in contrast to declining share prices in Europe, which also fell on concerns about the extent of the coronavirus.
“We have the safe-haven bid from the coronavirus. That is killing EM and really benefiting the dollar, and to a lesser extent the yen and Swiss,” said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.
Canada’s main stock index rose on Monday, led by a rally in the materials sector and consumer stocks led by Restaurant Brands.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 85.08 points, or 0.48 per cent, at 17,740.57.
Restaurant Brands International Inc. rallied 3.2 per cent after its quarterly results beat analysts’ estimates on Monday, taking the consumer discretionary index up 1.2 per cent.
Data showing Canadian housing starts rose by 8.8 per cent in January from the previous month further boosted sentiment, while separate data indicated the value of Canadian building permits rose by 7.4 per cent in December from November.
The energy sector erased early losses and finished narrowly higher as crude prices slid on weaker Chinese oil demand in the wake of the coronavirus outbreak.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 1.1 per cent as gold futures rose.
Leading the index were Great Canadian Gaming Corp., up 11.0 per cent, Silvercorp Metals Inc., up 7.8 per cent, and Ballard Power Systems Inc., higher by 6 per cent.
Lagging shares were Aurora Cannabis Inc., down 8.0 per cent, MEG Energy Corp., down 5.6 per cent, and Canada Goose Holdings Inc., lower by 4.2 per cent.
MSCI’s gauge of stocks across the globe gained 0.14 per cent and emerging market stocks lost 0.49 per cent. In Europe, automakers, among the most exposed to China, fell 0.8 per cent.
On Wall Street, the Dow Jones Industrial Average rose 174.27 points, or 0.6 per cent, to 29,276.78, the S&P 500 gained 24.39 points, or 0.73 per cent, to 3,352.1 and the Nasdaq Composite added 107.88 points, or 1.13 per cent, to 9,628.39.
“We know the coronavirus will affect results at least in first quarter,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “(But) we’ll be back to growth as usual for the rest of the year.”
Investors continued to monitor the advance of the virus, which had killed more than 900 people as of Sunday, mostly in China’s provincial capital of Wuhan, the epicenter of the outbreak.
The full economic impact of the virus is still unknown but is expected to exacerbate a slowdown in the Chinese economy. Electric carmaker Tesla Inc rose 4.7 per cent, however, as its Shanghai factory returned to service.
The dollar index rose 0.17 per cent, with the euro down 0.3 per cent to $1.091. The Japanese yen strengthened 0.04 per cent versus the greenback at 109.73 per dollar.
Bond yields fell. The benchmark 10-year U.S. Treasury note rose 7/32 in price to yield 1.5525 per cent.
Treasury debt, which serves as a safe-haven investment in times of geopolitical and economic volatility, has been in demand since the start of the year. The 10-year Treasury yield , which moves inversely to price, has fallen 17.8 per cent since Dec. 31.
Shares overnight in Asia mostly fell. Japan’s Nikkei was off 0.6 per cent, South Korea’s KOSPI was 0.5 per cent weaker while Australia’s benchmark index eased 0.14 per cent.
China’s indexes were the only ones in the black in Asia, with the blue-chip index adding 0.4 per cent and Shanghai’s SSE Composite up 0.5 per cent.
Oil prices dipped on weaker Chinese demand due to the coronavirus and as traders waited to see if Russia would join other producers in seeking further output cuts.
Oil has dropped more than 20 per cent from a peak in January after the spreading virus hit demand in the world’s largest oil importer and fueled concerns of excess supplies.
Brent crude slipped $1.20 to settle at $53.27 a barrel, while U.S. West Texas Intermediate fell 75 cents to settle down at $49.57 a barrel.
U.S. gold futures settled 0.4 per cent higher at $1,579.50 an ounce.