The markets badly needed a bit of good news and today they found it, even in the face of some unpleasant data.
The fact that the number of cases in Italy evened out over the last two days was taken as a signal that the country may be coming out of the worst of its viral affliction, partially because it went into a nearly full lockdown two weeks ago – the duration of incubation. Yet a meaningful analysis should also take into account that over the last week the country received a massive injection of help from other countries with batches of foreign doctors arriving to help the spread under control. Still, the spring sunshine was felt in the markets across Europe this morning with Milan’s FTSE MIB index trading up nearly 6% and the DAX up 5.8%.
Oil firms rally 13%
On the FTSE, which is up 3.7%, the focus this morning is to a large extent on oil shares as investors pin their hopes that the potential peaking of the spread in Italy and Germany may mean that some restrictions on movement in parts of Europe may start being eased soon. BP (NYSE:BP) and Royal Dutch (NYSE:RDSa) are both trading up 13%, as are hotel chains.
PMI readings close to forecasts
The Eurozone’s Purchasing Managers Index is one of the first indicators to show how badly the European economy has been hit in March, coming in at 31.4 versus 51.6 in February. Not much by way of a surprise but nevertheless uncomfortable reading. The ordered closures of all non-essential shops in Britain from today means that the economic implications will become even worse. It is too early to start calling the bottom on the decline in Europe as in a number of countries such as Poland, the Baltic states, Austria, Hungary and Croatia the virus has not yet spread on a large scale.