European Shares Higher on Dampened China Virus Worries; PMIs Not So Bad

The major European stock indexes are trading higher on Friday, following Asia’s lead, while looking to end a four-day losing streak after the World Health Organization (WHO) offered its opinion on the deadly Chinese coronavirus outlook, saying it was not a “global emergency” yet.

Investors are also digesting the European Central Bank’s launch of a major policy review on Thursday, which will assess the calculation and feasibility of the central bank’s key inflation target and methods deployed to achieve it.

At 09:05 GMT, the U.K.’s FTSE 100 Index is trading 7618.29, up 110.62 or +1.47%. Germany’s DAX Index is at 13574.09, up 185.67 or 1.39% and France’s CAC is trading 6053.68, up 81.89 or +1.37%.

World Health Organization Comments Boost Investor Sentiment

European shares are up on Friday, following stocks in major Asian markets higher, as the number of coronavirus cases in mainland China rose to more than 800, with the death toll increasing to 25.

Health officials in China put millions of people on lockdown in efforts to contain the coronavirus outbreak, but the World Health Organization (WHO) announced it was “a bit too early” to declare the virus a global health emergency. The statement seemed to calm investors in the United States on Thursday, while spreading to Asia and Europe overnight.

European Central Bank Launches Major Policy Review

The Euro and German bund yields sank on Thursday after ECB President Christine Lagarde struck a slightly more dovish tone than markets were expecting in a press conference, after the ECB left monetary policy unchanged at its first meeting of 2020.

The ECB launched a broad review of its policy, seeking to redefine its main goal and how to achieve it, as years of the central bank’s experiment with negative interest rates and quantitative easing have failed to deliver targeted inflation levels.

ECB President Christine Lagarde told a news conference that risks to growth in the Euro Zone remained tilted to the downside and traders took her overall tone as dovish.

A dovish tone is usually a greenlight for a stock market rally.

Euro Zone Economy Remains Weak, but There’s Hope According to Latest PMIs

Euro Zone business activity remained weak at the start of the year, a survey showed a day after the European Central Bank (ECB) said the manufacturing sector remained a drag on the economy, but there were some signs the worst may be over.

IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, held at 50.9 in January, missing the median prediction in a Reuters poll for 51.2. Anything above 50 indicates growth.

“While the year may have changed, the performance of the Euro Zone economy was a familiar one in January. Output growth was unchanged from the modest pace seen in December, signaling that the economy failed again to record a pick-up in growth momentum,” said Andrew Harker, associate director at IHS Markit.