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James Hyerczyk
S&P 500

European shares turned higher on Friday after the U.S. Dow Jones Industrial Average futures contract erased earlier losses, and turn higher for the session. Traders are now anticipating an opening gain of more than 700 points in the U.S. blue chip average.

Gains in most sectors were responsible for the turnaround, led by a surge in basic resource stocks. Travel and leisure stocks remained under pressure.

At 10:53 GMT, the UK’s FTSE 100 is trading 5473.28, up 235.80 or +4.50. Germany’s DAX is at 9465.69, up 304.56 or 3.32% and France’s CAC 40 Index is trading 4206.53, up 162.27 or +4.01%.

Thursday’s Recap

On Thursday, the benchmark pan-European Stoxx 600 Index plunged 11% to record its biggest one-day loss ever. Traders said the catalysts behind the sell-offs were U.S. President Donald Trump’s announcement of travel restrictions from the European Schengen area and the European Central Bank’s (ECB) decision not to cut interest rates. The losses were also driven in part by a new declaration by the World Health Organization that coronavirus had reached pandemic levels.

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Coronavirus Developments

U.K. Prime Minister Boris Johnson said on Thursday that up to 10,000 people in the U.K. many be infected with the virus, while BT confirmed that its CEO Philip Jansen had tested positive for COVID-19.

Additionally, EU banking regulators have delayed this year’s banking stress test and eased capital rules to encourage lenders not to switch off the faucets to a Euro Zone economy ailing from the pandemic fallout.

ECB Disappoints Investors

The European Central Bank decided Thursday not to cut interest rates, despite market expectations for a reduction amid the ongoing coronavirus outbreak. However, the central bank did announce measures to support bank lending and expanded its asset purchase program by 120 billion Euros ($135.28 billion).

Traders were expecting a rate cut of 10 basis points as a way to stimulate the Euro economy amid fears that a recession is about to hit the region. The ECB’s main rate stands at -0.5%. The negative rate is meant to spur banks to loan money rather than park it at the central bank.

Experts have argued that in comparison with other central banks, the ECB’s toolkit is more constrained given that its rates are in negative territory. Both the Federal Reserve and the Bank of England cut rates over the last week as ways to support their respective economies.

ECB President Lagarde Speaks

Speaking at a press conference, Lagarde said Thursday that the “spread of the coronavirus COVID-19 has been a major shock to the growth prospects of the global economy and the Euro areas economy and it has heightened volatility.”

Earlier in the month, Lagarde said that the bank was “ready to take appropriate and targeted measures” to deal with the economic fallout from the virus.

Lagarde further added, “Governments and all other policy institutions are called to take timely and targeted actions to address the public health challenge of containing the spread of the coronavirus and mitigate the economic impact.”

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