LONDON: Stocks extended a global rally and oil prices surged higher on Wednesday on eased market concerns about the impact of the deadly China virus following reports of a scientific breakthrough on tackling the epidemic, dealers said.

Strong US employment data underpinned market sentiment as well.

“Equity markets in Europe are driving higher on talk there has been progress in relation to the coronavirus situation,” said David Madden, analyst at CMC Markets UK.

Asian markets had posted gains earlier in the day following record highs overnight on Wall Street, which continued to move higher in midday trading on Wednesday on a better-than-expected gain in employment in January.

Meanwhile, Sky News had reported that a UK research team working on a coronavirus vaccine had made a “significant breakthrough”.

Professor Robin Shattock at Imperial College London told the broadcaster he was ready to begin testing the vaccine on animals next week.

“US futures and European stocks gained and Treasuries tanked as virus optimism ran wild on reports that a key breakthrough was made in the search for a coronavirus cure,” noted Edward Moya, senior market analyst at Oanda trading group.

European Central Bank chief Christine Lagarde commented meanwhile that the novel coronavirus in China and beyond presents “a new layer of uncertainty” for European economies.

Traders however took heart from the fact that the virus’ spread outside China had not spiralled.

Briefing.com analyst Patrick O’Hare said “the stock market has remained resolute in its determination that any economic impact caused by the coronavirus will be short-term in nature” despite a number of firms acknowledging their operations in China would be impacted.

Sportswear maker Adidas and European planemaker Airbus were among the latest, with Airbus saying that it has shut its factory outside Beijing that carries out the final assembly of its A320 and A330 planes.

Meanwhile, moves by Chinese authorities to support mainland stocks were also providing cheer, with the central bank pumping more than $200 billion into financial markets and the government easing restrictions on equities trading.

The rally in riskier assets saw investors shift out of safer investments such as gold and yen, dealers said.

Elsewhere, the pound reversed a rise against the dollar after the payrolls firm ADP reported that US companies added 291,000 jobs in January, far above expectations.

The dominant US services sector accelerated for the second straight month in January as well, and services firms continued to struggle to find workers, a report by the Institute for Supply Management showed.

Published in Dawn, February 6th, 2020