Buying the corona dip ahead of G7 meeting

Investors are buying the dip this morning, picking up assets which plunged in value last week

Investors are buying the dip this morning, picking up assets which plunged in value last week. Later today G7 finance minsters will have a phone call to discuss how to best to respond to the economic effect of the coronavirus and investors are hoping that they will decide on some form of financial stimulus to buffer their economies from a slowdown.

Over the last 24 hours the world-wide increase of new cases has been relatively small with only a few new cases registered in each country other than in South Korea and in China. It is possible that the 851 new cases reported by South Korea are also the result of a very stringent checking policy with company workers and officials having their temperatures measured as they enter official buildings. On the other end of the scale is the US which reported only three new cases overnight, possibly because many are passing undiagnosed.

The FTSE has rallied more than 2% not only on the corona-related recovery which included airlines, tour operators, oil majors and mining firms, but also due to a dip in sterling which helped boost UK-facing stocks such as housebuilders and DIY firms.

Sterling sinks to 1.2772

Britain’s fraught trade talks with the EU do not bode well for a quick resolution of the UK’s trade relations with the bloc and the prospect of the UK remaining in a trade limbo is eroding the pound. Sterling perked up 0.2% this morning, but only after falling to the lowest level in five months. Investors could be looking at a long and painful decline in the pound unless there is some progress in the EU trade talks over the coming month.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.