European markets remained directionally conflicted on Wednesday afternoon amid a major mixed bag of announcements and events.
After initially climbing this morning after the Bank of England introduced a series of emergency measures to curb the economic impact of the coronavirus outbreak on the UK, the FTSE 100 (^FTSE), Germany’s DAX (^GDAXI) and France’s CAC 40 (^FCHI) were slightly in negative territory.
This is down to a number of announcements that are pulling markets in different directions.
On the positive side:
On the negative side:
UK leads on mega announcements
UK chancellor Rishi Sunak announced a sweeping spending package designed to insulate the country’s economy from the coronavirus fallout in his budget speech on Wednesday. The total coronavirus fiscal stimulus measures equate to £30bn ($38.7bn).
Noting that the virus may mean that up to a fifth of the UK’s working age population may be out of work at any one time, Sunak said that the virus would have a “significant impact” on the UK economy, even if it would be “temporary.”
“I am confident that our economic performance will recover.”
Earlier today, the Bank of England (BOE) announced emergency measures in response to the economic impact of novel coronavirus, including an unexpected interest rate cut.
The central bank said on Wednesday it would lower the interest rate by 50 basis points from 0.75% to 0.25%.It’s the first time interest rates have been moved by 50 basis points since 2009 and take rates back down to a record low.
At a press conference, outgoing BOE governor Mark Carney said the economic fallout from coronavirus is unlikely to be as bad as the 2008 global financial crisis.
“It’s different form of shock than 2008,” Carney told journalists. “There is no reason for this shock to turn into the experience of 2008 — a virtual lost decade in a number of economies — if we handle this well.”
Afterwards, the Office for National Statistics (ONS) revealed that the UK economy flatlined in January, suggesting that the bounce in growth seen following the general election was short-lived.
Growth in the month compared with December came in at 0%, below analyst forecasts of 0.2%, according to the ONS.
The data, which does not yet reflect the potential economic impact of coronavirus, will raise fears about the health of the UK economy as Europe contends with a sweeping outbreak of the virus.
In the budget, chancellor Sunak said the Office for Budget Responsibility is forecasting inflation at 1.4% this year, increasing to 1.8% in 2021, and then remaining on or around target (2%).
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