20 ★ Thursday 27 February 2020

Leading the US fallers wereCarnival,
Royal Caribbean andNorwegian Cruise
Lineas worries grew about a coronavirus-
related slump in demand.
Morgan Stanley cut 2020 earnings
forecasts for the cruise operators by up
to 30 per cent, saying channel checks had
indicated “double-digit booking volume
drops in the US and Europe in recent
weeks, with elevated cancellations and
discounts”.
Sabre, a software company for the
lodging industry, dropped on a warning
that the virus would have a “material
impact” this year.
WatchmakerFossilalso cut sales
guidance to reflect disruption.
Toll Brothersled the housebuilders
lower after a move down market meant
its average selling price fell 6.6 per cent
last quarter, meaning headline revenue
missed expectations in spite of 5 per cent
more completions.
Sector peersDR Horton,PulteGroup
andKB Homeretreated after SunTrust
took all three stocks off its “buy” list on
fears of a second-half industry slowdown.
CMEgained after UBS upgraded the
derivatives exchange to “buy”, saying
heightened volumes and volatility in
recent weeks should be positive for first-
quarter earnings.Bryce Elder

Wall Street Eurozone London

ISSof Denmark led the Stoxx Europe 600

fallers after the facilities management

group cut 2020 margin targets.

It blamed losses from a contract with

the Danish ministry of defence as well as

a more cautious approach overall to

guidance, with the company also booking

provisions against problem contracts in

the UK and Hong Kong.

BioMérieux, the medical diagnostics

specialist, was punished after its full-year

results came with a cautious 2020

outlook, which triggered earnings

downgrades of about 8 per cent.

Stubbornly high operating expenses

and coronavirus supply chain disruption

left a valuation in excess of 30 times next

year’s earnings looking exposed, said

analysts.

ASM Internationalrallied after the chip

equipment maker said there had been no

substantial impact from the coronavirus

and that risks to first-half performance

looked to be limited.

Full-year results that matched a

January trading update came with a new

share buyback and special dividend.

Alcon, the Swiss optical surgery

equipment and contact lens maker spun

out last year from Novartis, rose on

strong full-year results and an upgrade to

“buy” from Berenberg.Bryce Elder

J Sainsburyrose after Berenberg added

the supermarket to its “buy” list.

A refocused pricing strategy and

smarter use of data from its Nectar

loyalty card, and a pledge to make no more

capital injections into its bank, should

mean it can cut debt while still delivering

profit growth that the consensus does

not expect, Berenberg argued.

Taylor Wimpeywas weakest among

the UK housebuilders after saying in an

update that sales volumes would be

“slightly lower” in 2020.

Sector peersBerkeley andBarratt

Developmentsslipped in tandem.

Restaurant Groupled the FTSE 250

fallers after the Wagamama owner

suspended its dividend to pay for an

accelerated restructuring plan.

SSP, the travel café operator, slipped

after warning that sales across the Asia-

Pacific region had halved in February.

Weir Groupbounced after its full-year

results beat expectations thanks to more

resilient than expected margins at its

minerals business.

The pumpmaker also raised the

for-sale sign on its oil and gas division,

saying the focus was not on becoming a

“mining technology pure play”.

Analysts put a value on the division of

about £600m.Bryce Elder

3 Global equities stabilise after heavy
back-to-back sell-offs
3 Travel and leisure stocks weigh on
European bourses
3 Haven rally triggered by coronavirus
crisis fades

Global stocks stabilised following several
bruising days of trading that sent haven
assets rallying.
The FTSE All-World index rose for the
first time in five sessions, climbing 0.5 per
cent, as investors charted the spread of
the coronavirus across the globe.
Ahead of a press conference scheduled
by President Donald Trump to address
the crisis, Greece, Brazil and North
Macedonia reported their first confirmed
cases of the contagion while in Italy the
death toll climbed to 12 with more than
370 confirmed cases.
The region-wide Stoxx Europe 600
index closed flat, having fallen for four
consecutive sessions. But the continent’s
airline and leisure stocks lagged behind
the wider benchmark, dropping 2 per
cent as governments and companies
introduced measures to curb travel in a
bid to contain the spread of the virus.
Following two days of volatile trading,
Wall Street opened higher with the S&P
500 climbing 0.6 per cent by midday and
the tech-leaning Nasdaq Composite up
0.6 per cent.
“The recent swings indicate the
complacency that appears to have settled

over markets during the earlier stages of

the outbreak has been dislodged,” said

George Efstathopoulos, multi-asset

portfolio manager at fund manager

Fidelity International. “In our view, the

volatility isn’t as surprising as the fact

that it took so long to rear its head.”

The Cboe Volatility index, a measure of

market volatility, fell back 4 per cent

yesterday although it remained close to

the year high that it hit on Tuesday.

A rally in haven assets spurred by

investor unease cooled yesterday with

yields on the 10-year US Treasury hitting

1.33 per cent, having fallen to an all-time

low of 1.31 per cent on Tuesday.

But gold edged up 0.4 per cent to

hover near a seven-year high.

In equities trading earlier in the

session, Hong Kong’s Hang Seng

retreated 0.7 per cent while the CSI 300

index of Shanghai- and Shenzhen-listed

stocks sank 1.3 per cent.

Oil prices, which have recently

retreated on concerns over weakening

demand, continued to slide. Brent crude,

the international benchmark, fell 1.9 per

cent to $53.91 a barrel.Ray Douglas

What you need to know

Travel clampdown hits airline and holiday stocks

Source: Bloomberg

Indices rebased

















 Feb  

Stoxx Europe  index

Stoxx Europe  Travel

& Leisure sector

The day in the markets

Markets update

US Eurozone Japan UK China Brazil
Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
Level 3155.49 1577.03 22426.19 7042.47 2987.93 107392.
% change on day 0.87 0.05 -0.79 0.35 -0.83 -5.
Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
Level 99.134 1.087 110.575 1.292 7.017 4.
% change on day 0.168 0.092 0.400 -0.768 0.009 0.
Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
Yield 1.330 -0.505 -0.098 0.503 2.848 6.
Basis point change on day -0.500 1.000 0.870 -1.400 0.900 3.
World index, CommodsFTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 358.11 54.05 49.41 1650.30 18.33 2628.
% change on day -0.05 -1.80 -1.46 -1.28 -2.37 0.
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.

Main equity markets

S&P 500 index Eurofirst 300 index FTSE 100 index

||||||| ||||||||| ||||

Dec 2020 Feb

3040

3200

3360

3520

||||||||||||||||||||

Dec 2020 Feb

1560

1600

1640

1680

1720

|||||| |||||||| ||||||

Dec 2020 Feb

6720

7040

7360

7680

Biggest movers
% US Eurozone UK

Ups

Tjx Companies 7.

Cme 5.

Netflix 4.

Jm Smucker (the) 3.

Oracle 3.

Thales 6.

Iberdrola 5.

Saipem 4.

Ucb 4.

Telecom Italia 3.

Nmc Health 6.
Evraz 4.
Smurfit Kappa 3.
Hsbc Holdings 2.
Ocado 2.
%

Downs

Norwegian Cruise Line Holdings Ltd -3.

Carnival -3.

Lowe's Companies -2.

Expedia -2.

United Airlines Holdings -2.

Prices taken at 17:00 GMT

Sodexo -2.

Yara Int -2.

Solvay -2.

Brenntag -2.

Airbus -2.

Based on the constituents of the FTSE Eurofirst 300 Eurozone

Taylor Wimpey -3.

Whitbread -3.

Informa -2.

Jd Sports Fashion -2.

Carnival -2.

All data provided by Morningstar unless otherwise noted.

Karen Ward

Markets Insight

C

entral banks move markets.

Financial analysts pore over

every word from top policy-

makers, seeking clues about

possible shifts. Investors

should therefore take heed that central

banksareincreasinglyturninggreen.

Christine Lagarde has said she wants

to make climate change a “mission-

critical”priorityinherpresidencyofthe

European Central Bank. Mark Carney,

the outgoing governor of the Bank of

England, described shifting global tem-

perature patterns as “the tragedy of the

horizon”inaspeechfiveyearsago.

This is not just happening in Europe.

TheSanFranciscoarmoftheUSFederal

Reserve hosted its first conference on

climatechangeinNovember.

So far, many of these discussions

among central bankers have centred on

the possibility that climate events could

generateshort-termdisruption.

Investors have understood that to

mean either a shock to short-term

macroeconomic activity — in the event

of a flood, for example — or a risk to

financial stability, as banks and insurers

payoutforclimate-relatedclaims.

But to think solely in those terms is to

missthepoint.

Central banks are tasked with max-

imising aggregate demand, relative to

supply constraints, to ensure that infla-

tionsticksclosetoaspecifiedtarget.

For much of the past decade, central

banks in the developed world have

struggled to generate sufficient demand

and have, as a result, consistently fallen

shortoftheirinflationtargets.

Nowhere is the deficiency of global

demand, relative to supply, more clear

thanintheoilprice.Thepriceofabarrel

of Brent crude has now dropped about

19percentsincethestartoftheyear.

Concerns about running out of oil

have been very wide of the mark — it

seems that we have more than plenty of

it. With such downward pressure on

inflation,mostcentralbankswillproba-

bly embark on new monetary experi-

ments to lift demand to encourage more

spending and more consumption. And,

along with all that, more carbon emis-

sions.Thereinliestheproblem.

The inflation objective sits in stark

contrast to another increasingly impor-

tant aim of governments — how to

tackleclimatechangemoredecisively.

If the current inflation objective does

not easily sit with an environmental

objective, what is the scope for align-

ment? In the UK, the BoE’s formal man-

date provided by the government is to

maintain price stability, first and fore-

most. The BoE is then tasked with sup-

porting the economic policy of govern-

ment, including growth and employ-

ment objectives. It is not too much of a

stretch to see the prevention of climate

changebecomingathirdobjective.

It would not be the first time that the

central bank is being asked to have a say

onthetypeofgrowthitisdelivering.

Central banks are increasingly being

asked to deliver growth that is

“balanced”. So we should expect central

banksto be asked to deliver stronger,

yetgreener,growth.

What would this mean for central

bank policy and markets? The most

obvious implication for policy would

involve a reorientation, and perhaps an

extension, of various asset purchase

programmes.Thiswouldsupportpublic

and private spending required for the

type of green infrastructure necessary

toshifttoazero-carboneconomy.

This would abandon the principle of

“market neutrality” that has governed

assetpurchasesuntilnow.

For some, this may stray too much

towards “helicopter money” or could

blur boundaries between monetary and

industrial policy. But it is not a signifi-

cantdeparturefromwherewearetoday

withthecentralbankeffectivelyprovid-

ing low or zero interest loans to govern-

mentsandcorporates.

The ECB is likely to be the first to

begin actively targeting its purchases.

Why do we think this? First, the asset

purchase programme is ongoing and, if

anything, will need expanding — even

though the supply of German Bunds

availabletobuyisdwindling.

Second, there is considerable political

momentum behind the European

Commission’shallmarkGreenDeal.

And third, the commission is closest

tohavingadesignatedsystemtoclassify

assets. In other words, the ECB would

have clear guidance as to what assets it

oughttobebuyingtomeetenvironmen-

talobjectives.

Many investors are beginning to rec-

ognise the importance of the shift in

environmental, social and governance

initiatives — and how it might alter the

economicandinvestmentlandscape.

But even those who are relatively

ahead of the game seem to underesti-

matejustquitehowtransformativecen-

tralbanks’interventionsarelikelytobe.

Actions by central bankers look set to

turbochargetheclimatechangeagenda.

Karen Ward is chief market strategist for

Emea at JPMorgan Asset Management

Do not underestimate

the green conversion

of policymakers

Mark Carney described

shifting temperature

patterns as ‘the tragedy

of the horizon’

Global Appointments

FEBRUARY 27 2020 Section:Markets Time: 26/2/2020 - 18: 57 User: stephen.smith Page Name: MARKETS2, Part,Page,Edition: ASI, 20, 1