FTSE miners lead recovery as China’s infection rate slows
FTSE miners led London’s blue-chip index higher today as traders welcomed a lower rate of new coronavirus infections in China.
Evraz, BHP, Anglo American, Glencore and Petra Diamonds all posted double-digit gains as the FTSE 100 surged over eight per cent higher following yesterday’s record sell-off.
Online trader IG analyst Joshua Mahony linked the jump in FTSE miners to a decrease in the daily coronavirus infection rate of China, where demand for commodities is high.
China only reported eight new coronavirus cases today in the second consecutive day of single-digit increases, marking a substantial drop in its daily infection rate.
“Chief amongst today’s outperformers are those firms that have particular exposure to Chinese economic demand, with the radical decline in new cases highlighting the potential benefits of a hardline lockdown such as that seen in Wuhan,” Mahony said.
“With China over the worst of this crisis, we are seeing investors scoop up mining names that have been heavily hit. However, it is likely to get worse before it will get better, with lockdowns like those in Wuhan and Italy likely to take shape in countries such as Spain, France, and Germany before long. “
The price of Brent crude also increased slightly to around $35 a barrel.
However, Mahony warned this may not last as the situation remains fluid, particularly in Europe.
However, by early afternoon the FTSE 100 had held onto gains of almost seven per cent after yesterday’s 10.87 per cent stock market collapse.
It is feared other countries could follow China’s lead by imposing mass lockdowns, causing further disruption in the world economy.
The crisis stemming from coronavirus has seen oil prices fall as low as $31 a barrel.
Oil prices crashed at the start of the week as Saudi Arabia and Russia engaged in a price war. Saudi Arabia flooded the market with oil in an attempt to hurt Russia, which had refused to agree to a further cut in oil production.
The pair had been slashing production in a bid to bolster oil prices as coronavirus hits travel demand.