What to watch: Eurozone business boost, UK factories warn on coronavirus, markets fall

Edmund Heaphy
Finance and news reporter
European Union flags fly outside the European Commission's headquarters in Brussels. (Reuters/Yves Herman)

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Eurozone business growth ticks up

A key measure of business activity in the European Union’s common currency area came in better than expected on Friday, in a further sign of momentum for the bloc.

A flash reading from IHS Markit’s eurozone composite managers’ index (PMI), which measures activity across several different sectors, came in at 51.6 in February.

That was higher than January’s 51.3 reading, and better than analysts had forecast.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

“The euro zone economy managed to pick up some momentum again in February despite many companies having been disrupted in various ways by the coronavirus, which caused supply problems,” said Chris Williamson, the chief business economist at IHS Markit, on Friday.

UK factories recover but warn of coronavirus supply chain issues

The UK economy is “no longer flat on its back” as manufacturing recovers despite the coronavirus starting to hit supplies and exports, according to new figures.

A closely watched industry survey shows a bounce-back in UK manufacturing that surpassed analysts’ expectations, with client spending picking up.

But firms warned the coronavirus was starting to hit their supply chains and export sales, with “abrupt shortages” of Chinese parts and a “marked reduction” in new orders from Asia.

Suppliers’ delivery times dropped at their fastest rate since the survey began, with many Chinese factories shut down to help contain the outbreak.

The growth of the UK’s dominant services sector, including everything from banking to retail to cafes, also slowed slightly over the past month. Some firms reported a drop in tourism-related bookings and cancellations by clients in countries most affected by the virus.

Coronavirus set to cost airlines £22.5bn in 2020

Global airline traffic will fall this year for the first time since the financial crisis because of the coronavirus outbreak, according to the industry.

Airlines will take a £22.5bn ($29.3bn) hit in lost flight revenue in 2020, according to the International Air Transport Association (IATA), which represents most global airlines.

Alexandre de Juniac, CEO of the IATA, warned of a “tough year for airlines” as a result of a “sharp downturn” in passenger demand.

Many airlines have been forced to cancel flights in and out of mainland China. “Airlines are making difficult decisions to cut capacity and in some cases routes,” said de Juniac.

Air France-KLM (AF.PA) became the latest to reveal the far-reaching disruption caused by the virus on Thursday, estimating its suspension until the end of March will cost at least £125m ($161.9m).

The IATA released figures on Friday laying bare the potential consequences if the outbreak has a similar impact to the SARS virus in 2003.

Stocks fall as Bank of Japan warns of ‘grave’ coronavirus concern

Asian and European stocks sunk on Friday as Bank of Japan governor Haruhiko Kuroda warned that he was watching the economic impact of the coronavirus outbreak with “gave concern.”

“Huge uncertainty remains on how the spread of the new virus may affect the Japanese economy,” Kuroda told Japan’s parliament.

“We're watching the impact with grave concern and keeping a close eye on downside risks,” he said.

Japan’s Nikkei (^N225) closed nearly 0.4% in the red on Friday in the wake of much weaker-than-expected purchasing managers’ index data from the country’s manufacturing sector.

Stocks elsewhere in Asia were also weak. The KOSPI Composite Index (^KOSPI) in South Korea, which on Friday reported a spike in coronavirus cases, fell by almost 1.5%.

The Chinese car industry, meanwhile, reported a 92% decline in car sales in the first half of February.

While China’s SSE Composite Index (^SSEC) climbed by 0.31%, the Hang Seng (^HSI) fell by more than 1% in Hong Kong on Friday.

Stocks in Europe also declined. The pan-European STOXX 600 index (^STOXX) was down by more than 0.4%, reversing marginal gains from earlier in the week.

The FTSE 100 (^FTSE) was down by more than 0.6% in London. Germany’s DAX (^GDAXI) was down by 0.1%, while France’s CAC 40 (^FCHI) was down by 0.36%.

What to expect in the US

Futures are pointing to a lower open for US stocks.

S&P 500 futures (ES=F) are down by 0.39% and Dow Jones Industrial Average futures (YM=F) are down by 0.37%. Nasdaq futures (NQ=F) are down by 0.5%.