By Barbara Kollmeyer, MarketWatch
AFP via Getty Images
The FTSE 100 headed higher on Wednesday, lifted by key sectors: mining and oil companies, which were buoyed by indications that the spread of COVID-19, which originated last year in Wuhan, China, was starting to slow.
The advance for London-listed shares was attributed to news that the rate of the spread of disease in China had receded, though the death toll rose to 1,100 as the country reported 97 more deaths over the last 24 hours. The outbreak has raised concerns about a retrenchment of growth in the world’s second-largest economy, as a number of factories— key links in global supply chains—remain idle in an attempt to contain the epidemic.
“It’s now hoped that, as far as the economy is concerned, we’re just facing a bad quarter that could wipe around 1% off full year Chinese growth. I’m sure the data over the coming weeks will enlighten us further on this but, should that turn out to be true, that seems perfectly manageable,” said Craig Erlam, senior market analyst at OANDA Europe, in a note to clients.
But he also cautioned that investors want to be careful of getting too excited over the signs of fewer reported cases, noting that it still may be early days for the virus.
As China is also a huge consumer of commodities, the news gave a lift to related companies. Mining stocks led the gains in London on Wednesday, with Anglo American /zigman2/quotes/201381512/delayed UK:AAL +2.50% /zigman2/quotes/201381512/delayed UK:AAL +2.50% /zigman2/quotes/201381512/delayed UK:AAL +2.50% up nearly 3% and Rio Tinto /zigman2/quotes/202627887/composite RIO +0.32% /zigman2/quotes/208934945/delayed UK:RIO +0.69% rising over 2%. Anglo American was upgraded to neutral from sell by UBS.
Major oil companies were the second-biggest sector on the move higher, as crude prices also climbed. Heavily-weighted BP /zigman2/quotes/207305210/composite BP -2.80% /zigman2/quotes/202286639/delayed UK:BP -1.72% and Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A -1.12% /zigman2/quotes/206428183/delayed UK:RDSA -0.65% were up around 1.7% each.
The Organization of the Petroleum Exporting Countries on Wednesday said Wednesday that it expects growth in world demand for crude to grow by 990,000 barrels a day in 2020, down 230,000 barrels a day from its January forecast. The outbreak of COVID-19 in China was “the major factor behind this revision, it said.
On the downside in London, shares of Ocado Group /zigman2/quotes/207225647/delayed UK:OCDO +3.19% fell 3%, giving back much of Tuesday’s gains after the online grocer posted a wider loss for fiscal 2019, but gave an upbeat assessment of the year ahead.