By Geoffrey Smith
Investing.com -- Stock markets pushed sharply higher on Wednesday on the back of reports that scientists in China and Europe had made significant breakthroughs in developing drugs to treat the novel coronavirus outbreak.
Business surveys showing that better-than-expected levels of activity in the eurozone economy aslo helped: strong services readings helped IHS Markit's eurozone composite purchasing managers' index to its highest level in five months, the increase to 51.3 beating forecasts for an unchanged reading of 50.9.
The news came as a relief to markets that had been pricing in a sharp drop in Chinese economic output at least in the first quarter of this year, along with the threat of reverberations throughout the world economy.
China accounts for nearly 20% of world gross domestic product, and the implications of the outbreak on Chinese demand have sent the prices of commodities such as oil and copper into freefall, a fall that had only been broken by large-scale liquidity injections by the Chinese central bank earlier in the week.
By 5:15 AM ET (1015 GMT), the benchmark Stoxx 600 index was up 1.0% at 422.58. The German DAX was up 1.1% while the FTSE 100 was up 0.7%. All three were off earlier highs as the initial spike in response to the news faded.
One of the reports was sourced to Sky News, which claimed a team of researchers at Imperial College London would begin testing a quickly-developed drug on animals next week. Reuters also sourced a Chinese television report saying that researchers in Zhejiang had developed a drug capable of treating the coronavirus effectively. However, those claims weren’t visible on any international editions of Chinese state media.
On Tuesday, a research institute had applied for a local patent on the antiviral drug remdesivir developed by Gilead Sciences (NASDAQ:GILD), which has also been used with success on coronavirus patients in the U.S. The drug hasn’t yet received approval from U.S. regulators, however.
The news rather overshadowed a flood of earnings from Europe’s blue-chips on Wednesday, which were a mixed bag. Siemens, a traditional bellwether for European manufacturing, underperformed with a 1.0% rise after reporting a slump in margins across all of its businesses, while chipmaker Infineon surged 8.0% after reporting a better-than-expected fourth-quarter report and upbeat guidance.
Elsewhere, packaging companies Smurfit Kappa (LON:SKG) and DS Smith (LON:SMDS) led the FTSE 100 higher with gains of 7.4% and 5.7% respectively, after the Irish-based company raised its dividend on the back of strong earnings at the end of last year. The two companies are riding a wave of enthusiasm for sustainable investment, capitalizing on the shift in public opinion away from plastic packaging to cardboard.
Wind turbine maker Vestas Wind Systems A/S (CSE:VWS), another company in the Green space, also surged 3.5% in Copenhagen after forecasting another three years of steady growth, in which it expects the rising share of services in its sales mix to offset declining margins in its biggest division, the manufacture of onshore turbines.
British Airways parent IAG (LON:ICAG) also surged 7.6% after underperforming in recent days on fears around the coronavirus’ impact on the travel sector.