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Coronavirus: Stocks rise as central banks pledge support Coronavirus: Shares rise as central banks pledge support
(about 4 hours later)
Share prices in Asia have risen after Japan's central bank promised to help protect markets from the impact of the coronavirus. London's FTSE 100 index soared almost 3% in early trading, buoyed by promises of support from major central banks.
It comes after data showed Chinese factory activity fell in February at the fastest rate on record. On Monday Japan's central bank said it would intervene to help protect markets from the impact of the coronavirus,
On Friday the US Federal Reserve made a similar pledge to stop more big falls on the world's financial markets. This mirrored a similar pledge from the US Federal Reserve on Friday to stop more big falls on global stock markets.
Last week concerns about the outbreak wiped more than $5 trillion from global stocks. Last week saw major stock markets suffer their worst weekly performance since the 2008 Global Financial Crisis.
There is the hope that central banks around the world will now work in unison to support financial markets as the coronavirus outbreak spreads.
The Bank of England said it continues to monitor developments and is assessing its potential impacts on the global and UK economies and financial systems. "The Bank is working closely with HM Treasury and the FCA (Financial Conduct Authority) - as well as our international partners - to ensure all necessary steps are taken to protect financial and monetary stability," a spokesman said.
In a rare emergency statement, Bank of Japan (BOJ) Governor Haruhiko Kuroda said the central bank would take necessary steps to stabilise financial markets: "Overseas and domestic financial markets continue to make unstable movements due to heightening uncertainty over the impact on the economy from the spread of the coronavirus."In a rare emergency statement, Bank of Japan (BOJ) Governor Haruhiko Kuroda said the central bank would take necessary steps to stabilise financial markets: "Overseas and domestic financial markets continue to make unstable movements due to heightening uncertainty over the impact on the economy from the spread of the coronavirus."
"The BOJ will monitor developments carefully, and strive to stabilise markets and offer sufficient liquidity via market operations and asset purchases," he added. Asian markets reacted positively to the BOJ move today with China's Shanghai Composite index up 3.2%, while Japan's benchmark index, the Nikkei 225, ended the day 1% higher.
The language used in the announcement suggested the central bank is ready to make full use of its existing tools to inject funds into the market, before considering what other steps it may take. Last week concerns about the outbreak wiped more than $5 trillion from global stocks.
It is the first time that the governor of the Bank of Japan has made this kind of statement since June 2016, when the UK voted to leave the European Union.
It follows a similar unscheduled announcement by the chairman of the US Federal Reserve. On Friday Jerome Powell said the central bank is watching developments closely for risks to the US economy and promised to take action if necessary.
On Monday the privately-run Caixin/Markit Manufacturing Purchasing Managers' Index showed the fastest rate of contraction in China's factory activity since the survey was launched in 2004. That followed the release on Saturday of equally weak official numbers.On Monday the privately-run Caixin/Markit Manufacturing Purchasing Managers' Index showed the fastest rate of contraction in China's factory activity since the survey was launched in 2004. That followed the release on Saturday of equally weak official numbers.
Both sets of data come after employers across the country were ordered to remain closed after the annual Chinese New Year holiday as part of attempts by authorities to stem the spread of the virus.Both sets of data come after employers across the country were ordered to remain closed after the annual Chinese New Year holiday as part of attempts by authorities to stem the spread of the virus.
The falls, which were even worse than the slump seen during the 2008 global financial crisis, highlighted the outbreak's huge impact on the world's second-largest economy.The falls, which were even worse than the slump seen during the 2008 global financial crisis, highlighted the outbreak's huge impact on the world's second-largest economy.
Over the weekend senior officials in President Donald Trump's administration also tried to soothe concerns about the impact of the outbreak, highlighting the US economy's underlying strength.Over the weekend senior officials in President Donald Trump's administration also tried to soothe concerns about the impact of the outbreak, highlighting the US economy's underlying strength.
US Vice President Mike Pence, who is leading the administration's response to the coronavirus, said that the stock market "will come back", adding that "the fundamentals of this economy are strong".US Vice President Mike Pence, who is leading the administration's response to the coronavirus, said that the stock market "will come back", adding that "the fundamentals of this economy are strong".
The fall in global stocks last week was similar in size to the biggest ever one-day fall in October 1987, which became known as Black Monday.
Stephen Clapham, the founder of Behind the Balance Sheet, was working in the City in 1987. "Somebody described this as carnage. This is not carnage, 1987 was carnage," he told the BBC Radio 4's Today Programme this morning.