European stocks reach record highs on hopes virus is peaking

Commodity prices recover from slowdown in Chinese consumption of raw metals, energy

LONDON: World stocks resumed rising towards record highs on Tuesday and the dollar reached a four-month high as China's top medical adviser said the coronavirus epidemic may plateau in the next few weeks.

China's factories were struggling to re-open after an extended break and analysts warned that investors might be underestimating the economic damage, but the mood remained strong after another Wall Street surge overnight.

The death toll in mainland China climbed past 1,000 on Tuesday, but the number of new confirmed cases fell. Zhong Nanshan, an epidemiologist who helped fight the SARS epidemic in 2003, said the situation in some provinces was already improving.

"The peak time may be reached at ... maybe middle or late this month," Zhong told Reuters.

The pan-European Stoxx 600 index rose as much as 0.7% to a record high of 427.46 points. Basic resources stocks led the gains, rising 1.7%, as commodity prices recovered from the slowdown in Chinese consumption of raw metals and energy.

"There are some hopes that the peak of virus may be on the horizon, but we are still quite cautious," said TD Securities' European Head of Currency Strategy Ned Rumpeltin. "We are still pretty far from the all clear ... and we just don't know what the macroeconomic impacts are going to be."

In China, factories were slow to reopen after an extended Lunar New Year break, leading analysts at JPMorgan to again downgrade forecasts for growth this quarter.

"The coronavirus outbreak completely changed the dynamics of the Chinese economy," they said in a note.

They assumed the contagion would peak in March and factories would slowly resume opening this month. In that case, growth would slow to around a 1% annualised pace in the first quarter, before rebounding to 9.3% in the second.

Should the contagion not peak until April, the economy could contract in the first quarter, with a rebound spread over the second and third quarters, the JPMorgan analysts said.

Even so, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9%, with Shanghai blue chips ahead by 0.8%.

Japan's Nikkei was closed for a holiday, although Nikkei futures traded up 0.8%.