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Stocks rout stemmed as China injects $71bn into banks

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
A doctor speaks with a patient during an online consultation session at a hospital in Shenyang in China's northeastern Liaoning province on February 4, 2020, amid an outbreak of a deadly SARS-like virus which began in the city of Wuhan. - The hospital provides the free online service to relieve the stress of face-to-face outpatient services and to avoid cross infection. The number of total infections in China's coronavirus outbreak has passed 20,400 nationwide with 3,235 new cases confirmed, the National Health Commission said on February 4. (Photo by STR / AFP) / China OUT (Photo by STR/AFP via Getty Images)
The $71bn cash injection is part of a $172bn package of stimulus aimed at supporting China during the deadly coronavirus outbreak. Photo: STR/AFP via Getty Images

Stock prices rebounded around the world on Tuesday, as China’s central bank moved to prop up its banking system in the face of the coronavirus outbreak.

The People’s Bank of China on Tuesday said it had injected 500bn renminbi ($71.5bn, £55bn) into China’s banking system to support liquidity “during the period of epidemic prevention and control.” The injection follows a $172bn stimulus package on Monday, aimed at supporting the country during the deadly coronavirus outbreak.

Asian stock markets bounced off lows in response. The Shanghai Composite (000001.SS) rose 1.4%, following a near 8% drop Monday, and the Hong Kong Hang Seng (^HSI) rose 1.2%. It follows the worst stock market rout for mainland Chinese stocks in five years on Monday.

READ MORE: Coronavirus sparks biggest Chinese stock crash since 2015

The rally in Asia helped spur a strong open in Europe. The FTSE 100 (^FTSE) opened 1.5% higher in London, the German DAX (^GDAXI) rose 0.8%, and France’s CAC 40 (^FCHI) climbed 0.8%.

US futures also climbed. S&P 500 futures (ES=F) were up by 0.9%, Dow Jones Industrial Average futures (YM=F) were up by 0.9%, and Nasdaq futures (NQ=F) were 1% higher.

Neil Wilson, chief markets analyst at Markets.com, said fear about the spread of coronavirus had “eased back a touch and investors hunted on the bargain shelf.”

Chinese authorities said on Tuesday that the death toll from coronavirus had risen to 425 and confirmed infections had climbed to 20,438. A 39-year-old man in Hong Kong also died overnight from the virus, marking only the second coronavirus fatality outside of mainland China and the first in Hong Kong.

READ MORE: Why investors are panicking about the coronavirus

However, Dr Adam Barker and Dr Tara Raveendran, research analysts at stockbroker Shore Capital, said the World Health Organisation’s (WHO) latest report on the epidemic suggested a slowdown in coronavirus’s spread.

“The daily growth rate in global reported cases fell below 20% for the first time, the percentage of severe cases continues its rapid decline and the mortality rate of the virus shows no sign of increasing,” the pair wrote in a note sent to clients on Tuesday.

“However, the most important data point in Situation Report 14 was the daily growth rate in ex-China cases, which suffered a very sharp fall to 4.8% having been as high as c30% only three days ago. We are very encouraged by this statistic.”