Equities sell off

Both European and US stocks lost ground yesterday, the former falling by around 2.5% and the latter by circa 1.5%, as worries surrounding the coronavirus weighed on markets. The dollar continues to benefit in this environment  – it is trading at about $1.10 against the euro this morning (remember it ended 2019 at $1.12) – while core bond yields fell on the day (by circa 8bps in the case of US 10-year yields)

Ahead of the eagerly awaited Bank of England interest rate announcement this Thursday, the pound is a touch softer against the euro this morning, trading at about 84.5p, and has also edged down against the dollar to just over $1.30

The IFO index of the business climate in Germany dipped at the start of 2020, having risen in both November and December, with an improvement in manufacturing offset by a decline in sentiment in the services sector

ECB member Mersch says the central bank is “attentive to the potential side effects” of its highly accommodative monetary policy (including very low and negative interest rates) on asset prices, which he says in some cases are “currently at very elevated levels”

Data due today include the latest (and post general election) CBI retail sales survey in the UK and consumer confidence, house prices, and capital goods orders in the US