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ECB's Lagarde warns coronavirus is fueling economic uncertainty

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FILE: Christine Lagarde speaks during a press conference following a meeting of the ECB governing council in Frankfurt, Germany, Thursday, Jan. 23, 20
FILE: Christine Lagarde speaks during a press conference following a meeting of the ECB governing council in Frankfurt, Germany, Thursday, Jan. 23, 20   -   Copyright  AP Photo/Michael Probst
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European Central Bank President Christine Lagarde warned on Wednesday that the coronavirus outbreak has fuelled economic uncertainty and could potentially damage global growth.

“While the threat of a trade war between the United States and China appears to have receded, the coronavirus adds a new layer of uncertainty,” Lagarde said at a conference in Paris.

More than 20,000 coronavirus cases have been confirmed globally, mostly in China, along with over 400 deaths.

“The short-term uncertainties are mainly related to global risks – trade, geopolitical and now the outbreak of the coronavirus and its potential effect on global growth,” she continued.

Lagarde's comments contrast with recent optimistic forecasts by the ECB last month.

But the agency's chief also struck a more reassuring tone on Wednesday when she said the Frankfurt institution wanted to keep its interest rates low and pursue asset purchases to support the Eurozone.

Impact on businesses

Global companies increasingly rely on China, the world's second-largest economy, as a major buyer of food, cars, movie tickets and other goods. But that has left them more exposed than ever to the pain of its latest abrupt slump.

Airlines have cancelled 25,000 flights to and within China after ticket sales collapsed, according to travel data provider OAG.

Italy could lose up to €4.5 billion in tourism revenue this year as virus fears keep visitors away, polling agency Demoskopika said in a study released Tuesday.

Oil prices were hit in recent weeks but a rebound loomed. Benchmark crude oil rose 41 cents to $50.02 a barrel on Wednesday -- compared to $70 in early January.

The mood was also more optimistic on equity markets this Wednesday, with stocks higher on Wall Street and in Asia.

Investors appeared to welcome a decision by China's central bank to inject $57 billion into its markets in a bid to soften the financial blow of the coronavirus.