Global stocks, oil tumble on fears virus to hurt China’s economy

NEW YORK (Reuters) – Global equity markets tumbled on Thursday as the death toll from China’s coronavirus outbreak hit 170, pummeling oil prices and inverting a closely watched bond as investors worried about the world’s second-largest economy.

Gold gained along with the safe-haven Japanese yen and Swiss franc, as the number of people infected by the virus in a fast-spreading health crisis surpassed 8,100 people globally, more than the total from the 2002-2003 SARS epidemic.

The World Health Organization declared a public health emergency of international concern.

Tedros Adhanom Ghebreyesus, WHO director-general, said the group’s greatest concern is the potential for the outbreak to spread to countries with weaker health systems. The virus has spread to 18 countries.

The International Monetary Fund said it was too soon to quantify the potential economic impact of the virus, which has halted tourism and commerce throughout China.

Damage to China’s economy is still hard to assess, but Wall Street economists see slower growth. Fitch Solutions said it maintains its real GDP growth forecast for China at 5.9% for 2020, but the impact of the virus could reduce that to 5.4%.

Major equity indexes slid across the globe, with the declines sharper in Asia and Europe than on Wall Street. Fading risk appetite sent yields on U.S. Treasuries down to the lowest in more than three months. A closely watched part of the yield curve briefly inverted.

Investors remain confused about the strength of the U.S. economy, yet they still own stocks because alternatives do not seem attractive, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

“We continue to vacillate between the view that we’re headed toward recession and that we’re going to have economic growth,” Meckler said. “There are times like today where the virus seems like it could push us back toward weakness.”

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 2.42% lower, while emerging market stocks lost 2.45%.

Latin American assets have been hit hard by expected demand disruptions in China, one of the region’s largest export destinations.

The pan-European STOXX 600 index lost 1.01% while MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.65%. The world index is weighted 55% to U.S. stocks.

Shares in London .FTSE fell 1.36%, extending losses as the pound climbed against the dollar after the Bank of England kept interest rates unchanged.

Disappointing earnings in Europe weighed on blue-chips, adding to the gloom. Royal Dutch Shell (RDSa.L) fell 4.4% after fourth-quarter profit halved to its lowest in more than three years.

The Dow Jones Industrial Average .DJI fell 40.44 points, or 0.14%, to 28,694.01. The S&P 500 .SPX lost 6.43 points, or 0.20%, to 3,266.97 and the Nasdaq Composite .IXIC dropped 18.83 points, or 0.2%, to 9,256.33.

The benchmark 10-year Treasury note US10YT=RR rose 12/32 in price to yield 1.5548%. The yield curve between three-month bills and 10-year notes inverted for the second time this week, a bearish economic signal.

German government bond yields fell sharply, with 10-year German bund yields dropping to a three-month low of -0.445%.

The dollar fell on news the U.S. economy posted its slowest annual growth in three years in 2019 and personal consumption weakened dramatically. The dollar index .DXY fell 0.13% after it had gained 0.65% in the last two weeks as investors sold off risk assets.

Still, coronavirus fears persisted, boosting the Japanese yen JPY= and Swiss franc CHF=.

The euro EUR= rose 0.19% to $1.103. The yen strengthened 0.22% at 108.78 per dollar.

FILE PHOTO: Traders Anthony Rinaldi (L) and Federico DeMarco (R) work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 28, 2020. REUTERS/Bryan R Smith

Gold prices rose, with U.S. gold futures GCv1 settling up 0.8% at $1,583.50 an ounce.

Oil prices fell more than 2% to the lowest in three months on virus-related worries, while traders also considered the possibility of an early meeting or the Organization of the Petroleum Exporting Countries.

Brent crude LCOc1 lost $1.52 to settle at $58.29 a barrel, while U.S. crude CLc1 fell $1.19 to settle at $52.14 a barrel.

Additional reporting by Tom Wilson in London, Tom Westbrook in Singapore, Swati Pandey in Sydney; Editing by Timothy Heritage, Diane Craft and David Gregorio

Leave a Reply