U.S. Stocks Fall on China Virus Fears
January 21 2020 - 10:26AM
Dow Jones News
By Steven Russolillo and Avantika Chilkoti
Global stocks dropped Tuesday on concerns over the rapid spread
of a potentially deadly pneumonialike virus originating in central
China.
The Dow Jones Industrial Average fell 0.2%, the S&P 500 lost
0.2% and the Nasdaq Composite dropped 0.3%. All three indexes
pulled back from record levels.
Overseas, the pan-continental Stoxx Europe 600 index dropped
0.3%. The Shanghai Composite closed 1.4% lower in its biggest drop
in over two months, while the Chinese yuan lost 0.6% against the
dollar in offshore trading.
The newly identified virus has spread between humans, a leading
Chinese health official said. That fueled concerns the disease
could quickly be transmitted across Asia as millions of Chinese
travel for the annual Lunar New Year holiday. The virus has already
claimed six lives. A similar coronavirus led to the outbreak of
severe acute respiratory syndrome, or SARS, in late 2002 in
southern China, killing 774 people.
"The economic consequences could be extremely concerning," said
Rajiv Biswas, chief economist for the Asia-Pacific region at IHS
Markit. "China's international tourism has boomed, so the risks of
a global SARS-like virus epidemic spreading globally have become
even more severe."
Shares of companies that could more directly affected
economically were mostly lower. Wynn Resorts lost 6%, Las Vegas
Sands dropped 5.6%, and MGM Resorts fell 4.1%. Delta Air Lines fell
1.6%, American Airlines lost 2.5%, and United Airlines Holdings
dropped 2.7%.
Apart from the Chinese yuan, other Asian currencies also fell
against the U.S. dollar on fears that tourism and Asian economies
could be hurt if there is a widespread outbreak of the virus. The
South Korean won slid 0.7% against the U.S. dollar and the Taiwan
dollar lost 0.2% against the greenback.
"Global asset markets have been pricing in this blue-sky
scenario: there wasn't a cloud in the sky," said Cliff Tan, East
Asian head of global markets research at Japanese bank MUFG. "Now
we have a cloud."
Among the biggest losers was UBS Group, which retreated over 5%
after the Swiss banking giant missed its key 2019 targets and
lowered its guidance.
Hong Kong's Hang Seng benchmark was the worst performer among
major Asian benchmarks, closing down 2.8% in its biggest decline in
over five months. Adding to the gloom in Hong Kong, Moody's
Investors Service downgraded the city's credit rating. The ratings
firm blamed the government for failing to properly deal with seven
months of social unrest, which has driven the economy into
recession.
Within commodities, copper prices dropped 1.4%, putting the
metal on track for the biggest fall in four months, as investors
weighed the impact of the virus on China's economy and the typical
slowdown in buying ahead of Lunar New Year holidays.
Brent crude, the global benchmark for oil, dropped 1.4% to
$64.27 a barrel as the International Monetary Fund's decision to
trim global growth forecasts led to speculation that demand for oil
could drop. Concerns about supply disruptions in Libya from earlier
in the week also abated.
Later in the day, a string of U.S. companies are scheduled to
report earnings including Netflix and International Business
Machines.
Caitlin Ostroff and Paul Vigna contributed to this article.
Write to Steven Russolillo at steven.russolillo@wsj.com and
Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
January 21, 2020 10:11 ET (15:11 GMT)
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