By Steven Russolillo and Caitlin Ostroff 

Global stocks slumped Thursday as China grappled with a worsening viral outbreak, leading investors to reassess the potential economic fallout world-wide.

Futures linked to the Dow Jones Industrial Average edged down 0.1%, while the pan-continental Stoxx Europe 600 slipped 0.2%. The Shanghai Composite Index sank 2.8%, its biggest drop since May, on the final day of trading before the market closes for the Lunar New Year holiday period.

The Chinese government on Thursday locked down Wuhan, where the new coronavirus originated, as well as a second city in a dramatic escalation of efforts to contain the outbreak that has killed at least 17 people and infected more than 500 so far. The lockdowns come shortly before one of the busiest travel periods for people in China and the region. Authorities feared that increased travel would enable the pneumonia-causing virus to spread further.

Concerns about what the outbreak may mean for economic growth in China and elsewhere weighed on European stocks, said Lars Kreckel, global equity strategist at Legal & General Investment Management.

The caution comes as investors look to past viral outbreaks, including severe acute respiratory syndrome, or SARS, to assess how bad the damage could be on the economy and markets this time around.

"The fallout of SARS in 2003 remains at the top of Asian investors' minds," said Jeffrey Halley, senior market analyst for the Asia-Pacific region at foreign-exchange trader Oanda.

Airlines listed in Hong Kong and Shanghai fell sharply, including Cathay Pacific Airways Ltd., which dropped 2.9%. Airport operators also dropped, including Guangzhou Baiyun International Airport Co., which slumped more than 8%.

Brent crude, the global benchmark for oil, fell 1.2% to $62.48 a barrel amid concern that the fallout from the outbreak may weaken economic growth and damp demand for the commodity.

Later in the day, some of the biggest U.S. companies including Procter & Gamble, Comcast and a number of airlines are scheduled to report results. Earnings so far have generally beaten analysts' expectations, according to Mr. Kreckel.

"This is not a part in the cycle where you get 10% earnings growth," Mr. Kreckel said. "But it's enough to keep equity markets where we are today."

The European Central Bank is widely expected to conclude a monetary policy meeting on Thursday by holding interest rates steady. Investors will be closely watching updates on a strategic review that President Christine Lagarde is undertaking at a time when inflation, interest rates and economic growth are all lower than policy makers would like.

Joanne Chiu contributed to this article.

Write to Steven Russolillo at steven.russolillo@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

(END) Dow Jones Newswires

January 23, 2020 05:30 ET (10:30 GMT)

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