Chinese Stocks Post Biggest Drop Since May
January 23 2020 - 10:05AM
Dow Jones News
By Steven Russolillo and Caitlin Ostroff
Stocks in Shanghai slumped Thursday, weighing on global markets,
as China grappled with a worsening viral outbreak that led
investors to reassess the potential economic fallout
world-wide.
In the U.S., the Dow Jones Industrial Average fell 141 points,
or 0.4%, shortly after the opening bell. The S&P 500 dropped
0.3% and the Nasdaq Composite declined 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 pan-continental Stoxx Europe 600 slipped 0.7%.
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.
"What's going on right now is it's the coronavirus in China:
that's worse than expected," Peter Garnry, head of equity strategy
at Saxo Bank. "What the market is trying to price in is what is the
economic cost."
Airlines listed in Hong Kong and Shanghai fell sharply,
including Cathay Pacific Airways Ltd. Airport operators such as
Guangzhou Baiyun International Airport Co. also dropped.
Brent crude, the global benchmark for oil, fell 2.7% to $61.49 a
barrel amid concern that the fallout from the outbreak may weaken
economic growth and damp demand for the commodity.
Yields on European bonds also fell as investors looked to less
risky assets.
Shares of Wynn Resorts dropped over 3% and Las Vegas Sands
declined 2.3%. The outbreak in China has weighed on both stocks
this week on concern that the coronavirus will disrupt Chinese
consumers' travel plans and impact sales at hotels and casinos.
Shares of Procter & Gamble fell 0.7% after the
consumer-products giant's sales in the latest quarter fell short of
analysts' expectations. Comcast gained 1.8% after the media
company's revenue and earnings topped estimates for the fourth
quarter.
Among European equities, STMicroelectronics rallied after
fourth-quarter revenue at the European chip maker beat
expectations, and its guidance for the first quarter also exceeded
estimates. Renault shares dipped 4.3% after Citigroup downgraded
the French car maker and said it may need to sell part of its stake
in Nissan Motor.
Later in the day, some of the biggest U.S. companies including
Intel 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."
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 09:50 ET (14:50 GMT)
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