U.S. Stocks Drop at Opening on Coronavirus Fears
January 27 2020 - 10:09AM
Dow Jones News
By Anna Hirtenstein
U.S. stock indexes fell at Monday's opening on concerns about
China's viral outbreak, as the detection of infected patients in
the U.S., Australia and France led to escalating concerns about its
containment and potential economic impact.
The Dow Jones Industrial Average was down 427 points, or 1.47%.
The S&P 500 fell 52 points, or 1.57%, and the Nasdaq Composite
was down 197 points, or 2.11%. In Europe, the Stoxx Europe 600
retreated 2.2%, led by declines in the U.K. and France. The Chinese
yuan slumped 0.8% against the dollar in offshore trading and the
Australian dollar declined 0.8% as well.
The coronavirus has infected more than 2,700 people and killed
at least 80, mostly in China's Hubei province, with public-health
officials warning that it is growing more contagious. The number of
U.S. cases has risen to five and the government is working to
evacuate American citizens from the epicenter.
"It's unclear how far it could have potentially spread," said
Georgina Taylor, a multiasset fund manager at Invesco. "If it turns
into a global health issue, that's really the next piece of
information that would worry us."
Investors headed into haven assets such as government bonds,
gold and the Japanese yen. The benchmark 10-year Treasury yield
fell six basis points to 1.613%, on pace for its lowest closing
level since October.
U.S. stocks are poised for swings as the Cboe Volatility Index,
or VIX, which measures expected moves in the S&P 500 index, has
climbed to its highest level since the start of this year.
Hotel, cruise and airline stocks fell on concerns that the
coronavirus could affect global travel. The Chinese government has
imposed restrictions on movement in Hubei province, and the U.S.
Centers for Disease Control and Prevention issued a warning to
avoid nonessential travel to this part of China.
In London trading, InterContinental Hotels slid 5.7% and
Carnival declined 4.5%. In premarket trading, Wynn Resorts was down
7.5%, due to its large presence in gambling hot spot Macau. Las
Vegas Sands was down 8.5%.
Airlines were among the biggest losers in the Stoxx Europe 600
on Monday, led by Air France-KLM's 6.5% decline. British Airways
owner International Consolidated Airlines fell 5.7% and easyJet
lost 5.1%.
Mining companies also slumped as investors feared that the virus
outbreak could erode China's demand for industrial commodities.
Copper hit its lowest level in eight weeks, trading at $5,819 on
the London Metal Exchange. BHP Group slipped 3.9%, Rio Tinto was
down 4.1% and Anglo American declined 4.3%.
Markets in China, Hong Kong and South Korea were closed Monday
for the public holiday. Japan's Nikkei 225 index closed down
2%.
Oil prices slumped by the most in over four months as the virus
outbreak threatens to damp economic growth in China, the world's
biggest energy consumer. Brent crude, the global benchmark,
declined 3.4% before recovering slightly to trade at $58.20 a
barrel.
Russia's ruble also lost 1% against the dollar, as falling oil
prices reduced the energy exporter's income. Norway's krone edged
down 0.7% against the euro.
Jordan Rochester, a foreign-exchange strategist at Nomura,
blamed the oil price. "All the oil currencies are suffering this
morning. That's typically the ruble in emerging markets, and in the
G-10, Canada and Norway."
The yield on Italy's benchmark 10-year government bond dropped
as much as 19.7 basis points to 1.033% after Sunday's regional
elections resulted in a win for the center-left Democratic Party in
the Emilia Romagna and Calabria areas. The nationalist League party
is losing support in Italy, reducing the country's political risk.
Italy's bonds are trading closer to Germany's benchmark bunds, with
the spread between the two tightening by 14 basis points to
146.2.
"Had the League been successful, they would have been able to
claim that the balance of power within public opinion has shifted,
it could have had an effect of weakening the government position,"
said Luca Cazzulani, a senior fixed income strategist at UniCredit.
The regional election result "reduced concerns that Italy could end
up having snap elections in the coming months, that's why the
market is reacting positively."
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
(END) Dow Jones Newswires
January 27, 2020 09:54 ET (14:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.