Stocks Sink as Coronavirus Cases Mount Outside of Asia
February 24 2020 - 9:04AM
Dow Jones News
By Chong Koh Ping and Anna Isaac
Stocks and the price of oil fell sharply Monday, spurred by the
emergence of fresh coronavirus hot spots outside China. Futures
suggested the Dow Jones Industrial Average would tumble more than
600 points at the open, following steep drops in European and Asian
equity markets.
The Stoxx Europe 600 index retreated 3.5% in its biggest drop
since 2016. The main equity gauge in Italy, which has the biggest
coronavirus outbreak outside Asia, fell 4.7%. Brent crude, the
global oil benchmark, tumbled roughly 4% in its sharpest drop in
almost five months.
The Group of 20 major economies warned Sunday that viral
outbreak poses a serious risk to the global economy as new cases
flared outside of China, prompting concerns about dangerous new
pockets of infection in places as far as Iran and Italy.
The contagion, which has curtailed Chinese manufacturing,
exports and consumption this year, is threatening to dampen global
growth as factories world-wide depend on a supply chain tethered to
China for many intermediate and finished goods. Officials and
economists are warning that an extended Chinese shutdown could
cripple global manufacturing and cost the world up to $1 trillion
in lost output.
"Not only are Chinese industrial hubs in lockdown, and derailing
global supply chains, you now have the virus spreading very close
to industrial hubs in Europe," said Florian Hense, European
economist at Berenberg Bank.
In Italy, more than 50,000 people weren't allowed to leave their
towns under a quarantine in effect Sunday. The outbreak's epicenter
within the country is just miles from Milan, the engine of Italy's
economy, and led to trade shows, soccer matches and other public
events being canceled.
"Northern Italy, Switzerland, Southern Germany, and Austria form
a big supranational industrial hub," Mr. Hense said. "Should a
lockdown in small areas of Italy be widened, there would be far
more significant disruption for manufactures like German car makers
in Europe."
Germany's DAX, the benchmark for Europe's industrial powerhouse,
tumbled 3.7%.
Airlines and travel-related stocks were hit particularly hard.
The travel and tourism segment of the Stoxx Europe 600, which
includes major hotel chains and airlines, dropped 5.7%. Short-haul
budget airline easyJet dropped 15%, leading the losers among
London-listed stocks and British Airways parent company
International Consolidated Airlines fell 8.6%. Paris-listed
plane-maker Safran fell 1.2% while aircraft engine-maker
Rolls-Royce declined 2.7%.
Ahead of the opening bell in New York, Delta Air Lines fell 5%,
United Airlines Holdings slipped 2.4% and American Airlines Group
dropped 4.9%.
In South Korea, which reported its seventh death from the
coronavirus, the benchmark Korea Composite Stock Price Index, or
Kospi, closed down 3.9%. That was its biggest one-day fall since
2018, according to FactSet. South Korea on Sunday raised its
infectious-disease alert to red -- the highest level -- for the
first time since the H1N1 swine flu outbreak in 2009.
"This could serve as a 'wake-up' call for Japan and other Asian
economies, which are vulnerable against the impact of the virus,"
said CMC Markets analyst Margaret Yang. "This will also put the
hosting of Tokyo Summer Olympic Games under scrutiny, as Japan now
has the highest number of infections outside of China alongside an
aging population."
Elsewhere in Asia, stock benchmarks in Hong Kong and Singapore
fell 1.8% and 1.2%, respectively.
In Australia the S&P/ASX 200 index declined 2.3%. Markets in
Japan were closed Monday.
Brent crude futures dropped to $55.74. Oil prices have declined
in recent weeks on investors' concerns that the viral outbreak
would sap demand for crude. Saudi Arabia is also considering a
break from its four-year oil-production alliance with Russia, The
Wall Street Journal reported Friday.
Investors fled to haven assets, leading to gold jumping 2% to
more than $1,682 an ounce on Monday, its highest in seven years.
Increased demand for U.S. Treasurys pushed yields, which move
inversely to prices, on the 10-year note down to 1.397% from 1.644%
Friday.
"The rally of haven assets such as gold reflects surging demand
for safety during a time of uncertainty. Things will probably get
worse before it gets better," said Ms. Yang.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
February 24, 2020 08:49 ET (13:49 GMT)
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