By Chong Koh Ping, Anna Isaac and Caitlin McCabe
Global stocks and oil prices fell sharply Monday, spurred by the
emergence of fresh coronavirus outbreaks in several countries
outside of China.
The blue-chip index fell more than 800 points, or 2.8%, shortly
after the U.S. market opened, on track for a third consecutive
session of losses. The drop erased the Dow's gains for the year
puts it on track for its biggest one-day decline in six months.
The S&P 500 also declined 90 points, or 2.7%, with all 11
sectors posting declines. The tech-heavy Nasdaq Composite fell the
furthest, dropping 3.2%.
Investors stepped up their flight to haven assets, pushing gold
prices up 1.7% to $1,678 a troy ounce. Increased demand for U.S.
government bonds sent the yield on the benchmark 10-year note down
to 1.371%, approaching the all-time low of 1.366% from 2016. Yields
move inversely to prices.
"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 CMC Markets analyst Margaret
Yang.
Meanwhile, Brent crude dropped 4.5% to $55.34 a barrel. 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.
After weeks of fresh records in U.S. indexes, market gains
started to unravel last week, as it became increasingly clear that
the coronavirus outbreak will disrupt global supply chains more
than originally anticipated. Those concerns worsened over the
weekend after a surge of cases were reported in South Korea, Iran
and Italy.
The Cboe Volatility Index, or VIX, jumped to 23.92 in early
trading, on track to close at its highest level since early August.
The options-based gauge tends to rise when markets fall and
investors reach for insurance-like contracts to protect their
portfolios. Near-dated futures contracts tracking the index also
jumped above those expiring in later months, a sign that many
investors are bracing for more volatility.
The Stoxx Europe 600 index retreated 3.9%. The main equity gauge
in Italy, which has the biggest coronavirus outbreak outside Asia,
fell 4.7%. Germany's DAX, the benchmark for Europe's industrial
powerhouse, also tumbled 3.9%.
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 damp 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."
Airlines and travel-related stocks were hit particularly hard.
American Airlines dropped 8.5%, while British Airways parent
company International Consolidated Airlines fell 8.6%.
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 Ms. 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.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
February 24, 2020 11:23 ET (16:23 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.