Coronavirus Concerns Fuel Fresh Selloff in Global Stocks
February 26 2020 - 6:06AM
Dow Jones News
By Chong Koh Ping and Anna Isaac
Global equities, U.S. stock futures and oil slipped Wednesday as
investors' concerns about the fast-spreading coronavirus and its
economic fallout continued to roil markets.
Futures linked to the Dow Jones Industrial Average eased 0.2%
lower, suggesting that the blue-chip index is likely to drop for a
fifth straight day after the opening bell in New York. The Dow fell
nearly 900 points on Tuesday to end at its lowest level since
October after U.S. health officials said they expect a wider spread
of the coronavirus and are preparing for a potential pandemic.
Investors' anxiety was also reflected in bond markets, where the
yield on the U.S. 10-year Treasury dipped to 1.312% Wednesday
before trading at 1.347%. On Tuesday, it had settled at an all-time
low of 1.328% as fund managers sought the safety of government
bonds, extending a decadeslong rally.
The U.S. yield levels reflect in part a growing expectation
among investors that the Federal Reserve may cut interest rates at
least two times later this year. But Federal Reserve Bank of Dallas
President Robert Kaplan told The Wall Street Journal Tuesday that
events were still too fluid around the coronavirus outbreak for the
central bank to cut short-term interest rates.
Meanwhile, regional equity indexes also retreated across Europe.
The pan-continental Stoxx Europe 600 dropped 1.2%, with travel
companies and the financial sector leading losses. The U.K.'s
equity benchmark FTSE 100 index shed 0.6% on Wednesday and briefly
entered correction territory when it dropped over 10% from its Jan.
21 high.
"Investors do not want to catch this falling knife," said James
Athey, a senior investment manager at Aberdeen Standard
Investments. "The speed with which equities are declining here is
something investors find very troubling. It's hard to see people
willing to step in and buy."
Brent crude, the benchmark for global oil prices, fell 1.1% to
$53.67 a barrel. Industrial metals including copper also waned,
while gold, which is considered a haven asset, was mostly flat.
In Asia, markets closed lower. Japan's Nikkei 225 index shed
0.8% to reach its lowest level since October. Australia's
S&P/ASX 200 dropped 2.3% and Korea's Kospi retreated 1.3%.
"The market is pricing in a significant slowdown in global
growth and corporate earnings," said Ong Zi Yang, senior macro
analyst at FSMOne.com in Singapore. "It is hard to quantify the
economic impact now but there will definitely be a slowdown."
Deaths and confirmed cases of the coronavirus have continued to
climb outside China -- notably in Italy, Iran, Japan and South
Korea. Concerns among investors that the virus will spread further,
disrupting the global economy, have triggered two sharp consecutive
stock selloffs this week.
Many European and Asian benchmarks, including those in Germany,
Japan, and South Korea are now solidly in negative territory for
the year. Germany's DAX is down 4.9% year to date, while Hong
Kong's Hang Seng Index and the Kospi in Seoul have both declined
more than 5%, according to FactSet.
"This is a classic case of risk aversion," said Kelvin Tay,
regional chief investment officer at UBS Global Wealth Management
in Singapore, who added that markets were likely to remain
volatile.
In currencies, the Australian dollar fell to its lowest level
against the U.S. dollar since March 2009. Meanwhile, the ICE U.S.
dollar index was up 0.1% Wednesday, taking its gains against other
major currencies so far this year to 2.8%.
Write to Chong Koh Ping at chong.kohping@wsj.com and Anna Isaac
at anna.isaac@wsj.com
(END) Dow Jones Newswires
February 26, 2020 05:51 ET (10:51 GMT)
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