2 Months : From Feb 2020 to Apr 2020
By Anna Isaac and Chong Koh Ping
Global stocks and oil prices slipped Wednesday as markets remained volatile with investors struggling to assess the impact of the fast-spreading coronavirus and its economic fallout.
Futures linked to the Dow Jones Industrial Average wavered between gains and losses ahead of the opening bell in New York. The gauge of blue-chip stocks 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.
"This is a time of peak uncertainty for coronavirus," said Edward Park, deputy chief investment officer at Brooks Macdonald. "We don't yet know the size of how much it's spread or the mortality rate. That's what markets are reacting to, peak uncertainty, rather than facts."
Investors' anxiety was also reflected in bond markets, where the yield on the U.S. 10-year Treasury dipped to 1.312% Wednesday before recovering to 1.380%. 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 level has come under pressure in recent days in part because of 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.
"There's a big question over how efficient it might be to have more easing from the Fed," Mr. Park said. "More fiscal stimulus might be needed to stimulate growth in the short term."
Meanwhile, the recent surge in volatility in U.S. equity markets showed few signs of abating. The Cboe Volatility Index, a closely watched measure of market turbulence known as VIX, remained elevated on Wednesday at 26.3.
"Markets are reacting to snippets of news or even a few hours of silence, " said Paul O'Connor, head of the U.K.-based multiasset team at Janus Henderson Investors. "The spike up in volatility this week reflects the increased uncertainty over the economic outlook. Investors are deleveraging."
Regional equity indexes retreated across most of Europe. The pan-continental Stoxx Europe 600 dropped 1.1%, with travel companies and the financial sector leading losses. The U.K.'s equity benchmark FTSE 100 index shed 0.7% 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 1.9% to $53.25 a barrel. Industrial metals including copper also waned.
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 Anna Isaac at email@example.com and Chong Koh Ping at firstname.lastname@example.org
(END) Dow Jones Newswires
February 26, 2020 07:48 ET (12:48 GMT)
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