By Chong Koh Ping and Anna Isaac
Global stocks fell Monday as investors grappled with the potential economic fallout from mounting coronavirus infections in South Korea and the emergence of other fresh hot spots outside China.
Futures tied to the Dow Jones Industrial Average fell 2.5%, pointing to another day of likely declines for the index of U.S. blue-chip stocks. Equities in Europe opened sharply lower, with the Stoxx Europe 600 index declining 3.5% and falling into negative territory for the year.
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.
In Italy, which is grappling with the biggest coronavirus outbreak outside Asia, the FTSE MIB equity benchmark declined 4.3% in its biggest drop since June 2016. 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.
"The risk of the virus for growth has finally struck home," said Gregory Perdon, co-chief investment officer at Arbuthnot Latham. "Developments in Italy are all of a sudden so close to the forefront of where European investors are."
Germany's DAX, the benchmark for Europe's industrial powerhouse, tumbled 3.6%.
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 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, the global oil benchmark, dropped 3.7% at $55.84. 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 2.2% to more than $1,684 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 1.384% from 1.644%.
"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 Chong Koh Ping at email@example.com
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(END) Dow Jones Newswires
February 24, 2020 05:41 ET (10:41 GMT)
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