Global
stock markets plunged further Friday on spreading virus fears,
deepening a global rout after Wall Street endured its biggest one-day
drop in nine years.
Germany’s
DAX skidded more than 5%, Tokyo and Shanghai closed 3.7% lower and New
York markets looked set for more losses with the futures for the Dow
Jones Industrial Average and S&P 500 down 2.3%.
Investors
had been growing confident the disease that emerged in China in
December might be under control. But outbreaks in Italy, South Korea,
Japan and Iran have fueled fears the virus is turning into a global
threat that might derail trade and industry.
Anxiety
intensified Thursday when the United States reported its first virus
case in someone who hadn’t traveled abroad or been in contact with
anyone who had.
Virus
fears “have become full-blown across the globe as cases outside China
climb,” Chang Wei Liang and Eugene Leow of DBS said in a report.
In
early trading, London’s FTSE 100 sank 2.8% to 6,602.24 and Frankfurt’s
DAX tumbled 5% to 11,750.10. France’s CAC 40 lost 3.9% to 5,274.32.
Markets
in China and Hong Kong had been doing relatively well despite virus
fears. Mainland markets were flooded with credit by authorities to shore
up prices after trading resumed following an extended Lunar New Year
holiday. Chinese investor sentiment also has been buoyed by promises of
lower interest rates, tax breaks and other aid to help revive
manufacturing and other industries.
But
now, major companies are issuing profit warnings, saying factory
shutdowns in China are disrupting supply chains. They say travel bans
and other anti-disease measures are hurting sales in China, an
increasingly vital consumer market.
In
Asian trading on Friday, the Nikkei 225 in Tokyo tumbled 3.7% to
21,142.96 and the Shanghai Composite Index also fell 3.7%, to 2,880.30.
Hong Kong’s Hang Seng lost 2.5% to 26,129.93.
The
Kospi in Seoul fell 3.3% to 1,987.01 and Sydney’s S&P-ASX 200 sank
3.2% to 6,441.2. India’s Sensex skidded 3.6% to 38,331.87. New Zealand
and Southeast Asian markets also retreated.
On
Thursday, the S&P 500 fell 4.4% to 2,978.76. The index is down 12%
from its all-time high a week ago, putting the market into what traders
call a correction.
Some
analysts have said that was overdue in a record-setting bull market,
though Mizuho Bank noted hitting that status in just six days was “the
fastest correction since the Great Depression” in the 1930s.
Investors
came into 2020 feeling confident the Federal Reserve would keep
interest rates at low levels and the U.S.-China trade war posed less of a
threat to company profits after the two sides signed a truce in
January.
The
market’s sharp drop this week partly reflects increasing fears among
many economists that the U.S. and global economies could take a bigger
hit from the coronavirus than previously thought, weakening consumer
confidence and depressing spending.
The
Dow shed 1,190.95 points on Thursday, its largest one-day point drop in
history, bringing its loss for the week to 3,225.77 points, or 11.1%.
To put that in perspective, the Dow’s 508-point loss on Oct. 19, 1987,
was equal to 22.6%.
“It
is a race to the bottom for U.S. indices,” Jingyi Pan of IG said in a
report. “It may still be too early to call a bottom given the
uncertainty around the matter of the coronavirus impact.”
U.S.
bond prices soared Thursday as investors fled to safe investments. The
yield on the benchmark 10-year Treasury note, or the difference between
the market price and what an investor will be paid if the bond is held
to maturity, fell to a record low of 1.16%.
A
shrinking yield caused by investors shifting money into the relative
safety of bonds and pushing up their market price is a sign of weakening
confidence in the economy.
Most
access to the city of Wuhan, a manufacturing hub of 11 million people
at the center of the outbreak, was suspended Jan. 23. The Lunar New Year
holiday was extended to keep factories and offices closed. The
government told the public to stay home.
China
has begun trying to reopen factories and other businesses in areas with
low risk after shutting down much of its economy to stem the spread of
the infection. Travel controls remain in effect in many areas and
elsewhere governments are tightening anti-disease controls as new cases
mount.
Japan
is preparing to close schools nationwide and officials on the northern
island of Hokkaido, where there are more than 60 confirmed cases of the
virus, declared a state of emergency and asked residents to stay home
over the weekend if possible. Saudi Arabia has banned foreign pilgrims
from entering the kingdom to visit Islam’s holiest sites. Italy has
become the center of the outbreak in Europe.
“The
more countries that are faced with fighting a pandemic, the wider the
potential for economic disruption and potential for increased
recessionary risks,” said Tai Hui of J.P. Morgan Asset Management in a
report.
In
energy markets Friday, benchmark U.S. crude fell $2.09 to $45.00 per
barrel in electronic trading on the New York Mercantile Exchange. The
contract lost $1.64 on Thursday to settle at $47.09. Brent crude oil,
used to price international oils, sank $2.05 to $49.68 per barrel in
London. It declined $1.25 the previous session to $52.18 a barrel.
The dollar declined to 108.57 yen from Thursday’s 109.58 yen. The euro gained to $1.1054 from $1.0998.
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