Stocks crumble as deadly coronavirus spreads, safe havens in demand

By Swati Pandey and Wayne Cole SYDNEY (Reuters) - Asian stocks extended a global selloff on Tuesday as China took more drastic steps to combat the coronavirus, while bonds found favour on expectations central banks would need to keep stimulus flowing to offset the likely economic drag.

Reuters January 28, 2020 07:05:29 IST
Stocks crumble as deadly coronavirus spreads, safe havens in demand

coronavirus spreads, safe havens in demand" src="https://images.firstpost.com/wp-content/uploads/reuters/01-2020/28/2020-01-27T233515Z_1_LYNXMPEG0Q2AY_RTROPTP_2_GLOBAL-MARKETS.jpg" alt="Stocks crumble as deadly coronavirus spreads safe havens in demand" width="300" height="225" />

By Swati Pandey and Wayne Cole

SYDNEY (Reuters) - Asian stocks extended a global selloff on Tuesday as China took more drastic steps to combat the coronavirus , while bonds found favour on expectations central banks would need to keep stimulus flowing to offset the likely economic drag.

As the death toll reached 100 and the virus spread to more than 10 countries, including France, Japan and the United States, some health experts questioned whether China can contain the epidemic.

China has already extended the Lunar New Year holiday to Feb. 2 nationally, and to Feb. 9 for Shanghai. On Tuesday, the country's largest steelmaking city in northern Hebei province, Tangshan, suspended all public transit in an effort to prevent the spread of the virus.

With Chinese markets shut investors were selling the offshore yuan and the Australian dollar as a proxy for risk.

"The wildcard is not the fatality rate, but how infectious the Wuhan virus is," Citi economists wrote in a note.

"The economic impact will depend on how successfully this outbreak is contained."

Analysts said travel and tourism would be the hardest-hit sectors together with retail and liquor sales though healthcare and online shopping were seen as likely outperformers.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slipped 0.8% in early Asian trading on Tuesday. Japan's Nikkei <.N225> was 0.7% down, Australian shares <.AXJO> stumbled 1.3% and South Korea's Kospi index <.KS11> skidded 2.6%.

On Monday, key indexes for British, French and German equity markets slid more than 2%, as did pan-European markets on worries about the potential economic impact from the deadly virus. Stocks on Wall Street fell more than 1%.

E-Mini futures for the S&P 500 reversed some of the losses after slumping 1.6% overnight for their biggest single day percentage loss since last October. They were last up 0.25%.

Analysts at JPMorgan said the coronavirus outbreak was an "unexpected risk factor" for markets though they see the contagion as a regional rather than a global shock.

"The rise in risk aversion and worry of a region-wide demand shock ... means the knee-jerk market reaction will likely be to richen low-yielding government bonds," JPMorgan analysts wrote in a note.

"Concerns about coronavirus contagion has driven yields lower and is the latest risk of a series that have driven U.S. Treasury (UST) yields far below what fundamentals indicate. We remain short 30-year UST."

Treasury 10-year note yields dived as deep as 1.598% on Monday, the lowest since Oct. 10. Yields on two-year paper also fell sharply while Fed fund futures <0#FF:> rallied as investors priced in more risk of a rate cut later this year.

Futures imply around 35 basis points of easing by year end . The Federal Reserve is widely expected to stand pat at its policy meeting this week, but markets will be sensitive to any changes to its economic outlook.

Australian and New Zealand bonds gained on Tuesday as did Japanese government bonds (JGB) with yields on 10-year JGBs set for their fourth straight day of losses.

JPMorgan said they have not yet altered their developed or emerging markets forex forecasts though they were taking profits on their "bullish" EUR/USD positions and remain "considerably long" on Swiss francs which benefits from safe-haven demand.

Short build-up in the Aussie was another risk hedge. The currency was last down 0.1% at $0.6752, on track for its third straight day of losses.

The euro was steady at $1.1017.

The yen , which has been rising for the past five sessions, paused at 108.94 per dollar.

In commodities, Brent crude was off 15 cents at $59.17 while U.S. crude eased 12 cents to $53.02.

Spot gold was flat at $1,581.11.

(Reporting by Swati Pandey and Wayne Cole; Editing by Stephen Coates & Shri Navaratnam)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Police officer hailed for steering Capitol mob from Senate chamber
World

Police officer hailed for steering Capitol mob from Senate chamber

By Tom Hals (Reuters) - A police officer is being hailed for his role steering an angry mob away from the Senate chambers in Wednesday's deadly storming of the U.S. Capitol by supporters of President Donald Trump

At least 25 domestic terrorism cases opened as result of assault on Capitol -lawmaker
World

At least 25 domestic terrorism cases opened as result of assault on Capitol -lawmaker

WASHINGTON (Reuters) - At least 25 domestic terrorism cases have been opened as a result of Wednesday's assault on the Capitol by supporters of President Donald Trump, U.S. Army Secretary Ryan McCarthy told a Democratic lawmaker on Sunday

Indonesia locates black boxes of crashed jet as body parts recovered
World

Indonesia locates black boxes of crashed jet as body parts recovered

By Fransiska Nangoy and Bernadette Christina JAKARTA (Reuters) - Indonesian authorities on Sunday located the black boxes of the Sriwijaya Air jet that crashed into the sea soon after taking off from the capital Jakarta, as human body parts and pieces of the plane were retrieved. The Boeing 737-500 with 62 passengers and crew was headed on a domestic flight to Pontianak in West Kalimantan on Saturday before it disappeared from radar screens four minutes after take-off