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.
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
"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
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
Futures imply around 35 basis points of easing by year end
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.
In commodities, Brent crude
(Reporting by Swati Pandey and Wayne Cole; Editing by Stephen Coates & Shri Navaratnam)
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By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.