Shares skidded and the price of gold surged on Monday as the number of people infected or killed by the viral outbreak that began in China surged, heaping more uncertainty on the economic outlook.
The decline followed a sell-off Friday on Wall Street and a weekend meeting in Riyadh, Saudi Arabia, of finance ministers and central bank chiefs of the Group of 20 major industrial economies where officials warned the outbreak that began in China is threatening to derail world growth.
“Interestingly, this time it’s markets outside of China (where the spread of coronavirus continues to slow) that have taken the brunt of the nervousness,” said Colin Cieszynski, chief market strategist at SIA Wealth Management in Toronto.
Britain’s FTSE 100 sank 2.7 per cent to 7,203.77, while the CAC 40 in Paris lost three per cent to 5,850.92. Germany’s DAX fell 2.9 per cent to 13,188.98.
In North America, major stock indexes opened sharply lower. The Dow dropped by more than three per cent or almost 1,000 points when the market opened. The TSX was also down 337 points, or just over two per cent, within minutes of opening.
The price of gold, viewed as a safe haven in times of peril, jumped $33.70 to $1,682.40 per ounce.
The price of oil is also sharply lower. West Texas Intermediate, the North American oil benchmark, is down by $2.21 a barrel to $51.08. It lost 50 cents to $53.38 per barrel on Friday.
Brent crude, the international standard, gave up $1.87, or 3.3 per cent, to $56.08 per barrel.
South Korea reported another large leap in new cases on Monday, a day after the the president called for “unprecedented, powerful” steps to combat the outbreak that is increasingly confounding attempts to stop the spread.
The 70 latest new cases raised South Korea’s total to 833, and two more deaths raised its toll to seven. The latest updates sparked selling of shares, pulling the benchmark Kospi 3.9 per cent lower to 2,079.04,
The viral outbreak that began in China has infected more than 79,000 people globally and killed more than 2,600 people. China has reported 2,592 deaths among 77,150 cases on the mainland.
Meanwhile, China cancelled its annual legislative session, usually held in early March, as part of efforts to contain the spread of the virus.
Travel restrictions, business closures and other efforts in China aimed at containing the spread of the virus have begun to disrupt supply chains and sales prospects for Apple and other big companies.
China trying to stimulate economy
Earlier Monday, officials in Beijing promised more help for companies and the economy, saying they expect their growth targets can still be reached despite the outbreak.
At a news conference Monday, finance and planning officials said they are looking at how to channel aid to businesses after President Xi Jinping publicly promised over the past week to ensure farming and other industries recover quickly.
The government is looking at “targeted tax reduction,” interest rate cuts and payments to poor and virus-hit areas, said an assistant finance minister, Ou Wenhan. “We will do a good job of implementing large-scale interest rate reduction and tax deferral and ensure effective implementation as soon as possible,” he said.
The latest measures failed to lift the Shanghai Composite, which lost 0.3 per cent to 3,031.23, though the smaller Shenzhen A-share market jumped 1.4 per cent.
Elsewhere in the region, the S&P ASX/200 in Sydney lost 2.3 per cent to 6,978.30. Hong Kong’s Hang Seng dropped 1.8 per cent to 26,820.88 and Thailand’s SET index lost 2.5 per cent. India’s Sensex lost 1.2 per cent to 40,689.12. Benchmarks in Jakarta, Taiwan and Singapore fell by more than 1 per cent.
Japan’s markets were closed Monday for a holiday.
Hopes that the outbreak had been contained were premature, Mizuho Bank said in a commentary, “and indeed, fears of secondary infections proliferating outside of China have come home to roost, sending risk assets in a tailspin and a wave of refuge-seeking into safe-haven.”
The yield on the 30-year treasury has dipped to record lows as investors sought the safety of U.S. government bonds. It fell to a record low of 1.886 per cent, according to Tradeweb, from 1.98 per cent late Thursday.
The yield on the more closely followed 10-year treasury was at 1.38 per cent. That yield, which is a benchmark for mortgages and other kinds of loans, was close to 1.90 per cent at the start of this year.
Expectations have been building among traders that the Federal Reserve will need to cut interest rates this year to help the economy. They’re pricing in a 90 per cent probability of at least one cut this year, up from an 85 per cent probability a day ago and a 58 per cent probability a month ago.