Advertisement

China virus rattles stock market amid memories of SARS outbreak

Human-to-human transmission of coronavirus confirmed
WATCH: Human-to-human transmission of coronavirus confirmed

Global stock markets took a hit on Tuesday as mounting concern about a new strain of coronavirus in China sent a ripple of risk aversion through markets.

Authorities in China confirmed that the new virus could spread through human contact, reporting 15 medical staff had been infected and a fourth person had died.

READ MORE: China confirms new coronavirus transmitted by human-to-human contact

Safe-haven bonds and the yen gained as investors were reminded of the economic damage done by the SARS virus in 2002-2003, particularly given the threat of contagion as hundreds of millions travel for the Lunar New Year holidays.

“I’m not an expert in the pandemics, but you can look at previous examples like the SARS outbreak, which also originated from Asia,” said Cristian Maggio, head of emerging markets strategy at TD Securities in London.

Story continues below advertisement

Noting that China had initially downplayed the full extent of the SARS outbreak, he said, “I think the market might be fearing something similar.”

China reports new virus cases, raising concern globally
China reports new virus cases, raising concern globally

The mood swing saw MSCI’s All-Country World Index slip as much as 0.4 per cent, at one point wiping out gains made on Monday. It traded down 0.27 per cent by afternoon in London. Asian markets were hit particularly hard.

Hong Kong, which suffered badly during the SARS outbreak, saw its index fall 2.8 per cent. Japan’s Nikkei lost 0.9 per cent and Shanghai blue chips 1.7 per cent, with airlines under pressure.

The chill in Asia carried over to European markets. Shares of luxury goods makers — which have large exposure to China — were among those declining the most. The pan-European STOXX 600 index fell as much as 1 per cent at the open before recovering to trade 0.4 per cent lower.

READ MORE: ‘Take every precaution’: Anxiety grows in China, abroad as coronavirus spreads

U.S. E-Mini futures for the S&P 500 eased 0.3 per cent.

Germany’s 10-year government bond yield touched a one-week low, then bounced back after a closely watched survey showed investor sentiment on Germany’s economy came in better than expected for December.

Story continues below advertisement

Investors had already been guarded after the International Monetary Fund lowered its global growth forecasts, mostly because of a surprisingly sharp slowdown in India and other emerging markets.

Growing concerns about new SARS-like virus
Growing concerns about new SARS-like virus

There had been some relief as U.S. President Donald Trump and French President Emmanuel Macron seemed to have struck a truce over a proposed digital tax. They agreed to hold off on a potential tariffs war until the end of the year, a French diplomatic source said.

Trump, marking his second meeting of global political and business leaders at the World Economic Forum, said that trade deals struck this month with China and Mexico represented a model for the 21st century.

READ MORE: Sixth person dies from new coronavirus, Chinese health authorities say

He also took aim U.S. Federal Reserve’s policy decisions, saying that the central bank “raised rates too quickly and has lowered them too slowly.”

The Bank of Japan cited lessened trade risks when it raised forecasts for economic growth after holding a policy meeting on Tuesday.

As widely expected, the BOJ maintained its short-term interest rate target at -0.1 per cent and a pledge to guide 10-year government bond yields around 0 per cent, by a 7-2 vote.

Story continues below advertisement
WHO says new China virus could spread, warns hospitals worldwide
WHO says new China virus could spread, warns hospitals worldwide

Japan’s yen gained on the safe-haven move and the dollar dipped to 110.04 from an early 110.17. It also gained on the euro.

Against a basket of currencies, the dollar lost 0.1 per cent to trade at 97.497, just off a four-week high of 97.729.

READ MORE: World Health Organization to hold emergency meeting on China coronavirus

The Australian dollar suffered from the flu worries since it attracts large numbers of Chinese tourists, who tend to be big spenders over the Lunar New Year holidays. Australia said it would step up screening of some flights from Wuhan.

The outbreak was particularly badly timed as the tourism industry has been mauled already by bushfires sweeping the country.

Spot gold hit a two-week high of $1,568.35 per ounce, but eased, last trading above $1,550 an ounce.

Oil prices slid over 1 per cent, having earlier gained on the risk of supply disruption in Libya.

Brent crude futures fell 1.5 per cent to $64.22 a barrel. U.S. crude fell 1.28 per cent to $57.79 a barrel.