Shares tumbled across Europe and on Wall Street – pointing to a sharp drop in Australia on Monday morning – as investors threw in the towel on the new year rally as concerns about the coronavirus outbreak heighten.
The outbreak that began in Wuhan, in China’s central province of Hubei, has spread to more than 9800 people globally, Reuters reported. The new virus has killed 213 people.
“This does not feel like a reflexive 2%-3% drawdown that ‘needs to be bought’ but rather, this feels like the start of a broader correction,” Fundstrat Global’s Tom Lee said in a note.
“Hence, the character of the market is changing from the relentless buying since October, to one where we need to ‘wait for the initial bottom’ before becoming more aggressive.”
Near 1.45pm on Friday in New York, the Dow was 580 points or 2.01% lower. The S&P 500 fell 1.7% and the Nasdaq dropped 1.5%.
ASX futures were down 115 points or 1.65% to 6839 near 6am AEDT. The Australian dollar sank 0.5% to US66.90¢.
The yield on the US 10-year note slid 6 basis points to 1.53% at 1.47pm New York time.
“Just as one source of uncertainty is fading, another is intensifying,” TD Securities said in a note, referring first to the US-China trade war and second to the coronavirus.
“Since China makes up close to a fifth of the global economy, the near-term slowdown will weigh on growth,” TD said. “Precisely how big that negative impact will be, will depend on the spread of the virus, the economic reach of impacted areas, as well as market sentiment and the evolution of financial conditions.”
The Chicago Board Options Exchange Volatility Index leapt near 21% to 18.7 at 2pm New York time.
Bank of Montreal chief economist Doug Porter said he cut his forecast for China growth to 4.5% year over year for the first quarter and to 5% for all of 2020; he previously had estimated a 5.9% pace for both periods of time.
“Looks like we picked the wrong year to be even modestly bullish on global growth prospects,” Mr Porter also said.
Copper hit a five-month low on Friday as funds and traders sold on the expectation of slowing demand in China.
ASX futures down 115 points or 1.65% to 6839 near 6am AEDT
- AUD -0.5% to 66.90 US cents
- On Wall St near 2pm: Dow -1.9% S&P 500 -1.7% Nasdaq -1.4%
- In New York: BHP -3.5% Rio -3.1% Atlassian -1.7%
- US techs: Amazon +8.1%, Apple -4.1%, Facebook -3.8%
- In Europe: Stoxx 50 -1.4% FTSE -1.3% CAC -1.1% DAX -1.3%
- Spot gold +0.7% to $US1585.43/oz
- Brent crude -0.3% to $US58.11 a barrel
- US oil -1.9% to $US51.16 a barrel
- LME aluminium -0.5% to $US1722 a tonne
- LME copper -0.4% to $US5567 a tonne
Among the latest tweets on markets:
Allianz’s Mohamed El-Erian said: “Yet more evidence today of the increasing sudden stop dynamics hitting #China‘s #economy … and, with that, growing appreciation in #markets — though, IMO, still not yet sufficient in some segments — that this latest blow to global #growth will prove harder to reverse quickly.”
Canaccord Genuity’s Tony Dwyer: “We downgraded our view two weeks ago for the first time in years with the intention of putting offense back on the field as the market corrected and our indicators got to the required levels. The time to worry about downside was heading into excessive upside.”