World markets slip on renewed fears over virus outbreak

February 21, 2020

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Currency traders watch monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea on Friday. Asian stock markets have followed Wall Street lower after a rise in virus cases in South Korea refuelled investor anxiety about China's disease outbreak. — AP
Currency traders watch monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea on Friday. Asian stock markets have followed Wall Street lower after a rise in virus cases in South Korea refuelled investor anxiety about China's disease outbreak. — AP

Global stock markets slipped on Friday after a spike in new virus cases in South Korea and other countries refuelled investor anxiety about China’s disease outbreak.

Benchmarks in Tokyo, Hong Kong and Sydney closed down and London, Frankfurt and other European indexes were trading lower. Wall Street futures was also expected to dip on the open.

Traders shifted money into bonds and gold, a traditional safe haven.

Bond markets are “sounding a warning on global growth” as virus fears spread to South Korea, Singapore and other economies, DBS analysts said in a report.

Markets had been gaining on hopes the outbreak that began in central China might be under control following government controls that shut down much of the world’s second-largest economy. The sentiment was buoyed by stronger-than-expected United States economic data and rate cuts by China and other Asian central banks to blunt the economic impact.

But investors were jarred by South Korea’s report of 52 new cases of the coronavirus, raising its total to 156, most of them since Wednesday. The report renewed concern the infection is spreading in South Korea, Singapore and other Asian economies. New cases were also recorded further afield, from Italy to Iran.

In Europe, the FTSE 100 in London sank 0.2 per cent to 7,422 and Frankfurt’s DAX lost 0.1pc to 13,656. France’s CAC 40 tumbled 0.1pc to 6,054.

Losses were trimmed after a survey showed that business activity in the eurozone improved in February despite the disruption from the virus outbreak. In particular, the slump in Germany’s manufacturing sector seemed to ease, though the ultimate impact of the outbreak on companies remains still unclear.

On Wall Street, the futures for the benchmark S&P 500 index and for the Dow Jones Industrial Average both lost 0.3pc.

In Asia, Tokyo’s Nikkei 225 declined 0.4pc to 23,387 and Hong Kong’s Hang Seng sank 1.1pc to 27,309. In Seoul, the Kospi lost 1.5pc to 2,163.

The Shanghai Composite Index bucked the regional trend, climbing 0.3pc to 3,040.

The S&P-ASX 200 in Sydney lost 0.3pc to 7,139. New Zealand advanced while Southeast Asian markets declined.

A measure of Japan’s manufacturing activity tumbled to an eight-year low and a companion gauge of service industries dropped even more sharply.

The decline “underlines that the coronavirus has started to weaken activity,” Marcel Thieliant of Capital Economics said in a report.

The airline industry association estimated that the virus outbreak will cost the sector some $29 billion in revenue.

To contain the disease, China starting in late January cut off most access to Wuhan, the central city where the first cases occurred, and extended the Lunar New Year holiday to keep factories and offices closed and workers at home.

Some Chinese factories and other businesses are reopening but restrictions that in some areas allow only one member of a household out each day still are in place. Forecasters say auto manufacturing and other industries won’t return to normal until at least mid-March.

A rise in new cases in Beijing, the capital, “raises alarm” because it suggests major Chinese cities “may be under pressure to contain the virus amidst returning workers” as companies reopen, Mizuho Bank said in a report.

In energy markets, the benchmark US crude contract lost $1 to $53 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 49 cents on Thursday. Brent crude oil, the international standard, lost $1 to $58 per barrel in London. It rose 19 cents in the previous session.

The dollar declined to 111.87 yen from Thursday’s 112.09 yen. The euro rose to $1.08 from $1.07.