NEW YORK - Coronavirus panic sent world stock markets tumbling again on Friday, putting them on course for their largest weekly fall since the 2008 global financial crisis, with over $5 trillion wiped from global market value so far this week.
The rout showed no signs of slowing and the ongoing dive for safety sent yields on U.S. government bonds, widely seen as the world's most secure asset, to record lows.
Disruptions to international travel and supply chains, school closures and cancellations of major events have all blackened the outlook for a world economy that was already struggling with fallout from the U.S.-China trade war.
Hopes the epidemic, first detected in China in December, would be over swiftly and economic activity quickly return to normal have been shattered as the World Health Organization warned it could spread worldwide.
The Dow Jones Industrial Average fell 588.05 points, or 2.28%, to 25,178.59, and the S&P 500 lost 55.33 points, or 1.86%, to 2,923.43.
MSCI's gauge of stocks across the globe shed 2.42% for a weekly loss of over 11%, it's second largest on record.
The over $5 trillion lost in market cap is roughly equivalent to Japan's yearly GDP, the third-largest in the world.
In Asia, MSCI's regional index excluding Japan shed 2.6%. Japan's Nikkei slumped 3.7% on rising fears the July-August Tokyo Olympics may be called off due to the coronavirus.
The CSI300 index of Shanghai and Shenzhen shares dropped 3.5% bringing its weekly loss to 5%, the largest since April.
RATE CUTS PRICED IN
About 10 countries have reported their first virus cases over the past 24 hours, including Nigeria, the biggest economy in Africa.
Expectations the Fed will cut interest rates to cushion the blow are rising in money markets. Fed funds futures 0#FF: are now fully pricing in a rate cut next month, with the question only being how large it will be.
The European Central Bank historically lags the Fed but it is now seen cutting by another 10 basis points by June.
The yen's luster shined, with the Japanese currency rising by the most for any week since mid-2016.
On Friday the yen strengthened 1.25% versus the greenback at 108.25 per dollar.
The dollar index fell 0.097%, with the euro up 0.02% to $1.1. Sterling GBP= was last trading at $1.2781, down 0.80% on the day.
The appeal of guaranteed income sent high-grade bonds rallying. U.S. yields - which move inversely to the price - plunged, with the benchmark 10-year note yield hitting a record low of 1.145%.
"The market is pricing in a rate cut by March and three rate cuts this year, which is a huge turnaround from the start of the year. But the fact that it looks like coronavirus has a long way to go means this is not surprising," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.
Benchmark 10-year notes last rose 1-9/32 in price to yield 1.165%, from 1.299% late Thursday. The 30-year bond last rose 2-24/32 in price to yield 1.6701%, from 1.783%.
Oil prices slumped again and were set for their steepest weekly fall in years on fears of drooping demand.
U.S. crude fell 5.27% to $44.61 per barrel and Brent was last at $50.47, down 3.28% on the day.
Spot gold dropped 3.3% to $1,587.91 an ounce after touching a 7-year high on Thursday. Copper lost 0.05% to $5,613.00 a tonne. Three-month aluminum on the London Metal Exchange rose 0.09% to $1,691.50 a tonne.
(Reporting by Rodrigo Campos; Additional reporting by Hideyuki Sano in Tokyo, Marc Jones in London, Medha Singh in Bengaluru, Kate Duguid in New York and Ross Kerber in Boston; Editing by Chris Reese) ((firstname.lastname@example.org; @rodrigocampos; +1.646.223.6344; Reuters Messaging: email@example.com))