|31 January, 2020

Shares slump on China virus economic concerns, gold gains

U.S., European equity markets fall more than 1%

Investors look at screens showing stock information at a brokerage house in Shanghai, China May 6, 2019.

Investors look at screens showing stock information at a brokerage house in Shanghai, China May 6, 2019.


NEW YORK: Global equity markets were poised for their first monthly loss since August on Friday as growing concerns about the economic impact of the coronavirus outbreak in China sapped investors' risk appetite and lifted the safe-haven yen and Swiss franc.

Gold headed to its best month in five, while yields on U.S. and euro zone government debt fell to three-month lows, as the United States, Japan and other countries tightened travel curbs to China, where the death toll from the virus rose to 213.

Crude prices slipped further as disruptions to supply chains and travel curbs are expected to weigh on Chinese economic growth, leading economists to temper their expectations for the world's second-largest economy.

Citigroup revised its full-year forecast for China's GDP growth to 5.5% in 2020 from 5.8%. The bank also cut growth expectations in the first quarter to 4.8% from 6% in the fourth quarter of 2019.

JPMorgan shaved its forecast for global growth by 0.3 percentage point for this quarter.

A U.S. economic indicator fell abruptly, dousing hopes for stronger growth. The Chicago Purchasing Management index fell to a lower-than-expected 42.9, the lowest since December 2015, as new orders and production tumbled and producers forecast tepid activity in 2020.

"The Chicago PMI was very weak," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The recently signed U.S.-China trade deal was expected to lift the global economy, but the coronavirus outbreak has dampened that outlook, he said.

"Market expectations are for a big push in growth. It's being put off every quarter, especially the industrial side of the economy," Ghriskey said. "Bond yields have plummeted. The bond market is trying to tell us something."

U.S. and European stock markets fell more than 1% and yields on the benchmark 10-year U.S. Treasury note slid below 1.53%.

MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.02%, while emerging market stocks lost 1.15%.

In Europe, the pan-European STOXX 600 index .STOXX lost 1.14%.

Early gains in Europe quickly soured as headlines of more cases and deaths, travel bans and factory shutdowns due to the virus were compounded by disappointingly weak economic data. .EU

The big blow was that both the French and Italian economies unexpectedly shrank at the end of last year, with Eurostat also confirming that the euro zone as a whole grew slower than analysts had forecast. 

On Wall Street, the Dow Jones Industrial Average .DJI fell 446.66 points, or 1.55%, to 28,412.78. The S&P 500 .SPX lost 45.71 points, or 1.39%, to 3,237.95 and the Nasdaq Composite dropped 115.92 points, or 1.25%, to 9,183.02.

The poor data reading and fears of a spreading virus obscured relatively solid fourth-quarter earnings reports.

Amazon.com Inc AMZN.O surged 8.7% after it trumped Wall Street's estimates for holiday-quarter results, bolstering the online retailer's market capitalization to more that $1 trillion. 

Asia-Pacific shares outside Japan extended their fall, dropping 0.4%. Japan's Nikkei bounced 1%, but was off 2.6% for the week. Hong Kong's Hang Seng .HSI drifted 0.3% lower and has shed 9% in two weeks. Korea's Kospi had its worst week in 15 months, losing 5.6%.

Sterling extended gains after jumping on Thursday when the Bank of England confounded market expectations by not cutting interest rate cut. GBP/

Sterling traded at $1.3186, up 0.70% on the day. The yen strengthened 0.54% versus the greenback at 108.39 per dollar.

The dollar index fell 0.46%, with the euro up 0.48% to $1.1083.

The Australian dollar fell to a four-month low against the U.S. dollar, while China's offshore yuan struggled to find a footing in the wake of the virus outbreak.

The 10-year Treasury note rose 9/32 in price to yield 1.5238%.

Spot gold was up 0.87% at $1,587.58 an ounce.

Oil prices fell, on track for a fourth straight weekly loss.

Brent crude LCOc1 fell 31 cents to $57.98 a barrel. U.S. West Texas Intermediate (WTI) CLc1 slid 66 cents to $51.48 a barrel. 

(Reporting by Herbert Lash; Editing by Andrea Ricci) ((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters Messaging: herb.lash.reuters.com@reuters.net))

((To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on: 0#.INDEXA ))

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