Virus fears drive sell-off in stocks, oil, yuan: markets wrap

Deepening fears about the economic and human impact of the deadly coronavirus sent stocks, oil and China’s yuan tumbling Monday while spurring haven assets. Italian bonds jumped after regional elections.

The Stoxx Europe 600 Index headed for its worst decline since October, with all 19 industry groups in the red. Contracts on the main US equity benchmarks fell, signaling the underlying indexes will add to Friday’s losses. Major Asian markets were closed for holidays with the exception of those in India and Japan, where stocks slumped and the yen climbed. Ten-year Treasury yields fell to their lowest level since October, while West Texas crude slumped the most since August.

With the main Shanghai market closed, futures on Chinese shares and a London-listed iShares China ETF both fell more than 5%. The yuan erased this month’s trade-deal driven gains in the wake of news that the virus continues to spread, with no peak in sight.

Fears around the virus, whose death toll has risen to at least 80, is spurring caution at the start of a week jam-packed with earnings and other events. Tech giants Apple, Facebook and Samsung are among those due to report this week. Investors will also have a Federal Reserve policy meeting and Mark Carney’s last monetary policy decision as the Bank of England’s governor to monitor.

“Any economic shock to China’s colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalisation,” Stephen Innes, chief Asia market strategist at Axitrader, wrote in a note Monday. “I’m starting to think cash is the right place to be for the next few weeks.”

China announced an extension of its Lunar New Year holiday through February 2 to help battle the spread of the disease. Beijing also suspended sales of package tours, hitting firms around the world that rely on Chinese travelers’ spending. Air transport providers were the worst performers in Japan’s session, while Thailand’s stocks slid the most since 2016.

Elsewhere, a key measure of risk for the debt of Europe’s most fragile companies jumped to the highest in nearly two months.

© 2020 Bloomberg