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World stocks skid as virus fears spook markets, hit tourism US stocks follow global markets lower over virus concerns
(about 3 hours later)
BANGKOK — Stock markets and the price of oil tumbled Monday after China announced sharp increases in the number of people infected with a potentially deadly virus. NEW YORK — U.S. stocks tumbled following a sell-off in markets in Europe and Japan Monday after China announced a sharp rise in cases of a deadly new virus that threatens to crimp global economic growth.
In Paris, the CAC 40 lost 2.2% to 5,889 while Germany’s DAX skidded 2.3% to 13,271. Britain’s FTSE 100 gave up 2.3% to 7,414. Shares also looked set for declines on Wall Street, where the future contracts for the S&P 500 and the Dow Jones Industrial Average both sank 1.5%. Every major U.S. index gave up a significant amount of their gains for January and bond yields moved lower as investors headed for safer holdings. Airlines, resorts and other companies that rely on travel and tourism suffered steep losses. Gold prices rose.
China announced it was extending its week-long public holiday by an extra three days as a precaution against having the virus spread still further. By midnight Sunday, the National Health Commission said 80 people had died out of 2,744 cases that were confirmed. Investors are in a “sell first, ask questions later situation,” said Alec Young, managing director of global markets research at FTSE Russell.
Various governments have announced plans to evacuate people from Wuhan, the central Chinese city at the center of the pandemic. China halted outbound tours and Wuhan and some other cities stopped public transport, obliging tens of millions of people to stay where they are at the time of the country’s peak travel season. The S&P 500 index slumped 1.4% as of 9:46 a.m. Eastern time. The Dow Jones Industrial Average dove 420 points, or 1.5%, to 28,571. The Nasdaq fell 1.7%. The Russell 2000 index of smaller company stocks fell 1.2%.
Many Asian markets, including China’s, were closed for Lunar New Year holidays, while Australia was closed for Australia Day. Tokyo’s Nikkei 225 index sank 2% to 23,343.51. India’s Sensex lost 1% to 41,204.15, while the benchmark in Thailand dropped 3.1%. Indonesia’s share benchmark was 1.8% lower. Most markets in Asia were closed for the Lunar New Year holiday, but Japan’s Nikkei fell 2.03%, its biggest decline in five months. European markets also slumped. Germany’s DAX dove 2.4%.
Apart from the direct impact on tourism and travel, “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 globalization,” Stephen Innes of AxiCorp said in a commentary. Chinese health authorities have confirmed 2,744 cases of the coronavirus along with 81 related deaths as authorities extended a week-long public holiday by an extra three days as a precaution against having the virus spread still further. Despite the lockdown that has expanded to 17 Chinese cities, the coronavirus has spread to a dozen countries, including the U.S.
The virus that has spread to a dozen countries in addition to Hong Kong and Macau can cause pneumonia and other severe respiratory symptoms. The World Health Organization has not yet declared the situation a global emergency, which would bring more money and resources to fight it, but could trigger still more economically damaging restrictions on trade and travel. Global health authorities are increasingly on alert for any new cases. Besides the threat to people’s lives and health, investors are worried about how much damage the virus will do to profits for companies around the world.
On Friday, the S&P 500 had its worst day since early October, dropping 0.9% as health care stocks saw steep losses. The sell-off followed news that a Chicago woman had become the second U.S. patient diagnosed with the new virus from China. Even if they’re thousands of miles away from Wuhan, the interconnected global economy means U.S. companies have plenty of customers and suppliers in China. It’s the world’s second-largest economy, and it accounts for 6% of all revenue for S&P 500 companies over the last 12 months. That’s nearly double any other country besides the United States, according to FactSet.
Investors have been shifting money into safe-play, high-dividend stocks and government bonds.The surge in bond-buying has sent yields lower. “Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy,” Young said.
Investors also are digging through the latest batch of company earnings reports, including strong results from chipmaker Intel and American Express. This week is shaping up to be the busiest week for earnings, with roughly 40% of the companies in the S&P 500 due to issue their results for the last three months of 2019. Resort operators are reeling as the lockdowns in China directly threaten their businesses. Wynn Resorts fell 6.3% and Las Vegas Sands shed 6.6%. Those companies get the majority of their revenue from the Chinese gambling haven of Macao. MGM Resorts fell 3.8%.
Benchmark U.S. crude gave up $1.71 to $52.48 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.40 to $54.19 per barrel on Friday. Brent crude, the international standard, declined $2.63 to $58.06 per barrel. It shed $1.39 to $59.89 per barrel on Friday. American Airlines fell 6.7% and Delta slipped 3.9% as part of a broad slide for airlines because of concerns international travel will decline amid the virus’ spread.
In currency trading, the dollar weakened to 108.94 Japanese yen from 109.28 yen. The euro was steady at $1.1020. Booking companies and cruise-line operators are also getting hurt. Expedia Group fell 3.5% and Carnival fell 3.7%.
Technology companies and banks were also among the losers in the early going. Apple, which relies on China for supplies and sales, slumped 2.6%. Citigroup fell 2.1%.
Energy stocks fell broadly as oil prices slipped 1.6%. Schlumberger fell 3.7%.
Utilities and real estate companies held up better than most of the market. Both sectors are viewed as less-risky and are little-affected by international issues and developments.
Investors are also dealing with a heavy week of corporate earnings. Apple will report financial results on Tuesday. Pharmaceutical giant Pfizer and Starbucks will also report.
Boeing, McDonald’s, Coca-Cola and Amazon are also among some of the biggest names reporting earnings throughout the week that includes 147 S&P 500 companies.
Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.