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Stock Markets Stabilize After an Outbreak-Inspired Slump Stock Market Jitters Persist After Wall Street’s Worst Drop in 2 Years
(about 1 hour later)
SHANGHAI — Global stocks stabilized on Tuesday, a day after fears of the spread of the new coronavirus outside China spooked investors into a worldwide sell-off. Stocks dropped again on Tuesday, and bond yields fell to record lows, as the spreading coronavirus rattled investors concerned that it could hamper global growth.
Shares fell in most markets in Asia, led by Japan, which had closed for a holiday on Monday and missed that day’s drop. The Nikkei 225 index tumbled more than 3.3 percent. Most other Asian markets fell at a much slower pace. The outbreak, now in its sixth week, has upended expectations that 2020 would be a rebuilding year for the global economy after the disruptions of the trade war between China and the United States.
But shares in Europe opened mostly higher, suggesting investors’ nerves had steadied. Futures trading indicated that American markets would rise when they opened on Tuesday. For weeks, American markets had shrugged off the outbreak, but the virus’s spread outside China has led to a growing fear among investors that the damage could be significant.
The signs of stabilization followed a difficult Monday, when investors began to more fully comprehend the extent of the outbreak. On Wall Street, the S&P 500 index fell 3.4 percent on Monday, its worst single-day performance since February 2018. European markets recorded their worst session since 2016. In recent days, yields on long-term Treasury bonds have collapsed, a sign that investors expect growth to slow.
Investors could face more wild rides as the coronavirus outbreak spreads further, crimping consumer demand and snarling the world’s supply chains. UBS said on Tuesday that it was recommending investors switch to emerging market stocks, and warned that holding shares in European companies presented a particular danger. Stocks have fallen, too: Monday was the worst day for American markets in more than two years, with the S&P 500 falling 3.4 percent after officials in Italy and South Korea reported new infections.
Updated Feb. 10, 2020 Updated Feb. 25, 2020
On Tuesday, the tumble continued. The S&P 500 was down about 1 percent before noon, while the yield on the 10-year Treasury note fell to 1.33 percent in early trading, putting it on track for a record low.
Tuesday’s losses were led by the energy sector, which fell more than 2 percent in concert with crude oil prices. A barrel of benchmark American crude oil dropped more than 1 percent, to less than $51 in early trading. Oil prices have dropped about 17 percent this year, as investors have priced in the weekslong immobilization of China’s economy — the world’s second largest.
China is world’s largest consumer of crude and most other industrial and commodities, which have also fallen, dragging on the share prices of the mining, chemical and fertilizer companies. On Tuesday, the S&P 500’s materials sector was the second-worst performing part of the market, falling 1.5 percent.
Investors could face more wild rides as the coronavirus outbreak spreads further, crimping consumer demand and snarling the world’s supply chains.
“The emergence of a large number of new cases in Italy has materially increased the risk of a sharp drop in consumer and business confidence in Europe, and potentially North America too if more cases are confirmed there in the coming days,” Mark Haefele, the chief investment officer at UBS’s global wealth management operations, said in an investment report.“The emergence of a large number of new cases in Italy has materially increased the risk of a sharp drop in consumer and business confidence in Europe, and potentially North America too if more cases are confirmed there in the coming days,” Mark Haefele, the chief investment officer at UBS’s global wealth management operations, said in an investment report.
UBS also said that it was recommending investors buy shares in companies that cater to “stay-at-home” consumers, like electronic commerce and food delivery services. President Trump, traveling in New Delhi on Tuesday, joked with business leaders that their investments in the United States had made them a lot of money “except for yesterday,” noting the market drop, according to a pool report. Mentioning the coronavirus outbreak, he said, “We think we’re in very good shape in the United States.”
In China, the Shanghai stock market fell 0.6 percent, while the market in the city of Shenzhen rose by about half a percent. Officials at the Federal Reserve and within the Trump administration are watching the coronavirus situation closely, although the central bank’s main tool for stoking growth — lowering interest rates — might not help much if factories are not producing goods and supply chains are disrupted by quarantines.
Both markets had been fairly insulated from the global selling on Monday, a stability that analysts attributed to Beijing policies such as ordering fund managers not to sell more shares than they buy. Beijing has a history of tolerating share price declines more readily if they look like echoes of Wall Street’s activity, and that appeared to be true on Tuesday as well. The growing outbreaks of the virus in Europe, Asia and the Middle East have stoked fears that its spread will be difficult to contain, and market analysts in recent days have issued new warnings that the outbreak could drag down economies around the globe.
The Hong Kong market was little changed, after falling more than the mainland markets on Monday. Economists at JPMorgan Chase wrote that they expected global growth to slow to a 1 percent annual pace in the first three months of the year, which would be the weakest quarter of the economic expansion that is now more than a decade long. In the United States, the general estimate for first-quarter domestic growth has slipped.
In South Korea, shaken by the world’s second-largest outbreak of the virus outside China, share prices rebounded on Tuesday morning after enduring one of the sharpest drops of any large market around the world the day before. They ended up 1.2 percent. Markets around the globe have been affected this week.
Stock markets in commodity-exporting countries continue to suffer losses as traders worry that demand for their goods may decline if more countries suffer the kind of bruising deceleration in economic activity that China has endured. Australia’s stock market fell 1.6 percent on Tuesday. Germany’s DAX and Britain’s FTSE 100 each fell more than 1 percent on Tuesday, a day after European markets had their worst drop since 2016.
In Europe, London’s FTSE 100 was up 0.3 percent early, while German’s DAX rose 0.1 percent. Shares also fell in most markets in Asia, led by Japan, which was closed for a holiday on Monday. The Nikkei 225 index tumbled more than 3.3 percent on Tuesday, although most other Asian markets fell at a much slower pace.
South Korea, which is facing the world’s second-largest outbreak of the virus outside China, was the bright spot: Share prices rebounded on Tuesday morning after enduring one of the sharpest drops of any large market around the world the day before. They ended up 1.2 percent.
Stock markets in commodity-exporting countries continued to suffer losses as traders worry that demand for their goods may decline if more countries suffer the kind of bruising deceleration in economic activity that China has endured. Australia’s stock market fell 1.6 percent on Tuesday.
Jeanna Smialek contributed reporting.