Deadly coronavirus fears drive sell-off in stocks, oil, yuan

Bloomberg

Intensifying concern about the economic and human impact of the coronavirus sent stocks, oil and China’s yuan tumbling on Monday while spurring haven assets. Treasuries gained and Italian bonds jumped after regional elections.
The Stoxx Europe 600 Index headed for its worst decline since October, with miners dropping by more than 4%. Contracts on the main US equity benchmarks fell, signalling the underlying indexes will add to earlier losses. Ten-year Treasury yields and West Texas crude futures fell to three- and five-month lows, respectively. A key measure of risk for the debt of Europe’s most fragile companies jumped to the highest in nearly two months.
Major Asian markets were closed for holidays with the exception of those in India and Japan, where stocks slumped and the yen climbed. Futures on Chinese shares and a London-listed iShares China ETF both dropped more than 6%.
The offshore 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. “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 travellers’ spending. Air transport providers were the worst performers in Japan’s session.
Elsewhere, copper, aluminum, nickel and iron ore all dropped.
Tech giants Apple, SAP, Facebook, Samsung and South Korean chip maker SK Hynix announce earnings, as do Boeing, International Paper, GE, United Technologies, Lockheed Martin, Caterpillar, Unilever, Exxon Mobil, Shell and Chevron.
The Senate impeachment trial of President Donald Trump was expected to continue in Washington on Monday.
Fed policy makers are expected to open 2020 the same way they closed 2019 — by holding interest rates steady on Wednesday.
The BOE meeting is highly anticipated on Thursday after a series of dovish comments raised speculation policy makers could lower interest rates.
The US reports fourth-quarter GDP on Thursday. The UK is scheduled to leave the European Union on Friday.
The Stoxx Europe 600 Index sank 2% in London. Futures on the S&P 500 Index fell 1.5%. Nasdaq 100 Index futures dropped 1.9%. Japan’s Topix index dipped 1.6%.
The Bloomberg Dollar Spot Index gained 0.1%. The British pound increased 0.1%.
The euro was unchanged at $1.1025. The Japanese yen strengthened 0.4% to 108.89 per dollar. The offshore yuan weakened 0.8% to 6.9885 per dollar.
The yield on 10-year Treasuries dipped seven basis points to 1.61%. Germany’s 10-year yield decreased four basis points to -0.37%. Britain’s 10-year yield dipped four basis points to 0.524%. Italy’s 10-year yield sank 19 basis points to 1.04%.
The Bloomberg Commodity Index fell 1.2% to 76.40.
Gold strengthened 0.8% to $1,584.70 an ounce.
Iron ore sank 6.5% to $85.10 per metric ton. West Texas Intermediate crude fell 3.4% to $52.37 a barrel.