By Rodrigo Campos
NEW YORK (Reuters) - Stocks across the globe fell on Tuesday to their lowest since mid-December and the benchmark U.S. debt yield was near a record low on lingering concerns about the economic hit of the spread of the novel coronavirus.
The yen strengthened against the dollar end euro in a sign traders were in search of relatively safer assets.
Countries around the world are stepping up efforts to prevent a pandemic of the flu-like virus that has now infected more than 80,000 people, 10 times more cases than the SARS coronavirus.
The World Health Organization, however, has said the epidemic in China, where it began in December, peaked between Jan. 23 and Feb. 2 and has been declining since.
On Wall Street, where stocks fell the most In two years on Monday, indexes shed another 1% at session lows.
"A lot of people who have been woken up by the volatility of the stock market will start to get a little panicky,” said Tom Plumb, president of Plumb Funds in Madison, Wisconsin.
The Dow Jones Industrial Average fell 387.52 points, or 1.39%, to 27,573.28, the S&P 500 lost 42.42 points, or 1.31%, to 3,183.47 and the Nasdaq Composite dropped 104.94 points, or 1.14%, to 9,116.34.
The pan-European STOXX 600 index lost 1.76% and MSCI's gauge of stocks across the globe shed 1.28%.
MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.14% higher, while Japan's Nikkei, catching up to the sell-off after a Monday holiday, lost 3.34%.
BET ON RATE CUTS
The risks are such that bond markets are starting to bet central banks will have to ride to the rescue with new stimulus.
Futures for the Federal Reserve funds rate have surged in the last few days to price in a 50-50 chance of a quarter-point rate cut as early as April. In all, they imply more than 50 basis points of reductions by year end.
The indication of falling U.S. rates hit the dollar against a basket of its peers.
"Signs of the USD being penalized for having a central bank with some capacity to cut rates raises the question of whether rate spreads are likely to become a key driver any time soon," said Alan Ruskin, chief international strategist at Deutsche Bank (DE:DBKGn).
The dollar index fell 0.332%, with the euro up 0.19% to $1.0873. The Japanese yen strengthened 0.59% versus the greenback at 110.09 per dollar.
Sterling was last trading at $1.3006, up 0.61% on the day.
The coronavirus death toll climbed to seven in Italy on Monday and several European countries were dealing with their first infections, feeding worries about a pandemic.
The rush to bonds left yields on 10-year U.S. Treasury notes near the record low of 1.321%. rose 15/32 in price to yield 1.3288%, from 1.377% late on Monday.
The 30-year bond set a record low at 1.79% and The 30-year bond last rose 25/32 in price to yield 1.8036%, from 1.836% late on Monday.
Gold ran into profit-taking after hitting a seven-year peak overnight and last dropped 0.9% to $1,645.75 an ounce..
Oil prices continued to fall as demand concerns linked to the virus' spread outweighed supply cuts.
U.S. crude fell 1.81% to $50.50 per barrel and Brent was last at $55.48, down 1.46% on the day.