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Coronavirus spreads, investors scurry for safety

Stock Markets Feb 24, 2020 04:57AM ET
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© Reuters. An investor is reflected in a window in front of a board displaying stock prices at the Australian Securities Exchange in Sydney, Australia

By Marc Jones

LONDON (Reuters) - Global share markets and oil fell on Monday, safe-haven gold surged and U.S. Treasury yields reached their lowest since mid- 2016, as coronavirus cases spread outside China, darkening the outlook for world growth.

Europe took a beating early on, with Italy plunging more than 4% after a spike in cases of the virus left parts of the country's industrial north in virtual lockdown. (EU) That put Milan on course for its worst day since 2016.

Frankfurt and Paris were both down more than 3% and London's FTSE dropped 2.5%, meaning at least $350 billion had been wiped off the region' market value.

The flight to safety was just as resounding. Gold surged 2.5% to a seven-year high of $1,680 an ounce, taking its gains for the year past 10%. [GOL/]

Bonds rallied, too. Ten-year U.S. Treasury yields dropped to 1.401%, their lowest since July 2016. The 30-year Treasury touched a record low at 1.855% and German yields dropped to -0.475%, their lowest in more than four months. [GVD/EUR]

"Everybody sees that this could be another leg down for the economy, and we were already in quite a fragile state to begin with," said Rabobank's head of macro strategy, Elwin de Groot. "It could be another step toward a recession in more countries."

In Asia, South Korea's KOSPI slumped 3.9% after the government declared a high alert. The number of infections jumped to 763 and deaths rose to seven.

Australia's benchmark index slid 2.25% and New Zealand fell about 1.8%. China's blue-chip CSI300 index closed down 0.4%.

That left MSCI's broadest index of Asia-Pacific shares outside Japan at its lowest since early February. Japanese markets were closed for a public holiday.

The virus has now killed 2,592 people in China, which has reported 77,150 cases, and spread to some 28 other countries and territories, with a death toll outside of China around two dozen, according to a Reuters tally.

Iran, which announced its first infections last week, said it had confirmed 43 cases and eight deaths, with most of the infections in the holy city of Qom. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions on the Islamic Republic.

"There is lots of bad news on the coronavirus front with the total number of new cases still rising," AMP chief economist Shane Oliver wrote in a note. "Of course, there is much uncertainty about the case data. New cases outside China still look to be trending up."

FUTURES GLOOM

Among U.S. stock futures, E-minis for the S&P 500 fell 2.3%. CBOE's VIX volatility index, the so called fear gauge, reached its highest since August.

As investors wagered central banks would step in with policy stimulus to support economic growth, U.S. fed fund futures <0#FF:> signaled more rate cuts later this year and a near 20% chance of a cut next month.

The dollar dipped to 111.34 against the Japanese yen , but against the rest of the world it was showing its safe-haven qualities.

The euro fell toward $1.08 and the Australian dollar, often traded as a proxy for China risk, tumbled to an 11-year low of $0.6585.

Korea's won was last down 1% at 1,219.06 after falling to its weakest since August 2019. Emerging-market currencies from Mexico's peso and Turkey's lira to Poland's zloty and Russia's rouble were in the red.

In commodity markets, Brent crude fell 3.5%, or $2.1, to $56.35 a barrel. U.S. crude dropped 3%, or $1.64, to $51.74 a barrel. Among the main industrial metals, copper fell 1.4% and zinc was down 2.5%. [MET/L]

Coronavirus spreads, investors scurry for safety
 

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Comments (14)
Anand Krishnan
Anand Krishnan Feb 24, 2020 5:03PM ET
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Vix closed way above its bollinger bands. Pcall is still low, so I may short on a bounce up. Unless there is news of a vaccine or the spread slowing down dramatically, I think the path of least resistance for the market is still downward. It may actually take the pcall above 1. If that happens I will be going long again.
François Du
François Du Feb 24, 2020 9:59AM ET
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Let’s hope trump catches the bug
Jack Drummond
Jack Drummond Feb 24, 2020 8:13AM ET
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C'mon guys. Just relax and enjoy mass death and corruption of the Chinese supply chains.
Brendan Short
Brendan Short Feb 24, 2020 5:20AM ET
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Be careful. This could be the start of a very ugly correction.
Hayrettin Cetinturk
Hayrettin Cetinturk Feb 24, 2020 4:09AM ET
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time to buy now
Alex Gaitan
Alex Gaitan Feb 24, 2020 4:02AM ET
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Time to sell everything!
Tumelo Mash
Tumelo Mash Feb 24, 2020 3:42AM ET
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Gold will only turn if the is some calm In the Outbreak and g10 countries work together to control this wide spread
katya litski
katya litski Feb 24, 2020 2:52AM ET
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sell everything ???
Alum Pergo
Alum Pergo Feb 24, 2020 2:50AM ET
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Gold mining etfs and long term treasury bonds should do well now.
Space Lord
Space Lord Feb 24, 2020 2:49AM ET
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S&P500 - 3500, NASDAQ - 10000, DOW30 - 30000. Very soon.
Alex Gaitan
Alex Gaitan Feb 24, 2020 2:49AM ET
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Where do you get this ludicrous information, this is it, Welcome to the official recession of 2020. This market will not recover. 2020 Bear market has officially started, see you Bulls in 2022...
Bilderberg CEO
Bilderberg CEO Feb 24, 2020 2:49AM ET
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Alex Gaitan Maybe because literally half of China--you know the place that makes almost everything--is in quarantine.
Bilderberg CEO
Bilderberg CEO Feb 24, 2020 2:49AM ET
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Alex Gaitan Maybe because the manufacturing powerhouse of the world is under quarantine.
 
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