Global Stocks Drop Amid Outbreak of Deadly Virus in China
21 January 2020 - 1:44PM
Dow Jones News
By Steven Russolillo and Avantika Chilkoti
Global stocks and commodities dropped on Tuesday amid concerns
about the rapid spread of a potentially deadly pneumonialike virus
originating in central China.
Futures tied to the Dow Jones Industrial Average edged down 0.2%
after the public holiday on Monday. The pan-continental Stoxx
Europe 600 index dropped 0.4%. The Shanghai Composite closed 1.4%
lower in its biggest drop in over two months, while the Chinese
yuan lost 0.6% against the dollar in offshore trading.
The newly identified virus has spread between humans, a leading
Chinese health official said, fueling concerns that the disease
could quickly be transmitted across Asia as millions of Chinese
travel for the annual Lunar New Year holiday. The virus has already
claimed four lives as the number of confirmed cases tripled on
Monday. A similar coronavirus led to the outbreak of severe acute
respiratory syndrome, or SARS, in late 2002 in southern China,
killing 774 people.
"The economic consequences could be extremely concerning," said
Rajiv Biswas, chief economist for the Asia-Pacific region at IHS
Markit. "China's international tourism has boomed, so the risks of
a global SARS-like virus epidemic spreading globally have become
even more severe."
Shares of airlines, cinemas and restaurant operators dropped in
China as investors tried to decipher the impact of the disease in
the region. Japan's Nikkei 225 benchmark also fell 0.9%.
Hong Kong's Hang Seng benchmark was the worst performer among
major Asian benchmarks, closing down 2.8% in its biggest decline in
over five months. Adding to the gloom in Hong Kong, Moody's
Investors Service downgraded the city's credit rating. The ratings
firm blamed the government for failing to properly deal with seven
months of social unrest, which has driven the economy into
recession.
Apart from the Chinese yuan, other Asian currencies also fell
against the U.S. dollar on fears that tourism and Asian economies
could be adversely impacted if there is a widespread outbreak of
the virus. The South Korean won slid 0.7% against the U.S. dollar
and the Taiwan dollar lost 0.2% against the greenback.
"Global asset markets have been pricing in this blue-sky
scenario: there wasn't a cloud in the sky," said Cliff Tan, East
Asian head of global markets research at Japanese bank MUFG. "Now
we have a cloud."
Ahead of the opening bell in New York, shares in U.S. airlines
fell with Delta Air Lines losing 2% in premarket trading and
American Airlines Group dropping 2.3% on worries that the virus
could hurt the tourism industry. United Airlines Holdings retreated
1.8%.
In Europe, International Consolidated Airlines Group, which owns
British Airways, dipped 3.6%. Stocks of luxury retailers -- led by
France's Kering SA, owner of the Gucci and Yves Saint Laurent
brands, and Switzerland's Cie. Financière Richemont SA -- also
retreated.
Major market moves among other European equities were largely
driven by corporate results. Hugo Boss ticked up 6.1% after the
German fashion house's sales in the fourth quarter exceeded
analysts' expectations, buoyed by momentum in Europe and China.
EasyJet gained almost 4% after the budget airline posted
higher-than-expected revenue for the fiscal first quarter and
boosted its forecast for revenue per seat for the first half of the
year.
Among the biggest losers was UBS Group, which retreated over 5%
after the Swiss banking giant missed its key 2019 targets and
lowered its guidance.
Within commodities, copper prices dropped 1.4%, putting the
metal on track for the biggest fall in four months, as investors
weighed the impact of the virus on China's economy and the typical
slowdown in buying ahead of Lunar New Year holidays.
Brent crude, the global benchmark for oil, dropped 1.4% to
$64.27 a barrel as the International Monetary Fund's decision to
trim global growth forecasts led to speculation that demand for oil
could drop. Concerns about supply disruptions in Libya from earlier
in the week also abated.
Later in the day, a string of U.S. companies are scheduled to
report earnings including Netflix and International Business
Machines Corp.
-- Caitlin Ostroff contributed to this article.
Write to Steven Russolillo at steven.russolillo@wsj.com and
Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
January 21, 2020 08:29 ET (13:29 GMT)
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