U.S. Stocks Open Lower on China Virus Fears
21 January 2020 - 3:10PM
Dow Jones News
By Steven Russolillo and Avantika Chilkoti
U.S. stock indexes followed Asia and Europe lower amid concerns
about the rapid spread of a potentially deadly pneumonialike virus
that originated in central China .
The Dow Jones Industrial Average fell 50 points, or 0.1%, to
29296 shortly after the opening bell. The S&P 500 declined 0.2%
and the Nasdaq Composite also dropped 0.2%.
Elsewhere, the pan-continental Stoxx Europe 600 index fell 0.3%.
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.
Shares of U.S. airlines fell with Delta Air Lines losing 1.3%
and American Airlines Group dropping 2.5% on worries that the virus
could hurt the tourism industry. United Airlines Holdings retreated
2.4%.
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 six 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."
Brent crude, the global benchmark for oil, dropped 0.9% to
$64.59 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.
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.
"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."
In Europe, International Consolidated Airlines Group, which owns
British Airways, declined about 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 after the German
fashion house's sales in the fourth quarter exceeded analysts'
expectations, buoyed by momentum in Europe and China. EasyJet
gained 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, 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.
-- 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 09:55 ET (14:55 GMT)
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