By Xie Yu 

U.S. stock futures fell by the maximum allowed, and international indexes tumbled, as the financial turmoil sparked by the novel coronavirus continued to roil markets.

By midafternoon Wednesday in Hong Kong:

*S&P 500, Dow and Nasdaq futures had fallen about 4%, hitting daily limits

*Indexes in Japan, South Korea and Australia lost 1.7%, 4.9% and 5.8% respectively

*Hong Kong's Hang Seng fell 3.7%, while Shanghai's main index lost 1.6%

The sharp moves laid the groundwork for another choppy day's trading in the U.S. and Europe. U.S. benchmarks suffered their worst day in decades on Monday before rallying more than 5% the following day, helped by a $1 trillion stimulus proposal from the Trump administration.

The Cboe Volatility Index, or VIX, which uses options prices to gauge expected volatility in U.S. stocks, eased on Tuesday to 75.9--still extremely elevated by recent standards, but down from a record high in the previous session.

In one sign of the damage created by the turbulence, Malachite Capital Management LLC, a U.S. hedge-fund manager specializing in trading volatility, said it would shut down immediately, citing "extreme adverse market conditions" and the effects on fund performance.

On Wednesday afternoon, the WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, eased about 0.1% to 94.02. The dollar surged against major currencies on Tuesday, with the WSJ Dollar Index rising the most in a single session since 2016, amid stress in the offshore markets for dollar funding.

Bruce Pang, head of macro and strategy research at China Renaissance Securities (HK) Ltd., said: "The demand for dollars is still strong as risk aversion surges."

Mr. Pang said market sentiment would remain fragile until the spread of the coronavirus in Europe and the U.S. showed signs of coming under control.

Markets remain jittery despite a series of measures taken by central banks.

In recent days, the Federal Reserve has slashed rates and extended terms on emergency loans to banks borrowing from its discount window; relaunched a financial-crisis-era commercial paper tool; and ensured dollars were available internationally via swap lines with five major central banks.

"I think the Fed is doing the right thing. But people are having margin calls," said Alex Au, managing director at Alphalex Capital Management, a hedge fund based in Hong Kong. "There might be many forced sellings on the market as people unwind earlier positions."

Investors who have used borrowed money to make bigger bets can face margin calls when holdings fall in value, forcing them either to stump up more cash or to sell their positions.

A reversal in the bond market continued after yields on the 10-year U.S. Treasury notes jumped on Tuesday. The yield rose to 1.031%, according to Tradeweb, up from 0.994% on Tuesday. Yields rise as prices fall and demand for the safest assets had recently helped push bond yields to record lows.

Economists are slashing growth forecasts, with some warning the coronavirus will trigger a global recession. In a note published Tuesday, Morgan Stanley economists said they now expect world growth in 2020 to fall to 0.9%, the lowest since the global financial crisis.

The Philippines will resume stock trading Thursday, two days after operations were suspended due to a lockdown of the country's main island to prevent the coronavirus's spread.

In Tokyo, shares in SoftBank Group Corp. tumbled more than 10% to their lowest point since 2016, after The Wall Street Journal reported the Japanese technology group was backing away from part of a planned bailout of office-sharing company WeWork.

Write to Xie Yu at Yu.Xie@wsj.com

(END) Dow Jones Newswires

March 18, 2020 04:24 ET (08:24 GMT)