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Thursday, February 27, 2020

Global Stocks Plunge as Coronavirus Fears Deepen

Global stocks plunged to four-month lows, government debt yields sunk to unprecedented levels and crude oil extended declines as anxiety over the spread of the coronavirus deepened.

The S&P 500 tumbled 4.4% to close at the lowest levels of the day. It whipsawed investors earlier, turning lower late after California's governor said the state was monitoring 8,400 people for signs of the virus after they traveled to Asia. The decline of more than 10% since last Friday has the benchmark on pace for its worse week since the 2008 global financial crisis and helped push the index into what is known as a correction. The MSCI All-Country World Index fell to the lowest since October, while the Stoxx Europe 600 also entered a correction.

"Stocks and bonds say we're doomed," said Chris Rupkey, chief financial economist for MUFG Union Bank. "Anyone who has a better idea for what lies ahead please let us know because right now the direction ahead for the economy is straight down."

The outbreak has the potential to become a pandemic and is at a decisive stage, the head of the World Health Organization said Thursday. The global economy is on course for its weakest year since the financial crisis as the virus damages demand in China and beyond, Bank of America predicted. Earlier, Goldman Sachs slashed its outlook for U.S. companies' profit growth to zero. Germany is examining potential stimulus measures to stem the economic impact. Saudi Arabia halted religious visits that draw millions.

Haven assets continued to be in demand, and the yen strengthened as yields on 10-year U.S. and Australian government bonds hit fresh record lows. Oil sank further. The pound reversed a gain after the U.K. told the European Union it could walk away from the negotiating table in June if progress isn't being made toward a trade deal.

Investors are pricing in a Federal Reserve easing in April followed by another rate cut in July, swaps data show, while bets for easing from Japan to Australia have also increased after the International Monetary Fund cut global growth forecasts.

Losses continue to mount as investors weigh each gloomy headline on the virus. U.S. health authorities on Wednesday said they found the first case of the illness that does not have ties to a known outbreak. Microsoft Corp. joined an expanding list of companies warning over the impact of the virus on operations.

"The way the market is going down, it's happening pretty quickly, but it's very difficult to say that it's over," said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute. "Bottoming is a multistep process and you're probably still in step one."

Earnings keep rolling in from companies including: Baidu Inc., Occidental Petroleum Corp. and Dell Technologies Inc. on Thursday after the close of U.S. trading, and London Stock Exchange Group Plc on Friday.Here are some key events still to come this week:

Japan industrial production, jobs, and retail sales figures are due on Friday.

These are the major moves in markets:

Stocks

The S&P 500 Index sank 4.4% to 2,978.48 as of 4:02 p.m. New York time, hitting the lowest in 19 weeks with its sixth consecutive decline and the largest tumble in more than eight years.

The Dow Jones Industrial Average decreased 4.4% to 25,763.96, reaching the lowest in six months on its sixth consecutive decline and the biggest dip in about two years.

The Nasdaq Composite Index sank 4.6% to 8,566.48, the lowest in almost 12 weeks on the largest tumble in more than eight years.

The MSCI All-Country World Index sank 3% to 521.99, reaching the lowest in 19 weeks on its sixth consecutive decline and the biggest tumble in almost four years.

Currencies

The Bloomberg Dollar Spot Index dipped 0.3% to 1,211.80.

The euro gained 1% to $1.0989, the strongest in almost three weeks on the biggest climb in 21 months.

The Japanese yen appreciated 0.5% to 109.85 per dollar, the strongest in more than a week.

Bonds

The yield on 10-year Treasuries fell five basis points to 1.28%, reaching the lowest on record with its sixth straight decline.

The yield on 30-year Treasuries declined four basis points to 1.78%, hitting the lowest on record with its sixth straight decline.

Britain's 10-year yield fell three basis points to 0.47%, reaching the lowest in almost 20 weeks on its eighth straight decline and the biggest fall in almost four weeks.

Germany's 10-year yield dipped four basis points to -0.54%, the lowest in almost 20 weeks.

Commodities

Gold weakened 0.1% to $1,637.44 an ounce.

West Texas Intermediate crude declined 3.8% to $46.68 a barrel, hitting the lowest in 14 months with its fifth straight decline and the largest drop in almost seven weeks.