Shares and oil hit by global coronavirus fear
Global shares and the price of oil dropped amid growing concern that a virus spreading from China could curb global growth.
Makers of consumer goods were among the biggest drags on the S&P 500 index in the US as investors tried to gauge the potential impact of the virus on travel and shopping.
In Europe, mining companies led the Stoxx Europe 600 index lower after declines from Seoul to Sydney.
China’s Shanghai Composite Index plunged 2.8% on the last trading day before the Lunar New Year holiday, the biggest drop in eight months.
The reverberations were also felt in other markets, with oil sinking to its lowest level since November on concerns the virus could dent demand. Around the world, government bonds and the yen rallied as investors sought a haven.
Investors are turning cautious with stocks trading at lofty valuations near record highs, trying to gauge the threat to airlines, retailers and energy providers as the illness spreads, with confirmed cases in the US, South Korea and Singapore.
While fewer than 20 deaths have been tallied, traders are hesitant to take on risk on the chance the outbreak could develop into something like the much more devastating Sars respiratory illness that emerged in China 17 years ago.
In the US, casino and hotel operators including Wynn Resorts, Melco Resorts, and Las Vegas Sands, which draw a large portion of their revenue from China, were down.
“There is concern that this may become a much bigger event,” said Quincy Krosby, chief market strategist for Prudential Financial.
“The market is vulnerable to a pullback or a consolidation,” he said.
Fears of the fast-spreading coronavirus hitting the global economy have knocked world stock markets off record highs this week, even as US earnings reports so far have mostly been in line with expectations.
“There is some fear that it appears to be spreading, and certainly there are some fears about what it’s going to do to the Chinese economic growth,” said Scott Ladner, chief investment officer at Horizon Investments.
“People are generally trading off the assumption of a very bad outcome,” he said.
In Ireland, shares ended mostly lower. Ryanair and AIB shares fell 2% and 1%, respectively, although Permanent TSB gained by over 2%. Building products group Kingspan fell 2%.
Elsewhere, the euro weakened after policymakers held interest rates steady and ECB president Christine Lagarde said officials will look into the potential side effects of negative interest rates.
