Global stocks at seven-week lows as virus fears hit China after holiday

03 Feb, 2020 - 16:02 0 Views
Global stocks at seven-week lows as virus fears hit China after holiday

eBusiness Weekly

A gauge of global stocks was near seven-week lows on Monday as Asian stocks plunged on their first trading day after a long break, amid fears the coronavirus epidemic would hit demand in China.

Despite the selling in Asia, though, markets elsewhere showed signs of rebounding from a selloff that pushed global stocks into negative territory for the year.

Shares opened higher in Europe on relief that the UK had finally exited the European Union, although ongoing fears over the virus kept buying in check. [.EU]

Futures for U.S. stocks were higher, oil pared early losses while safe havens Japanese yen and gold stepped back from recent highs.

Aiming to head off any panic, China’s government took steps to shore up an economy hit by travel curbs and business shut-downs. But Chinese shares were deep in the red, with the blue-chip index down 7.8% to a four-and-a-half-month low.

The benchmark Shanghai Composite index lost $420 billion of its value and the yuan opened at its weakest level in 2020, sliding past 7 per dollar.

MSCI’s All Country World Index, which tracks shares in 47 countries, was down 0.2% on the day, touching its lowest since Dec. 16.

The pan-European STOXX 600 index was 0.2% higher in early London trading. Blue-chip British stocks added 0.4%.

While China’s losses were heavy, they were mostly a product of selling pressure that had built up over the Lunar New Year break, not a reflection of new market fears.

“The market seems to have reacted quite reasonably,” said Pala Asset Management portfolio manager

“There is no panic and no selloff of securities that are unrelated to the coronavirus. The government interventions have been so heavy, though, that you will see an impact on the global economy.”

Asian markets, more broadly, continued to sell off. MSCI’s broadest index of Asia-Pacific shares outside Japan was down for an eighth straight day, falling 0.9% at 527.39 points, its lowest since early December.

Japan’s Nikkei dropped 1% to the lowest since November and Australia’s benchmark index ended down 1.3%.

“The impact in Chinese equity markets has been in line with what futures were suggesting, so the market has taken the slump in its stride,” said Rodrigo Catril, Sydney-based strategist at National Australia Bank. “There was also some cushion from the new measures.”

A total of 361 people have died in China from the coronavirus. The first death outside the mainland was reported on Sunday in the Philippines.

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