Stocks, oil prices tumble as China virus rattles markets

Global stock markets and oil prices plunged yesterday as panicked investors bolted into safer assets such as gold after China warned that the spread of a deadly new coronavirus was accelerating.

China extended its traditional Lunar New Year holidays to buy time in the fight against the epidemic, prompting neighbouring Mongolia to close its border after the death toll spiked to 81 despite unprecedented quarantine measures.

Fears of a repeat of the 2003 SARS outbreak, which also began in China, spooked investors who only recently pushed markets to record highs -- meaning there was plenty of room for a reverse.

All sectors were hit but luxury goods makers and airlines suffered particularly as Chinese tourist spending is a key factor for them.

Wall Street opened lower, quickly losing nearly two per cent as the global sell-off continued, adding to the pressure on Europe.

In mid-afternoon trade in Europe, London was down some 2.2 pc, with Paris and Frankfurt doing even worse with losses of some 2.6 pc each.

Oil prices were down around 2.5 pc, coming off early lows hit on concerns over demand from the world’s top energy consumer China.

‘Major panic’

“Market participants in Europe have grave concerns about coronavirus,” said Ava Trade analyst Naeem Aslam.

“The bottom line is that the virus has become deadly and it has caused a major panic in markets.”

Chinese President Xi Jinping warned over the weekend that China was facing a “grave situation” given the “accelerating spread” of the new SARS-like virus that has infected nearly 3,000 people across the country.

Analysts said there were growing fears the crisis could become as bad as the Severe Acute Respiratory Syndrome (SARS) outbreak that hammered markets and the global economy in 2003.

“Coronavirus fears have gripped the markets... as all the major European equity benchmarks are nursing big losses,” said analyst David Madden at trading firm CMC Markets UK.

“Stocks that are connected to China are feeling the pain... as traders are afraid the health crisis will curtail economic activity.”

The outbreak has led China to lock down the epicentre of the disease, Wuhan -- a city of 11 million people -- while imposing tight travel restrictions on a number of other cities including Beijing.

The move comes during the Lunar New Year holiday when hundreds of millions of people criss-cross the country and spend billions of dollars.

The government decided late Sunday it would extend the holiday and related school closures beyond the January 30 end date to “reduce population flows”, state media said.

Most Asian markets were closed for the Lunar New Year break but Tokyo was open and fell two pc. Bangkok plunged nearly three pc on worries about the Thai travel sector.

The flight to safety saw the yen rally against the dollar, with the unit now up more than one pc from eight-month lows touched earlier this year.

Gold, another go-to asset in times of turmoil and uncertainty, is heading back towards $1,600 per ounce and the sixyear peaks touched at the start of January.

While the main focus is on the spread of the virus, traders will also be keeping an eye on the release of earnings this week from top companies including Apple, Facebook and Samsung.

The oil market had already tumbled more than six pc last week owing to concerns about the effects on demand in China, which is the world’s number two economy after the United States.