NEW YORK ― Shares skidded, oil prices sank and the price of gold surged on Monday as the number of people infected or killed by the viral outbreak that began in China surged, heaping more uncertainty on the economic outlook.
The decline promises a sharp drop on Wall Street when it opens and comes after finance chiefs of the Group of 20 major economies warned the outbreak that began in China is threatening to derail world growth.
Canada’s main stock index posted a triple-digit decline, dropping 278.61 points to 17,564.92 or about 1.5 per cent. In New York, the Dow Jones Industrial Average sank 3 per cent by mid-day, down around 900 points to 28,087.
Britain’s FTSE 100 sank 3.5 per cent on Monday, to 7,147, while the CAC 40 in Paris lost 3.7 per cent to 5,806. Germany’s DAX fell 3.6 per cent to 13,086.
The FTSE MIB in Italy, which has seen a surge in new cases that lead to the lockdown of towns and businesses, dropped 4.6 per cent to 23,620.
Police in the country manned checkpoints around quarantined towns as authorities sought to contain new cases of COVID-19 virus that have made the country the focal point of the outbreak in Europe and fears of its cross-border spread.
The price of gold, viewed as a safe haven in times of peril, jumped $35.80 to $1,684.60 per ounce, its highest in seven years.
Another safe haven, U.S. Treasuries, were in high demand. That pushes down the yield, and that for the 30-year bond hit a record low of 1.85 per cent.
The yield on the more closely followed 10-year Treasury was at 1.40 per cent. That yield, which is a benchmark for mortgages and other kinds of loans, was close to 1.90 per cent at the start of this year.
South Korea reported another large leap in new cases on Monday. The 70 latest new cases raised South Korea’s total to 833, and two more deaths raised its toll to seven. The latest updates sparked selling of shares, pulling the benchmark Kospi 3.9 per cent lower to 2,079.04.
Energy prices dropping
Uncertainties are weighing on energy prices as well. Benchmark U.S. crude lost $2.07 or 3.9 per cent, to $51.31 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gave up $2.86, or 5 per cent, to $55.64 per barrel.
The viral outbreak that began in China has infected more than 79,000 people globally and killed more than 2,600 people. China has reported 2,592 deaths among 77,150 cases on the mainland.
Travel restrictions, business closures and other efforts in China aimed at containing the spread of the virus have begun to disrupt supply chains and sales prospects for Apple and other big companies.
As the virus begins to disrupt other countries more severely ― with business events being cancelled in South Korea and Italy, for example ― some economists worry about a hit to economic growth that cannot be easily assuaged by authorities. Central banks can cut interest rates and governments can cut taxes, but that will do little in the short term to ease disruption to supply chains.
‘Prepare for more adverse scenarios’
Kristalina Georgieva, the head of the International Monetary Fund, said that the virus outbreak “could put the recovery at risk” and said “it would be prudent to prepare for more adverse scenarios.”
Expectations have been building among traders that the Federal Reserve will need to cut interest rates this year to help the economy. They’re pricing in a 90 per cent probability of at least one cut this year, up from an 85 per cent probability a day ago and a 58 per cent probability a month ago.
Officials in Beijing promised more help for companies and the economy, saying they still expect their growth targets can still be reached despite the outbreak.
Finance and planning officials on Monday said they are looking at how to channel aid to businesses after President Xi Jinping publicly promised over the past week to ensure farming and other industries recover quickly.
The government is looking at “targeted tax reduction,” interest rate cuts and payments to poor and virus-hit areas, said an assistant finance minister, Ou Wenhan. “We will do a good job of implementing large-scale interest rate reduction and tax deferral and ensure effective implementation as soon as possible,” he said.
― The Associated Press, with a file from HuffPost Canada