Asian shares follow Wall Street decline on growing virus threat
Asian shares fell on Friday following another Wall Street rout as disruptions to global business from the coronavirus beyond China worsened, stoking fears of a prolonged world economic slowdown.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.3 percent. Australian shares were down 1.64 percent, while Japan’s Nikkei stock index slid 2.29 percent.
Yields on 10-year United States Treasuries fell to a record low as investors increased bets that the Federal Reserve will follow this week’s surprise half-percentage-point rate cut with further easing.
Tumbling yields hammered the US dollar, which traded near a six-month low versus the yen and close to a two-year trough against the Swiss franc. Bond yields fall as their prices rise, as investors move their money into what they consider to be safer assets compared with stocks.
Oil prices rose on hopes that output cuts would protect the market from an expected decline in global energy demand.
The spread of a new coronavirus has accelerated so much in Europe, the United Kingdom and North America that investors who once played down the virus are now re-assessing the risks, which means more volatility in financial markets.
“Optimism overseas is fading and now people are really starting to question just how bad things will get,” said Takuya Kanda, general manager of research at Gaitame.com Research Institute in Tokyo.
“For some investors, Treasuries are the only place to park their money, but for others buying the dollar or stocks is out of the question.”
US stock futures rose 0.43 percent in Asia on Friday, but that did little to brighten the mood.
The S&P 500 tumbled 3.39 percent on Thursday. The benchmark S&P 500 ended down more than 10 percent from its February 19 closing high after last week logging its biggest weekly percentage decline since October 2008.
Officials and companies in the UK, France, Italy, and the US are struggling to deal with a steady rise in coronavirus infections that have in some cases triggered corporate defaults, office evacuations, and panic buying of daily necessities.
The flu-like virus emerged late last year in the central Chinese city of Wuhan and has since spread to more than 80 countries and took more than 3,000 lives. New infections have slowed in China, but there are concerns other countries are not prepared.
Travel restrictions and factory closures aimed at curbing the spread of the virus are expected to put downward pressure on global economic growth.
Many investors await the release of US non-farm payrolls later on Friday. Recent US economic data has been strong, but concerns about the epidemic are likely to overshadow any signs of a strong labour market.
The Federal Reserve and Bank of Canada responded to the economic threats by cutting interest rates by 50 basis points this week.
The yield on benchmark 10-year Treasury notes fell to a record low of 0.8980 percent in Asia on Friday.
Money markets were pricing in another 25 basis-point-cut from the current 1 percent to 1.25 percent range at the next Fed meeting on March 18-19 and a 50-basis-point cut by April.
Against the Japanese yen, the US dollar fell to a six-month low and was last at 106.30 yen. The greenback also sank to a two-year trough of 0.9447 Swiss francs.
Sterling traded near a one-week high versus the US dollar.
The euro eased slightly to $1.1215. Markets in the euro zone are pricing in a 93 percent chance that the European Central Bank will cut its deposit rate, now minus 0.50 percent, by 10 basis points next week.
US crude ticked up 0.87 percent to $46.3 a barrel. OPEC on Thursday agreed to a bigger-than-expected oil output cut to support prices that have been hit by the coronavirus outbreak.