Yahoo News China virus fear sends markets into global slide
MARKETS were sent reeling on Monday as investor concern deepened at the hit to the world economy and the rising death toll from the coronavirus “snake flu”.
After Beijing confirmed that 80 people have died and another 2744 are infected, markets across Europe tumbled. Airlines and fashion chains which rely on the Chinese market were among the worst affected. The FTSE 100 lost 152.64 points to 7433.34, with Burberry plunging 8% in early trading.
Christian Dior and LVMH suffered too, if less brutally. British Airways owner IAG fell 5%, as did rivals such as Air France and Lufthansa. Miners and bankers operating in the region also fell heavily. UK banks with offices in China said they were closed in line with official guidance.
Chinese firms have been telling people to work from home to try to stem the spread of the virus. China will not reopen for business until February 9 at the earliest. In Hong Kong, the stock exchange cancelled a ceremony on Wednesday to mark the first trading day of the Lunar New Year.
Chinese markets were shut for New Year in any case, but it is unclear whether they will reopen on Friday as previously planned. They are widely expected to sink when they do resume trading.
Wall Street was expected to follow European bourses down today, with reports that rockets have hit the US embassy in Baghdad further undermining confidence.
The oil price fell more than 2%, with Brent crude at $59.35, on fears that travel will be severely curtailed. Analysts are concerned that the virus will stymie a global economic recovery. Chinese GDP was already slowing.
Conor Campbell, financial analyst at SpreadEx, said: “Last Friday, the European markets were rebounding on the hopes that the coronavirus was being contained, that China was putting more cities on lockdown, and that the WHO had stopped short of announcing a global emergency. “Now those fears have come back with a vengeance. A weekend full of increasingly alarming headlines about jumping death tolls and known cases rising into the thousands — one expert has claimed there could be as many as 100,000 affected by the virus, a figure that dwarfs the official number — has sent the global markets reeling.”
City watchers say that if the WHO does declare a health emergency it could lead to restrictions on both trade and travel, which makes it difficult for investors to act with confidence until the situation is clearer.
The pound, at least, was steady ahead of a possible interest rate cut on Thursday. It climbed 0.17 cents against the dollar to $1.3090. Gold rose 0.5% to $1,578 per ounce, and yields on the 10-year US Treasuries fell to 1.6528% as prices rose thanks to demand from safe-haven investors.
