'A true black swan' - stocks and oil slump as Wuhan coronavirus hammers markets
- Stocks and oil slumped and gold climbed on Monday as the rapid spread of Wuhan coronavirus spurred traders to seek haven assets.
- The virus has infected more than 2,700 people, killed 80, and spread to more than a dozen countries including the US, France, and Canada.
- "The problem is for most investors this is just not a risk event they are prepared for - a true black swan in the making," one analyst said.
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Stocks and oil tumbled and gold climbed on Monday as traders scrambled to find havens amid the rapid spread of Wuhan coronavirus.
The virus has infected more than 2,700 people and killed 80. It has spread from Wuhan, China, to multiple Asian countries as well as the US, Canada, France, and Australia. Chinese authorities have locked down at least a dozen cities, restricting the movements of more than 40 million people, in a bid to stop the disease.
Tourism and retail stocks that rely on Chinese demand dropped sharply. Shares in Burberry, cruise-giant Carnival, and British Airways-owner International Consolidated Airlines Group (IAG) fell by more than 4.5%. Meanwhile, demand for government bonds pushed 10-year US Treasury yields to their lowest level since October.
"The virus has become deadly and it has caused a major panic in markets," Naeem Aslam, chief market analyst at AvaTrade, said in a morning note. "Shocks to the Chinese economy always have ripple effects and the commodity markets are deeply affected by it."
The sudden, unanticipated nature of the virus could exacerbate its impact on markets.
"The problem is for most investors this is just not a risk event they are prepared for - a true black swan in the making," Neil Wilson, chief market analyst for Markets.com, said in a morning note.
However, other analysts argued the health crisis might help to calm frothy markets.
"From a cold markets perspective the coronavirus might serve the purpose of taking some of the heat out of a market that has been rising rapidly for months," Jasper Lawler, head of research at London Capital Group, said in a morning note.
Here's the market roundup as of 9:40 a.m. in London (4.40 a.m. in New York):
European equities have dropped sharply. Germany's DAX fell 1.8%, Britain's FTSE 100 slid 2.2%, and the Euro Stoxx 50 slipped 1.8%.
Most Asian markets are closed, and the Chinese government has extended the Lunar New Year holiday by three days through to Sunday. Japan's Nikkei slumped 2%, its largest one-day drop in five months.
US markets are set to open lower. Futures underlying the Dow Jones Industrial Average and S&P 500 were down 1.2%, while Nasdaq futures slumped 1.5%.
Crude oil prices fell sharply with West Texas Intermediate down 3.3% at $52.40 a barrel, and Brent down 3.2% at about $58.
Gold rose 0.4% to $1,582 per ounce.
