European markets fall heavily on spreading coronavirus

Intense market stress stemming from the growing coronavirus crisis has spilled into the fourth consecutive day, with European stocks following Asia’s lead with heavy declines at the start of trading.

The Euro Stoxx 600 index of European shares fell by more than 3.5 per cent by lunchtime, with similar declines in the FTSE 100 and the German Dax. Since its January peak, the FTSE All World index has shed around $5 trillion (€4.6 trillion) in value. The Iseq was 3.8 per cent weaker.

US Treasury bond yields touched a record low of 1.2905 per cent in Asian trading after US health authorities confirmed the first likely case of community transmission of the deadly coronavirus on American soil, fuelling concern over the outbreak’s spread. Yields fall when prices rise, demonstrating strong demand for this haven asset.

Futures pointed to a decline of 0.8 per cent in the US benchmark S&P 500 index when it opens later in the day.

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Oil price falls deepened, with global benchmark Brent crude down 1.2 per cent at $52.80 a barrel, its lowest level in more than a year.

The latest bout of market selling came after the US Centers for Disease Control and Prevention late on Wednesday confirmed a possible instance of community transmission of Covid-19 in California.

The CDC said it had confirmed the infection in a person who apparently had not travelled to China recently or been exposed to another known coronavirus patient. There are now a total of 15 confirmed cases in the US.

Share trading on Wall Street whipsawed overnight with the S&P 500 ending a volatile session down 0.4 per cent on concerns over Covid-19’s spread outside China. The Wall Street benchmark has shed 8 per cent since hitting record highs earlier in February.

Coronavirus cases have spread to countries including South Korea and Italy and US president Donald Trump said other nations besides China might be "cut off" from US travel at some point.

Cases outside China

The World Health Organisation said on Wednesday that new cases reported outside China had exceeded those within that country for the first time.

Havens rose again in Asian trading on Thursday with gold adding 0.6 per cent to $1,650.38 per ounce.

"The price action since the weekend is a clear departure from the strikingly calm conditions of prior weeks," said Tim Graf, a strategist at State Street.

He said heightened risk and volatility due to the coronavirus “should keep the already-strong demand for safe haven assets in place”.

Hong Kong’s Hang Seng fell 0.4 per cent but Chinese equities gained at the open. The CSI 300 index of Shanghai and Shenzhen-listed stocks rose 0.2 per cent.

Sydney’s S&P/ASX 200 shed 0.6 per cent, making it the last large Asian stock benchmark to fall into the red for the year to date. – Copyright The Financial Times Limited 2020