European stocks drop, US equity futures fall as Asian markets decline
Stocks hit by negative developments in Hong Kong, worries about a deadly virus in China
Travellers wear face masks as they sit in a waiting room at the Beijing West Railway Station in Beijing. Photograph: Mark Schiefelbein/AP Photo
The Stoxx Europe 600 Index fell a second day, with financial firms among the biggest losers after UBS Group AG missed key profitability and cost targets, sending the shares down nearly 6 per cent. Contracts on the three main US equity benchmarks all pointed to a drop when Wall Street returns from the long weekend. Asian markets set the tone, with shares in Hong Kong slumping after a slew of negative headlines, from a credit rating downgrade and violent clashes at the weekend to a top official calling for new security legislation and mounting fears over the outbreak of a new coronavirus in the region.
The risk-off mood helped spur traditional haven assets, and the yen and Treasuries advanced while gold was steady. China’s yuan weakened by the most in three months.
The emergence of the illness in China is stirring memories of the SARS outbreak 17 years ago for some market watchers, though it’s not yet as serious. Still, easing trade tensions, a solid start to earnings season and signs global growth is bottoming have all combined to stoke stocks to multiple records this month; for many investors it may be time for a pause.
“For the market, the more meaningful driver still remains the economic cycle and earnings momentum,” Fan Cheuk Wan, Asia chief market strategist at HSBC Private Bank, said on Bloomberg TV. “Based on previous experience we have come across during SARS, the impact of the virus is likely to be short lived.”
Elsewhere, the Bank of Japan kept policy unchanged as expected, though raised its economic growth forecast for 2020. Oil dipped below $65 a barrel as ample global supplies offset the loss of exports from Libya. – Bloomberg