Markets in Asia take hammering whilst China ramps up coronavirus response
Investor fears about the outbreak of a lethal new Chinese virus rocked Asian equities and oil prices Thursday as officials scrambled to curb the epidemic.
More than 570 citizens across China and Wuhan have been diagnosed with coronavirus, the town at the heart of the epidemic has been put under successful quarantine.
Shanghai tumbled 2.8 per cent in the final trade day before a week-long Lunar New Year market break, as hundreds of millions of people fly around China-raising concerns of further increasing contagion.
It was the bourse’s most significant pre-Lunar New Year decline on record.
Hong Kong’s declines were pared down marginally to end down 1.5 per cent while Tokyo was down 1.0 per cent.
OANDA senior market analyst Jeffrey Halley said it was “quite understandable that some money would be taken off the table until the true extent of the coronavirus issue becomes obvious.”
The outbreak also triggered concern owing to its similarities with SARS (Severe Acute Respiratory Syndrome), which in 2002-2003 killed hundreds of people.
“China’s importance in the overall global supply chain and the fact they are a huge export market for many countries… opens up a more unfavourable global outcome this time around,” Stephen Innes, AxiCorp’s chief market strategist, said in a statement.
In overnight trading, oil prices were struck with both global indices crashing by more than 1.3 per cent.
“Given the importance of China for oil demand and having the outbreak falling on the cusp of peak domestic travel season, the timing is particularly damaging,” Innes said.
So far, the World Health Organization has failed to announce a global health emergency – an unusual tool only used for the worst outbreaks.
On Wednesday, WHO president Tedros Adhanom Ghebreyesus said that China had taken “very, very strong measures” to curb the epidemic.
Li Shiyu, managing director at Guangdong Xiaoyu Investment Management, told Bloomberg News that the number of new cases in the coming weeks would depend on a turnaround in sentiment.
“The epidemic may reach a peak in two weeks and hopefully start to slow,” he added.
“If there is a trend for new cases to decline, I would consider buying shares again.”
EURO TARIFF THREAT
The pound dramatically strengthened overnight after a business report showed growing confidence among Uk producers, upping the odds of a Bank of England rate cut later this month.
But the London Stock Exchange closed 0.5 per cent lower in early trade, widening the declines on European markets on Wednesday amid the revived proposal from US President Donald Trump to place tariffs on imported vehicles and a grim auto sales outlook.
Trump cautioned again of a potential punitive tax of 25 per cent on European cars if Brussels failed to agree to a trade deal.
Carmakers ‘ shares fell with Daimler down more than two thirds-the Benz parent company also reports of a possible 2019 profit deficit due to massive new charges relating to its cheating scandal over diesel emissions.
Wall Street equities had ended down, with indices hardly disturbed by either trustworthy news of local results or the growing death toll in the coronavirus epidemic.