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Coronavirus: Stocks sink and havens rally amid mounting global concern — live updates

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Via Financial Times

Investors see volatility ahead

Expectations for volatility in the US equity market have spiked to their highest level since early October, as the CBOE’s volatility index, or Vix, rose 4 points to 18.68.

US shares were set to open sharply lower on Wall Street, with S&P 500 futures indicating a fall of more than 1.5 per cent. A rally in sovereign debt also gathered pace throughout the day’s trading as investors moved into the relative safety of government bonds.

China’s currency hit by rising angst that virus will slow growth

Hudson Lockett, the FT’s Asia capital markets correspondent, writes:

The offshore exchange rate for China’s renminbi fell almost 1 per cent on Monday with downbeat sentiment in Europe deepening losses incurred during the Asian trading day, as concerns mounted over the economic impact and continued spread of a deadly coronavirus that has forced authorities to lock down multiple Chinese cities.

The 0.9 per cent drop against the dollar to was the largest since December 13, when the currency pulled back from earlier gains made on the promise of a trade war truce with the US.

The offshore exchange rate — which moves unconstricted by the central bank-set trading band that limits moves by its onshore counterpart — is now also trading without immediate reference to the onshore rate.

That is because the larger and more stringently controlled onshore market, where the onshore exchange rate can only move 2 per cent either direction of a daily fix set by the People’s Bank of China, has been off since Friday for the lunar new year holiday. That has left offshore traders without an up-to-date steer from the central bank.

But markets are not completely without signals from Beijing. On Monday China’s banking and insurance regulator pledged support to companies suffering due to the outbreak “through measures such as encouraging appropriate lowering of loan interest rates”.

And if moves by the offshore rate get too big for policymakers to stomach, the PBoC also has tools at its disposal – such as issuance of offshore renminbi-denominated bonds – which can be deployed to mop up offshore liquidity and boost borrowing rates for the currency, making it more costly to bets against.

UK ‘working on plans’ for British nationals to exit Hubei

FT political correspondent Laura Hughes reports:

The UK foreign office has said it is “working to make an option available” for British nationals to leave China’s crisis-struck Hubei province.

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An FCO spokesperson said:

We are working to make an option available for British nationals to leave Hubei Province due to the heavy travel restrictions and increased difficulty of accessing consular or medical assistance.

The safety and security of British nationals is our number one priority. We continue to monitor developments and are in close touch with the Chinese authorities.

If you are a British national in Hubei Province and require assistance please contact our 24/7 number +86 (0) 10 8529 6600 or (+44) (0)207 008 1500.

Virus spreads abroad as Australia, South Korea and US report cases

International cases mount as official sources on Monday confirm those affected, writes Naomi Rovnick. Australia reports its fifth case of the virus, which is a 21-year-old woman who arrived in the country on the last flight out of Wuhan to Sydney before China imposed a travel ban.

South Korea confirms four cases, Hong Kong five while the US has reported cases in Washington State, Chicago, southern California and Arizona.

Taiwan, Thailand, Vietnam, Singapore, Malaysia, Nepal and Canada have also announced cases.

In the UK, 52 people have been tested for the flu-like virus but results were negative, the Department of Health and Social Care said on Sunday. The DHSC updates on coronavirus tests at around 2pm London time each day.

Travel, luxury and mining shares under pressure

Major stock indexes across Europe have posted severe declines this morning, with London’s FTSE 100 down 2.4 per cent and on course for its worst day since early October.

Household names in the airline, hotels, luxury and mining sectors are under significant pressure, as investor concerns over the economic impact of the virus escalate.

Big Read on coronavirus: is China moving quickly enough?

Zhang Luhua’s ordeal began when the 57-year-old Wuhan resident had trouble breathing, report Tom Hancock in Wuhan, Christian Shepherd in Beijing and Clive Cookson in London.

A doctor at Hubei Provincial People’s Hospital, one of the best in the city, said she might have a new virus that was starting to cause global alarm, but he could not test her. Four other hospitals then turned her away before a doctor told her she probably had the virus and should go home and “self-quarantine”.

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Wuhan, a city of 11m, is at the centre of an outbreak of a previously unknown coronavirus: nCoV, which has demonstrated some similarities with Sars, which killed almost 800 between 2002 and 2004. The global cost of Sars was estimated at $50bn. 

For the authoritarian government of President Xi Jinping, who is under pressure over the protests in Hong Kong and the victory of an opponent in the Taiwanese elections, the outbreak of a new virus is a public test of its ability to manage an international crisis — and one that cannot easily be blamed on malign outside influences. 

The Big Read, published on January 24: The new coronavirus: is China moving quickly enough?.

Over 30,000 under observation in China

Naomi Rovnick writes:

According to a statement released this morning by the Chinese National Health Commission, 30,453 people in China are under medical observation for the virus.

30 Chinese municipalities have now reported confirmed cases of Coronavirus to the government.

There are now 5,794 suspected cases of the virus in China

This includes 461 cases that are classed as “severe”.

How China’s slow response aided the outbreak

City authorities have claimed the air-and-rail travel ban on the city of Wuhan is evidence of decisive action to combat the spread of the disease.

But – as the FT’s Tom Hancock and Wang Xueqiao write – analysts have questioned whether the slow release of information made matters worse.

China only began a determined national drive after President Xi Jinping last Monday urged an all-out effort to curb the spread of the virus, and the Communist party threatened local officials who tried to cover it up.

The government’s dissemination of information on the Wuhan virus is a dramatic improvement on 2003, when authorities covered up the Sars outbreak. But it has remained a slow process, according to analysts.

The city’s bestselling commercial newspaper, the Wuhan Evening News, did not feature the outbreak on its front page for two weeks, between January 6 and January 19.

And Chinese censors also initially instructed media to stick to reprinting official reports on the virus from central government-controlled media, severely restricting independent reporting, according to multiple journalists.

Read the full piece here for more on the Chinese government’s response.

Some key points as virus fears weigh on markets and industries

The latest from the Chinese national health commission puts the death toll at 80.

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A few key points:

• China’s leaders are bracing themselves for a blow to first-quarter growth as the virus fears weigh on consumption, travel and manufacturing

• Global stock and oil markets have been hit while haven assets such as gold are up

• As the year of the rat dawns, the virus outbreak has led authorities to cancel events for the weeklong lunar new year period that began on Saturday

• Wuhan in Hubei province, where the virus originated, is in lockdown

• Shanghai has ordered companies not to open until February 9 while manufacturing hub of suzhou has postponed the return to work

• Manufacturing hub Suzhou postpones the return to work of millions of migrants for up to a week

European stocks on track for worst day in more than three months

A rolling stock market sell-off has gathered pace throughout the day, while investors have also moved into haven assets.

European stocks are on track for their worst day since early October, with major names in the travel, luxury and mining sectors tumbling. Brent crude is also taking a heavy hit, down more than 3 per cent and below $60 a barrel for the first time this year. Most Asian markets were closed for regional holidays today, but Japan’s Topix fell 1.6 per cent.

Investors have responded by piling into havens, with gold rising 0.8 per cent to $1,578 an ounce. Yields on 10-year US Treasuries, which move inversely to prices, fell 5 basis points to 1.6218 per cent, its lowest level since October. Japan’s yen strengthened past ¥109 to the dollar. China’s offshore renminbi exchange rate weakened 0.8 per cent to Rmb6.9820 a dollar.

Coronavirus fears spread

Welcome to the FT’s rolling coverage of the deadly coronavirus outbreak in China.

The disease has now killed at least 81 people in China and infected more than 2,500, leading authorities to extend the lunar new year holiday in some cities and impose an unprecedented lockdown on a population of about 40m around Wuhan in Hubei province.

The effects are beginning to ripple around the world, with global stocks falling sharply as concerns grow over the economic impact of the outbreak.

We will have reports and analysis throughout the day from the FT’s teams in China and around the world.

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