Global stocks and oil sold off sharply on Thursday after the US temporarily suspended travel from Europe in response to the coronavirus outbreak, triggering a flurry of panic selling that sent American stock futures into a tailspin.
President Donald Trump announced the move in a televised address hours after the World Health Organization said the crisis was now a “pandemic”. The number of cases of infected patients in the US has risen to 1,281. Mr Trump said the new travel restrictions, which excludes the UK, would take effect from Friday.
In Asian trading following the announcement, US futures pointed to another day of heavy losses on Wall Street, with the S&P 500 tipped to open down 4.7 per cent and Nasdaq futures dropping by the maximum of 5 per cent.
Overnight the Dow Jones Industrial Average fell 5.9 per cent into a bear market, or a 20 per cent fall from its February all-time high. Futures trading suggested the FTSE 100 would open 5.9 per cent lower, while European stocks were set to open 7 per cent lower.
“Stocks are cratering on the president’s remarks from the White House”, said Chris Rupkey, chief financial economist for MUFG Union Bank. “Stock markets around the world are in freefall as the spread of this deadly pandemic virus has the potential to slow the global economy to a crawl.”
Oil prices, which crashed at the start of this week on the prospect of a price war between Saudi Arabia and Russia, fell on the expectation the ban would mean more pain for the travel industry. International benchmark Brent crude was down 6.6 per cent at $33.43 a barrel, while US marker West Texas Intermediate fell the same degree to $30.81.
Japan’s Topix stock index followed the Dow Jones into a bear market as investors piled into US Treasuries. The 10-year US Treasury yield was down 11 basis points to 0.759 per cent.
Mr Trump’s comments also caused sharp gains for Japan’s yen, which added about 1 per cent to near ¥103 per dollar shortly after the president’s announcement. The yen, often viewed as a haven during times of stress, has surged in recent days. Dealers have speculated that Japanese authorities may engage in forms of stealth intervention to soften any move to ¥100 per greenback.
The Topix index, which fell 4.8 per cent on Thursday, is down by almost a quarter from its recent peak on February 6, putting the benchmark on track for its worst year since the 2008 global financial crisis.
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Equities sold off across the Asia-Pacific region with China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks dropping 2.2 per cent and Hong Kong’s Hang Seng falling 3.7 per cent. In Sydney the S&P/ASX 200 index tumbled 5.4 per cent.
Early hopes in Tokyo that the US president’s scheduled remarks might bring some stability to equity markets were quickly dashed, said traders.
“The Japanese market has just been a domino-run of all the fears relating to this virus, and here we go again,” said one fund manager.
“Now it’s basically an index of global fear with a strong currency making things worse,” he said, adding the market had in some ways become “untradable” for long-term money.
Additional reporting by Richard Henderson in New York