Oil prices and Asian shares skidded lower on Monday as concerns grew over the potential impact of a China virus outbreak, with safe-haven assets such as the Japanese yen and US Treasury notes in greater demand.
The price of Brent crude oil fell below $60 per barrel for the first time since October, as Asian stocks fell in line with their Wall Street counterparts.
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Brent futures lost as much as $2.01, or 3.3 percent, to $58.68 on the London-based ICE Futures Europe exchange and traded at $59.34 as of 8:21am Singapore time (00:21 GMT). The contract dropped 6.4 percent last week. West Texas Intermediate fell as much as $2.04, or 3.8 percent, to $52.15.
Japan‘s Nikkei average suffered a steep 1.8 percent loss, on track for the biggest one-day fall in three weeks.
The United States‘ S&P 500 mini futures were last down 0.9 percent, having fallen 1.3 percent in early Asian trade.
“Media wins – all you see is headlines about the coronavirus, giving investors a reason to sell the markets,” said Takeo Kamai, head of executions services at CLSA in Tokyo.
The ability of the coronavirus to spread is increasing and infections could continue to rise, China’s National Health Commission said on Sunday, with more than 2,700 people globally infected and 80 in China killed by the disease.
China’s cabinet also announced it will extend the weeklong Lunar New Year holiday by three days to February 2 and schools will return from their break later than usual, state broadcaster CCTV said.
Market participants kept a wary eye on developments surrounding the coronavirus, which the World Health Organization (WHO) on Friday deemed “an emergency in China”, but not, as yet, for the rest of the world.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, although trade in the region has already slowed for the Lunar New Year and other holidays, with financial markets in China, Hong Kong and Australia closed on Monday.
“I’m starting to think cash is the right place to be for the next few weeks,” Stephen Innes, chief Asia market strategist at Axitrader, wrote in a note on Monday. “Any economic shock to China’s colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalization.”
All three of the biggest Wall Street indexes closed sharply lower on Friday, with the S&P 500 seeing its biggest one-day percentage drop in more than three months.
The index lost 0.90 percent, while the Dow Jones Industrial Average fell 0.58 percent and the Nasdaq Composite shed 0.93 percent after the Centers for Disease Control and Prevention confirmed a second case of the virus in the US.
US Treasury prices advanced on Friday, pushing yields lower for a fourth straight session, with the benchmark 10-year notes dropping to a nearly three-month trough of 1.67 percent.
In the currency market, the concerns about the virus supported the yen, often perceived as a safe haven because of Japan’s net creditor status.
The Japanese currency strengthened as much as 0.49 percent to 108.73 yen per US dollar, a two-and-a-half-week high.