Stock markets tumbled worldwide on Monday as investor worries about the potential economic impact of the coronavirus drove up prices of safe-haven assets such as the Japanese yen and government debt.
China‘s yuan slid to a 2020 low, and commodity-linked currencies such as the Australian dollar fell on mounting concerns about the coronavirus. The yen was the primary beneficiary, though its move higher was limited.
Crude oil prices dropped below $60 a barrel for the first time in nearly three months, while gold prices surged one percent to a nearly three-week high before paring gains.
Benchmark United States Treasury yields fell to lows last seen in early October while the yield on 10-year German bunds, the eurozone benchmark, fell to the lowest in almost two months.
Key indexes for British, French, and German equity markets slid more than two percent, as did pan-European markets. Stocks on Wall Street fell more than one percent.
Major markets in Asia – those including China, Hong Kong, Taiwan, South Korea, Singapore and Australia – were closed on Monday.
MSCI’s gauge of stocks across the globe shed 1.62 percent to a three-week low, while its emerging market index lost 1.59 percent.
The broad FTSEurofirst 300 index in Europe closed down 2.26 percent at 1,619.00, while the pan-European STOXX 600 index fell by the same amount.
More than 97 percent of stocks in the STOXX 600 fell, with many tumbling from record highs. The rout wiped about 180 billion euros ($198.3bn) of market capitalization from the index.
US stocks fell a bit less. The Dow Jones Industrial Average fell 453.93 points, or 1.57 percent, to 28,535.8. The S&P 500 lost 51.84 points, or 1.57 percent, to 3,243.63, and the Nasdaq Composite dropped 175.60 points, or 1.89 percent, to 9,139.31.
The Nasdaq had its biggest one-day decline since August 23, while for the Dow Jones Industrial Average, it was the biggest since October 2, closing lower for a fifth straight day in its longest losing streak since a five-day decline ending last August. The S&P 500 also posted its biggest daily drop since October 2.
Wall Street was overdue for a correction, said David Kelly, chief global strategist at JPMorgan Funds in New York.
“We have a slow and steady economy, a giddy and fast market, and eventually those two things have to meet in the middle somewhere,” he said.
The benchmark S&P 500 rose more than 12 percent from the end of September to an all-time high last week.
“The market was due for a fall, and coronavirus is a perfect case of an unknown unknown. An increase in uncertainty causes the market to fall. But the real question here [is] ‘Does it affect the global economy?'” he said.
Kelly said he did not expect the outbreak to significantly change global economic growth or corporate earnings.
Still, the potential for the virus to spread exponentially was cause for concern, said Matt Weller, global head of market research at GAIN Capital in Grand Rapids, Michigan.
Whether the virus scales to epidemic proportions “remains to be seen, but certainly that’s not priced into markets,” he said.
China extended its Lunar New Year holiday, and the Shanghai stock exchange said it would reopen February 3. More big businesses in China shut down and told staff to work from home as the death toll rose to 81.
The Nikkei share average in Tokyo slumped 2.03 percent, its biggest percentage fall since August, with tourism shares hard hit.
Infections could continue to rise, China’s National Health Commission said on Sunday. The total number of confirmed cases in China has risen to 2,835.
Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York, said investors are scared that the virus could lead to an economic slowdown, but at the moment, the market has overreacted.
“The market has been waiting for some sort of selloff to develop after a roughly 30 percent year and for a reason for it to happen,” Pavlik said.
Oil prices fell about two percent after earlier sliding by more than three percent.
Brent crude slid $1.37 a barrel to settle down at $59.32 – its lowest since late October and the biggest intra-day fall since January 8. US crude fell $1.05 to settle at $53.14 a barrel.
US Treasury prices advanced, pushing their yield lower.
Benchmark 10-year Treasury notes rose 23/32 in price to yield 1.6012 percent. The benchmark 10-year bund yield fell five bps to -0.414 percent.
Yields on tax-exempt municipals slid to all-time lows. The new 10-year MMD AAA GO yield of 1.18 percent slid below the previous record low of 1.21 percent set last August.
In the currency market, the dollar index rose 0.08 percent, with the euro down 0.05 percent to $1.1018.
The yen strengthened 0.36 percent versus the greenback at 108.89 per dollar.
US gold futures settled 0.3 percent higher at $1,577.4 an ounce, as spot gold climbed to $1,586.43 earlier in the session, the highest level since January 8.