US Federal Reserve Chairman Jerome Powell acknowledged on Wednesday the risks from a potential slowdown in China – the world’s second-largest economy – but said it was too early to determine what the extent of the impact would be on the United States.
A Chinese government economist said on Wednesday that the country’s growth rate could drop to 5 percent or lower because of the virus. China’s economic expansion slowed to a near 30-year low of 6 percent in the fourth quarter.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7 percent to an almost seven-week low. It has dropped for six straight sessions.
Japan’s Nikkei dropped 2 percent. Hong Kong’s Hang Seng fell 1.7 percent and has lost more than 8 percent in the 10 days since the spread of the virus roiled markets.
Taiwan’s benchmark index slumped 5.8 percent, its biggest daily drop in 15 months, in its first session since the Lunar New Year break. The Taiwan dollar fell half a percentage point to its lowest this year.
Yields on benchmark 10-year US Treasuries, which fall when prices rise, hit a three-month low of 1.5600%.
China’s National Health Commission said on Thursday the total number of confirmed deaths from the coronavirus in the country climbed to 170 as of late Wednesday and the number of infected patients rose to above 7,700.
Infections have been reported in at least 15 other countries and in every province of mainland China.
Meanwhile, the corporate fallout has also continued to grow.
Swedish furniture giant IKEA said on Thursday that it has temporarily closed all its stores in China because of the outbreak of the new coronavirus.
Several major airlines including United, British Airways and Hong Kong-based Cathay Pacific have trimmed their services to and from mainland China.
Coffee chain Starbucks and Oreo maker Mondelez have warned that the outbreak could dent their earnings.
“At the moment, offline consumption – restaurants, hospitality, tourism, transportation, brick-and-mortar retail, entertainment, casino and gaming – are among the heavily-hurt sectors,” CMC Markets analyst Margaret Yang said in an email to Al Jazeera.
“The overall impact, however, is partially offset by a growing business of online consumption and demand for healthcare goods and services. Those include online streaming, e-commerce, food delivery, online entertainment, gaming, online education and medical consultation,” she said.
Most analysts have looked to the impact of the 2002-03 spread of severe acute respiratory syndrome (SARS), which pounded tourism and confidence, albeit briefly, as a reference point to how the current outbreak could play out.
JPMorgan economists on Thursday said a big negative shock in the current quarter could knock China’s growth from a previously forecast 6.3 percent to 4.9 percent, for a year-on-year figure of 5.6 percent. ING economists made a similar forecast on Wednesday.
“The SARS episode in 2003 suggests that the shock could lead to a large impact on economic activity, especially as the fear factor could restrict people’s mobility,” JP Morgan analysts wrote.
“The spillover effect from China to the rest of world tends to be much larger than the SARS episode,” they added, pointing out China’s share of the world economy has more than trebled since then.
The World Health Organization’s Emergency Committee is due to reconvene on Thursday to decide whether the rapid spread of the virus now constitutes a global emergency.
Elsewhere, investors sought safe-haven assets. Gold extended overnight gains to rally 0.2 percent to $1,579.45 per ounce.
Wall Street turned from positive to close flat.
Oil prices, a barometer of the expected impact of the virus on the world’s economy, resumed their slide. US crude and Brent crude each shed a percentage point, with Brent last trading at $59.21 per barrel.
China’s yuan currency, which had steadied on Wednesday, was again falling – dropping 0.2 percent to 6.9871 per dollar along with other trade-exposed currencies in the region.
The Australian dollar, New Zealand dollar and Korean won fell, while the safe havens of the Japanese yen and Swiss franc were firmer.