Asian shares tumble after Trump halts all travel from Europe

Global shares crumbled on Thursday after United States President Donald Trump said the US will suspend all travel from continental Europe as he unveiled measures to contain the coronavirus epidemic that has extracted a heavy human and economic toll worldwide.

US S&P500 futures slumped more than 3 percent, a day after the S&P 500 lost 4.89 percent, putting the index in a bear market, defined as a 20 percent fall from a recent top.

Euro Stoxx 50 futures dived more than 5 percent to their lowest levels since mid-2016. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 2 percent to its lowest level since early 2019, while Japan’s Nikkei 225 index lost 3.3 percent.

Australia’s benchmark S&P ASX 200  index dived 3.7 percent and South Korea’s Kospi fell 2.7 percent to a four-year low.

Trump announced on Wednesday night that the US will suspend all travel from Europe, except the United Kingdom, to the US for 30 days starting on Friday.

He also announced some other steps, including instructing the Treasury Department to defer tax payments for entities hit by the virus.

But investors were not convinced those measures will turn around the global economy as concerns grew that the number of infections could quickly snowball in many countries. The World Health Organization on Wednesday categorised the outbreak as a pandemic.

Safe-haven assets were back in favour, though many of them were still below recent peaks, which some market players suspect reflects a desperate bout of profit-taking to make up for losses suffered elsewhere.

Gold edged up 0.5 percent to $1,642.5 per ounce but still stood well below Monday’s high above $1,700.

The yield on the 10-year US Treasury note fell 8.7 basis points to 0.737 percent, though it is still more than 40 basis points above the record low of 0.318 percent touched on Monday. Some analysts say the rise in bond prices could reflect worries about an increase in government spending for stimulus. Bond yields fall as their prices rise.

The two-year yield fell 4 basis points to 0.458 percent, but stood well above Monday’s low of 0.251 percent.

Investors appear to be expecting more interest rate cuts in the US. The Federal Reserve cut its benchmark interest rate by half a percentage point on March 3 in a surprise move aimed at shoring up the economy against the negative fallout from the coronavirus outbreak.

The Federal Reserve fund rate futures are pricing in a rate cut of at least 0.75 percentage points and about a 50-percent chance of a 1.0 percentage point cut at a policy review on March 17-18.

“The initial reaction in financial markets shows that even after Trump spoke, investors feel they need to avoid risk,” said Junichi Ishikawa, senior currency strategist at IG Securities in Tokyo.

“Trump has outlined what he considered to be tough measures, but movements in stocks, stock futures, and currencies show that this is not enough to ease investors’ concerns. We are in a very difficult situation now.”

Oil prices extended losses as they were also hit by renewed weakness in the stock market and as Saudi Arabia and the United Arab Emirates announced plans to escalate a burgeoning price war against other producers.

US West Texas Intermediate (WTI) crude last traded up slightly at $32.14 per barrel, down 2.5 percent.

In the currency market, the US dollar slid against the safe-haven Japanese yen and Swiss franc.

The US currency fell 0.7 percent to 103.64 yen and lost 0.5 percent to 0.9333 franc.

The euro traded at $1.1272, flirting with its lowest level in a week, in the run-up to the European Central Bank’s policy meeting later on Thursday.

The ECB is all but certain to unveil new stimulus measures, including new, ultra-cheap loans for banks to pass onto small and medium-sized firms.

Markets have priced in a 10 basis point cut to its policy rate that now stands at minus 0.50 percent, already a record low. Many policymakers, however, have said further cuts could be counterproductive because they hurt bank margins to the point of thwarting lending.