China stocks lead Asian markets down as virus fears grow

Reuters Tokyo | Updated on January 23, 2020

File photo   -  Reuters

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.07 per cent

Asian shares tumbled on Thursday, led by the biggest slide in Chinese stocks in more than eight months, as investors grew more anxious about the spread of a new flu-like virus in China just as millions prepared to travel for the Lunar New Year.

The likely hit to airline travel from the contagion sent oil futures skidding to seven-week lows, while the International Energy Agency's warning of an oil surplus and a larger-than-expected increase in US crude inventories re-kindled fears of excess supply.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.07 per cent.

Chinese shares suffered a steep 3.04 per cent loss, on course for their biggest daily decline since May 6, 2019, when US President Donald Trump's threats of additional tariffs on Chinese goods roiled financial markets.

Shares in Hong Kong also took a beating, down 1.91 per cent, while Japan's Nikkei stock index slid 0.99 per cent.

Euro Stoxx 50 futures were down 0.4 per cent, suggesting European shares are also heading into a rough trading session.

The Chinese yuan fell to a two-week low, while safe-havens such as the Japanese yen, gold, and US Treasuries rose as a travel blockade of the Chinese city Wuhan, the epicentre of the outbreak, started earlier on Thursday.

Deaths in China from the new coronavirus rose to 17 on Wednesday, with nearly 600 cases confirmed. The outbreak has evoked memories of Severe Acute Respiratory Syndrome (SARS) in 2002-2003, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.

“Markets are expressing concern about the growth outlook,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The coronavirus has introduced some caution. There is no reason to expect a global pandemic now, but there is some repricing in financial markets.”

US stock futures fell 0.2 per cent on Thursday in Asia.

The S&P 500 eked out a 0.03 per cent gain on Wednesday, but the overall tone on Wall Street was mixed as investors assessed the impact of the virus and braced for the corporate earnings season.

Cases have been detected in Beijing, Shanghai, Macau, Hong Kong, Japan, and the US. China put Wuhan, a city of 11 million people, on lockdown earlier on Thursday by closing public transportation hubs and suspending outgoing flights.

However, there are fears the virus could spread rapidly, because millions of Chinese travel domestically and abroad during the week-long Lunar New Year holidays, which start on Friday.

Air China, China's flagship carrier, skidded 4.06 per cent to the lowest in nine weeks. Shares of Australia's Qantas Airways Ltd fell 1.77 per cent, while Japan Airlines Co dropped 1.82 per cent and rival air carrier ANA Holdings Inc declined 1.84 per cent.

In the onshore market, the yuan fell 0.25 per cent to 6.9261 per dollar, reaching the lowest since January 10.

The yen rose 0.25 per cent to 109.58 versus the dollar, while the Swiss franc traded at 0.9684 against the greenback.

Gold, another asset that is often bought as a safe haven, rose 0.08 per cent to $1,559.73 per ounce.

The yield on benchmark 10-year Treasury notes fell to 1.7482 per cent in Asia as some investors sought the safety of government debt.

US crude fell 1.78 per cent to $55.73 a barrel, touching the lowest since December 3. Brent crude slumped by 1.52 per cent to $62.25 per barrel to reach the lowest since December 4.

The American Petroleum Institute said US crude inventories rose 1.6 million barrels last week, compared with analysts' expectations for a 1 million-barrel draw.

The markets took Trump's impeachment trial in stride, as he is widely expected to be acquitted in the Republican-controlled Senate.

Democrats accused Trump at the start of his impeachment trial on Wednesday of a corrupt scheme to pressure Ukraine to help him get re-elected.

Trump told reporters in Switzerland the Democrats did not have enough evidence to find him guilty and remove him from office.

Published on January 23, 2020

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