BEIJING (AP) – Global stock and oil prices tumbled yesterday as concern about the impact of a Chinese disease outbreak increased and a rating agency cut Hong Kong’s credit rating for official borrowing due to political tension.
Japan’s central bank left its key interest rate unchanged and upgraded its economic growth outlook.
London and Frankfurt declined and Shanghai, Tokyo and Hong Kong closed sharply lower after China announced a fourth death from coronavirus. The outbreak, centred on the central Chinese city of Wuhan, has sickened more than 200 people.
Authorities said some infections were transmitted person-to-person, increasing the risk the disease might spread faster during the Lunar New Year holiday, the Chinese-speaking world’s busiest travel season.
Other Asian governments stepped up screening of travellers from China, highlighting the potential impact on tourism. That prompted a sell off in of airlines, hotel operators and other travel businesses.
The outbreak “is developing into a major potential economic risk to the Asia-Pacific region,” said Rajiv Biswas of IHS Markit in a report.
Biswas pointed to the example of the 2003 outbreak of severe acute respiratory syndrome, whose economic impact was felt as far away as Canada and Australia.
In early trading, London’s FTSE 100 lost 1.1 per cent to 7,562.97 and Frankfurt’s DAX sank 0.7 per cent to 13,459.81. France’s CAC 40 was 1.2 per cent lower at 6,005.76.
On Wall Street, futures for the benchmark Standard & Poor’s 500 index and Dow Jones Industrial Average were off 0.4 per cent as markets prepared to reopen after a three-day holiday weekend.
In Asia, the Shanghai Composite Index fell one per cent to 3,063.56 and Tokyo’s Nikkei 225 retreated 0.9 per cent to 23,866.15.Hong Kong’s Hang Seng index sank 2.8 per cent to 27,985.33 after Moody’s Investors Service cut its government credit rating by one notch to Aa3 from Aa2.
Moody’s cited the lack of “tangible plans” to respond to issues highlighted by six-month-old anti-government protests and said that may reflect “weaker inherent institutional capacity” than previously thought. The protests began in June over a proposed extradition law and have expanded to include demands for greater democracy in the Chinese territory.
Seoul’s Kospi sank one per cent to 2,2239.69 and Sydney’s S&P ASX 200 lost 0.2 per cent to 7,066.30. India’s Sensex was 0.3 per cent lower at 41,381.52. Southeast Asian markets also declined.
Air China Ltd lost 3.2 per cent and Hong Kong’s Cathay Pacific Airways dropped 4.1 per cent. Japan’s ANA Holdings Inc fell 2.2 per cent.
Also yesterday, the Bank of Japan left its policy rate at -0.1 per cent and affirmed its commitment to increase holdings of government bonds. Board members raised their economic growth projection for the year that starts in April to 0.9 per cent from 0.7 per cent.
The European central bank also is due to make an interest rate decision this week.
ENERGY: Benchmark US oil fell 48 cents to USD58.11 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained five cents on Monday to close at USD58.58. Brent crude, used to price international oils, lost 65 cents to USD64.57 per barrel in London. It advanced 35 cents the previous session to USD65.20.
CURRENCIES: The dollar declined to JPY109.93 from Monday’s JPY110.18. The euro edged down to USD1.1091 from USD1.1094.