Stocks struggle as China virus sparks fear for world economy

NEW YORK (AFP) – Stocks struggled worldwide on Friday with most indices ending sharply lower amid mounting worries the coronavirus outbreak will dent global economic growth.

The Dow slid more than two per cent losing more than 600 points in its worst session since August as the three largest US carriers halted all service to China.

Just after markets closed, United States (US) authorities declared a public health emergency, and starting today will ban entry into the country of any foreign national who has travelled to China in the past two weeks, while quarantining Americans who have made the trip.

Major European markets slid more than one per cent, including London, where equities were weakened by a stronger pound in the final session before Britain was due to leave the European Union (EU).

Asian equity markets also were gripped by virus fears in a volatile end to the week, although Japan’s Nikkei finished higher.

Specialists work at the New York Stock Exchange. PHOTO: AP

At least 259 people have died and nearly 12,000 people have been infected by the novel coronavirus, while fresh cases were found abroad with more than two dozen countries now affected.

“Unless a cure is found, this could push a fragile world economic recovery into reverse,” warned Douglas McWilliams, deputy chairman at British research group the Centre for Economics and Business Research (CEBR).

Oxford Economics analysts said the outbreak would have a large short-term impact on Chinese economic growth and possibly curb global GDP growth by 0.2 per centage points this year.

“It’s increasingly apparent the disease is becoming an economic as well as a public health concern,” they said.

The World Health Organization (WHO) invoked a global health emergency on coronavirus – but stopped short of recommending trade and travel restrictions that could have had a bruising effect on China, a key global growth engine.

After initially applauding the WHO action, investor fear returned as Britain confirmed its first cases and Italy declared a state of emergency to fast-track efforts to prevent its spread after two cases were confirmed in Rome.

Quincy Krosby, chief market strategist at Prudential Financial, said the outbreak has raised doubts about whether growth would accelerate in the aftermath of the US-China trade detente.

“We expected to see global growth,” she said. “What this does is perhaps slows that down and adds more uncertainties.”

Krosby said the outbreak also could pose problems for companies with supply chain dependent on China. Separately, the EU’s official statistics agency announced on Friday that the 19-member single currency area already suffered a sharp slowdown after a turbulent year of Brexit uncertainty and trade spats with US President Donald Trump.

The eurozone economy grew 1.2 per cent over the year, down from 1.8 per cent in 2018 and well off the 2.7 per cent seen in 2017.

Losses were broad-based on Wall Street, but an exception was Amazon, which surged 7.4 per cent after releasing quarterly earnings results for the holiday period that trounced market expectations.