World shares slump after Trump announcement on virus plans

AP – Shares fell in Europe and Asia yesterday after United States (US) President Donald Trump announced the US was stepping up its efforts to combat the virus outbreak that began in China, as the number of cases surpassed 81,000.

Germany’s DAX lost 2.2 per cent to 12,498.88 and the CAC 40 in Paris dropped 2.3 per cent to 5,59.99. In London, the FTSE 100 lost 2.5 per cent to 6,869.80. The future for the Dow Jones Industrial Average fell 0.5 per cent to 26,779.00 and the future contract for the S&P 500 was 0.6 per cent lower, at 3,092.20.

Trump told reporters late Wednesday that he was open to spending “whatever’s appropriate” to fight the virus, after the Senate Democratic Leader Chuck Schumer of New York suggested USD8.5 billion instead of the requested USD2.5 billion.

He put Vice President Mike Pence in charge of the response to the virus outbreak.

Trump said he didn’t believe a pandemic was inevitable, though health officials standing beside him warned more infections are coming.

And shortly after Trump spoke, the government announced that another person in the US was infected — someone in California who appears not to have the usual risk factors of having travelled abroad or being exposed to another patient.

People walk past an electronic board showing the share index outside a local bank in Hong Kong yesterday. PHOTO: AP

Traders are concerned the global economy could stumble as major industrial countries struggles to contain the outbreak. News of hundreds of new infections in China and elsewhere helped pull share prices lower yesterday in Asia.

“Previous crisis playbooks have all revolved around buying the dip in equities, so I wonder just how much further the fire sale will go before the market at least starts to scale in again,” Stephen Innes of AxiCorp said in a report. “But based on last night’s price action, it does appear that any bounce in stocks is likely to be short-lived. And eventually, the markets could fall deeper as investors start to think what’s the point of trying to pick the bottom in the short term.”

Japan’s Nikkei 225 index lost 2.1 per cent to 21,948.23, while in Australia, the S&P ASX/200 dropped 0.8 per cent to 6,657.90. Hong Kong’s climbed 0.3 per cent to 26,778.62.

In South Korea, where 334 new cases of the virus were reported, the Kospi dropped 1.1 per cent to 2,054.89.

The central bank downgraded its growth estimate for 2020 to 2.1 per cent from 2.3 per cent and said the virus outbreak would have a short-term impact on business activity, after the economy expanded at its slowest pace in a decade last year.

The Bank of Korea kept its key policy rate unchanged, at its current record low 1.25 per cent.

The Shanghai Composite index rose 0.1 per cent to 2,991.33, while shares fell in Taiwan and most of Southeast Asia.

Thailand’s benchmark rose 1.5 per cent after tumbling 5.1 per cent on Wednesday following reports of newly discovered virus cases.

Investors have been moving more money from stocks into bonds in the wake of the outbreak.

The yield on the 10-year Treasury was at 1.29 per cent yesterday, down from 1.34 per cent.

The yield on the three-month Treasury bill edged up to 1.51 per cent.

The inversion in the yield between the 10-year and the three-month Treasury is a red flag for investors because it has preceded the last seven recessions.

Benchmark crude gave up 60 cents to USD48.13 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday it lost USD1.17 to settle at USD48.73 a barrel. Brent crude oil, the international standard, shed 63 cents to USD52.18 per barrel. It dropped USD1.52 to close at USD53.43 a barrel in London.

Gold climbed USD7.60 to USD1,650.70 per ounce, silver rose 17 cents to USD18.01 per ounce and copper fell two cents to USD2.58 per pound.

The dollar fell to JPY109.89 from JPY110.40 on Wednesday. The euro strengthened to USD1.0942 from USD1.0884.