Asian shares sink on mounting worries over China outbreak

TOKYO (AP) – Asian shares skidded again yesterday on deepening worries over the expanding outbreak of a new virus in China.

Markets in Hong Kong and mainland China were closed yesterday for Lunar New Year holidays, while South Korea’s benchmark tumbled 3.4 per cent to 2,170.88 as it reopened after its own holidays.

Japan’s Nikkei 225 index lost 0.9 per cent to 23,128.24, while Australia’s S&P ASX/200 slipped 1.4 per cent to 6,988.60. Shares also fell in Taiwan, Jakarta and Singapore.

China has extended its national holiday by three days so that offices should reopen on Monday. Shanghai’s holiday was extended until February 9.

Overnight, a sell-off on Wall Street gave the Dow its first five-day losing streak since early August and handed the S&P 500 its worst day since early October. The latest bout of selling on Wall Street came after China announced a sharp rise in cases of the virus.

“How long and how deep the correction lower will last, depends both on the success of China’s efforts to control the viral spread, and the prevalence of its occurrence internationally,” Jeffrey Halley of Oanda said in a commentary.

Currency traders work at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea. PHOTO: AP

Airlines, resorts and other companies that rely on travel and tourism suffered steep losses. Gold prices rose as did bonds as traders sought refuge in safer holdings.

“Over the weekend you saw more cases,” said Quincy Krosby, chief market strategist at Prudential Financial. “That got investors and traders worried that this may be a longer event. The next question is, ‘What happens to global growth if this does continue and magnify?’”

The Dow Jones Industrial Average fell 453.93 points, or 1.6 per cent, to 28,535.80. The Dow had been down nearly 550 points. The S&P 500 index dropped 51.84 points, or 1.6 per cent, to 3,243.63. The Nasdaq lost 175.60 points, or 1.9 per cent, to 9,139.31. The Russell 2000 index of smaller company stocks gave up 18.09 points, or 1.1 per cent, to 1,644.14.

The virus has spread to a dozen countries, including the United States (US). Besides the threat to people’s lives and health, investors are worried about how much damage the virus will do to profits for companies around the world.

Even if they’re thousands of miles away from Wuhan, the interconnected global economy means US companies have plenty of customers and suppliers in China. It’s the world’s second-largest economy, and it accounts for six per cent of all revenue for S&P 500 companies over the last 12 months. That’s nearly double any other country besides the US, according to FactSet.

“Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy,” said Alec Young, managing director of global markets research at FTSE Russell.

Resort operators were among the biggest losers in the S&P 500. Wynn Resorts led all company’s in the index lower with an 8.1 per cent tumble, while Las Vegas Sands dropped 6.7 per cent. The companies get most of their revenue from Macao. MGM Resorts fell 3.9 per cent.

American Airlines lost 5.5 per cent and Delta dropped 3.4 per cent as part of a broad slide for airlines because of concerns international travel will decline amid the virus’ spread.

Booking companies and cruise-line operators also got hurt. Expedia Group fell 2.7 per cent and Carnival slid 4.7 per cent.

Chinese companies that trade shares in the US also declined. Search engine operator Baidu fell 2.9 per cent and e-commerce company dropped 4.8 per cent.

The technology sector, the biggest in the S&P 500, also saw heavy selling. Apple, which relies on China for supplies and sales, fell 2.9 per cent. Financial stocks also took steep losses. Citigroup dropped 2.2 per cent.

Energy stocks fell broadly as US oil prices fell 1.9 per cent on worries about reduced demand from China. Schlumberger skidded 5.1 per cent.

Utilities, real estate stocks and household goods makers held up better than the rest of the market, though they still finished in the red. The sectors are viewed as less-risky and are not as affected by international issues and developments.

Investors are also dealing with a heavy week of corporate earnings. Apple reported financial results yesterday. Pharmaceutical giant Pfizer and Starbucks also reported.

Boeing, McDonald’s, Coca-Cola and Amazon are also among some of the biggest names reporting earnings throughout the week that includes 147 S&P 500 companies.

ENERGY: Benchmark crude oil lost 28 cents to USD52.86 a barrel in electronic trading on the New York Mercantile Exchange Brent crude oil, the international standard, fell 37 cents to USD58.21.

CURRENCIES: The dollar rose to JPY108.97 from JPY108.89 on Monday. The euro strengthened to USD1.1022 from USD1.1019.