GLOBAL MARKETS – Fear of viruses weighs on Asian stocks and increases the offer for safe havens

* US Fed dissatisfied with inflation below 2%

* Virus death toll is increasing, and WHO is reviewing whether an emergency is reported

* Looking for stocks with soft, secure assets

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook

SINGAPORE, January 30 (Reuters). Asian stocks fell, while gold and bonds were in demand on Thursday as concerns over the spread of a new virus from China brought investors to safety.

The Federal Reserve left rates unchanged as expected on Wednesday, although President Jerome Powell’s comments on the low inflation outlook made US government bonds more attractive.

MSCI’s broadest Asia Pacific non-Japanese equity index fell 0.8% to a nearly seven-week low. The Japanese Nikkei fell 1%. Hong Kong’s Hang Seng extended the decline on Wednesday, and Taiwan’s benchmark index fell 1.5% in its first session since the New Year break.

Yields on ten-year US government bonds, which sank as prices rose, fell nearly 9 basis points overnight to 1.5790% and fell to 1.5750% in Asian trade, which was not far above Tuesday’s three-month low of 1.5700% ,

Gold gained 0.2% overnight to $ 1,579.60 an ounce.

Fed chairman Jerome Powell said after key rates were held as expected that the central bank “is not satisfied with inflation below 2% and is not a cap”.

Given the Fed’s target of 1.6% core inflation, this comment was interpreted as a scenario for a rate cut. Markets are now pricing in 10% that could come in March.

Powell also had a small rally in stocks on Wall Street, saying that the new corona virus, which has spread rapidly since it started in Wuhan, China, has further exacerbated global uncertainty.

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China’s National Health Commission said Thursday that the total number of confirmed coronavirus deaths in the country rose to 170 at the end of Wednesday as the number of infected patients increased to 7,711.

The World Health Organization’s Emergency Committee will meet again on Thursday to decide whether the rapid spread of the virus is now a global emergency.

“Within a few days, the corona virus shuffled the cards and the Fed’s policy is not as comfortable,” said Alan Ruskin, chief international strategist at Deutsche Bank.

“Like everyone else, the Fed will have a hard time quantifying the scale of the potentially large shock China is experiencing.”

Overnight, Wall Street changed from positive to flat after the Fed held interest rates stable. The Dow Jones Industrial Average and Nasdaq Composite rose about 0.05%, while the S&P 500 declined 0.1%.

The US stock futures traded in a series of mixed company results after hours.

Facebook Inc saw a decrease in costs and slowed sales growth, while Microsoft Corp and Tesla Inc saw earnings growth and production forecasts exceed expectations.

Samsung, which is listed on the Seoul Stock Exchange, the world’s largest memory chip maker and a guarantor of global tech demand, announced that December earnings were down a third as expected, but forecasted a turnaround this quarter at the chip trips.

SARS 2.0?

Elsewhere, risk currencies and oil have interrupted their recent decline as investors have assessed the potential impact of the virus.

The Chinese yuan off the coast, which had strengthened on Wednesday, again lost – if not much – to 6.9750 per dollar.

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The export-driven Aussie dollar remained stable, while the safe haven of the Japanese yen and the Swiss franc topped slightly.

Oil prices, which fell in anticipation of the virus weighing on global demand, moved close to lows on Monday. US crude was recently 0.56% lower at $ 53.03 a barrel. Brent crude was $ 59.81 a barrel.

Most analysts have studied the impact of the spread of severe acute respiratory syndrome (SARS) in 2002-2003, which, if only briefly, has affected tourism and self-confidence.

The economists of J.P. Morgan said on Thursday that a strong negative shock in the current quarter could push China’s growth from 6.3% previously forecast to 4.9% after 5.6% year-on-year. ING economists made a similar forecast on Wednesday.

J.P. Morgan anticipates an increase to 7% in the next quarter, provided current control measures may contain the virus.

“The 2003 SARS episode suggests that the shock could significantly impact economic activity, especially since the fear factor could limit people’s mobility,” the bank’s analysts wrote.

“The spillover effect from China to the rest of the world tends to be much larger than the SARS episode, both in terms of demand shock and supply shock,” they added, pointing out that China’s share of the global economy has grown more than ever since then tripled. (Reporting by Tom Westbrook; editing by Sam Holmes)

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