Global markets slumped again on Friday, tracking heavy losses on Wall Street and staging a repeat of last week’s bloodbath on growing signs that the novel coronavirus outbreak will lead to a sharp economic downturn.
About $9 trillion has been wiped off global stocks in nine days, Bank of America said in a research note after US markets closed deep in the red again on Thursday.
Japan’s Nikkei 225 (N225) led declines among Asia’s main indexes on Friday, closing down 2.7%. South Korea’s Kospi (KOSPI) fell 2.2%. Hong Kong’s Hang Seng Index (HSI) dropped 2.3%, and China’s Shanghai Composite (SHCOMP) declined 1.2%.
In Europe, London’s FTSE100 was trading 3% lower on Friday morning. Germany’s DAX (DAX) was down 3.5% and France’s CAC40 was 3.6% weaker.
As Asian and European markets fell Friday, so did US stock futures. Dow futures were last down 580 points or 2.2%. S&P 500 and Nasdaq Composite (COMP) futures fell more than 2% each.
Wild market swings over the past few days indicate how nervous investors are about the unfolding outbreak. There are now nearly 98,000 confirmed cases of coronavirus worldwide, and almost 3,400 deaths. South Korea, Italy, Japan and Iran have become hotspots, recording the most cases outside of mainland China. And the rate of infection continues to climb in the United States and the United Kingdom.
Oil prices extended their downward slide, despite plans unveiled Thursday by OPEC to slash the supply of crude oil to world markets by 1.5 million barrels a day, assuming the cartel’s main ally Russia agrees at a meeting in Vienna on Friday. Those supply curbs would come on top of existing cuts of 2.1 million barrels per day as producers try to respond to a collapse in demand.
Brent crude futures, the global benchmark, were down more than 4% at $47.80 a barrel.
Investors, meanwhile, are still plowing their money into safe haven assets as fear takes hold. Gold continued its upward march, adding to gains on Thursday to trade 1% higher at $1,688 an ounce. And the 10-year Treasury yield sank below 0.7%, a new all-time low. Yields on 10-year bonds in developed economies are at their lowest level in 120 years, according to Bank of America.
Friday’s losses in Asia and Europe followed a nearly 1,000-point drop for the Dow (INDU) overnight. The steep declines came after the index recorded two 1,000-point gains and an 800-point loss earlier this week.
The S&P 500 (SPX), meanwhile, fell 3.4% The benchmark is down 6.4% for the year.
“Markets have shifted from pricing temporary China weakness to a more protracted global event, which will see a good chunk of global GDP go up in smoke,” wrote Stephen Innes, chief market strategist at AxiCorp, in a Friday research note.
Recovery delayed
On Friday, S&P Global Ratings downgraded its economic outlook for Asia Pacific, saying the coronavirus could wipe $211 billion from household, corporate and government incomes and slow economic growth in the region to 4% for the year. The ratings agency had earlier forecast growth of 4.8%.
“Our U-shaped recovery has been pushed back to later in 2020 due to a harder hit to China’s economy in the first quarter, viral transmission outside China, and tighter financial conditions,” the S&P economists wrote, referring to a slower return to normal than the fast V-shaped recovery that some economists had hoped for last month.
The ratings agency also forecast that China’s economy will likely grow by just 4.8%, and said growth could slump even more if infections spike as people return to work and governments reintroduce restrictions on activity.
The growing global outbreak will deliver shocks to Japan and South Korea’s domestic supply and demand, they said, adding that it will also result in weaker demand from the United States and Europe.
Some industries are expecting steep losses as the outbreak rages on.
Global airlines stand to lose $113 billion in sales if the coronavirus continues to spread, according to the latest assessment from the International Air Transport Association. Just two weeks ago, IATA had been expecting lost sales in the range of $30 billion.
Starbucks, meanwhile, said it expects a 50% decline in sales at stores in China during the January-March quarter.
— Laura He and Julia Horowitz contributed to this report.
