* MSCI ACWI down nearly 10%, S&P500 in correction in just 6
days
* U.S. yield curve firmly inverted, investors fear recession
* Fed rate cut next month seen probable
* European shares fall 3%-5%
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, Feb 28 (Reuters) - Coronavirus panic sent world
share markets skidding again on Friday, compounding their worst
crash since the 2008 global financial crisis and pushing the
week's wipeout in value terms to $5 trillion.
The rout showed no signs of slowing as Europe's main markets
slumped 3-5% and the ongoing dive for safety sent yields on U.S.
government bonds, seen as probably the securest asset in the
world, to fresh record lows. GVD/EUR
Hopes that the epidemic that started in China would be over
in months and that economic activity would quickly return to
normal have been shattered this week as the number of
international cases spiralled. Bets are now that the Federal Reserve will cut U.S. interest
rates as soon as next month and other major central banks will
follow to try and nurse economies through the troubles and stave
off a global recession. "Investors are trying to price in the worst case scenario
and the biggest risk is what happens now in the United States
and other major countries outside of Asia," said SEI Investments
Head of Asian Equities John Lau.
"These are highly uncertainty times, no one really knows the
answer and the markets are really panicking."
Disruptions to international travel and supply chains,
school closures and cancellations of major events have all
blackened the outlook for a world economy that was already
struggling with the U.S.-China trade war fallout.
MSCI's all country world index .MIWD00000PUS , which tracks
almost 50 countries, was down more than 1% ahead of U.S. trading
and almost 10% for the week - the worst since October 2008.
Wall Street shares .SPX plunged 4.4% on Thursday alone,
their largest fall since August 2011. Futures pointed to a
modest 1% drop later, but the S&P 500 has lost 12% since hitting
a record high just nine days ago, putting it in so-called
correction territory. .N
Europe's airlines and travel stocks .SXTP have plunged 18%
in their worst week since the 2001 9/11 attacks in the United
States. .EU . The CBOE volatility index .VIX , often called
the "fear index", jumped as high as 47, its highest in about two
years, well out of the 11-20 range of recent months.
The index, which measures expected swings in U.S. shares in
the next 30 days, typically shoots up to around 50 when bear
market selling hits its heaviest and approached almost 90 during
the 2008-09 financial crisis.
PANDEMIC WARNING
In Asia, MSCI's regional index excluding Japan
.MIAPJ0000PUS shed 2.6%. Japan's Nikkei .N225 slumped 3.7%
on rising fears the Olympics planned in July-August may be
called off due to the coronavirus.
"The coronavirus now looks like a pandemic. Markets can cope
even if there is big risk as long as we can see the end of the
tunnel," said Norihiro Fujito, chief investment strategist at
Mitsubishi UFJ Morgan Stanley Securities.
"But at the moment, no one can tell how long this will last
and how severe it will get."
World Health Organization Director General Tedros Adhanom
Ghebreyesus said the virus could become a pandemic as the
outbreak spreads to major developed economies such as Germany
and France.
About 10 countries have reported their first virus cases
over the past 24 hours, including Nigeria, the biggest economy
in Africa.
The global rout knocked mainland Chinese shares, which have
been relatively well supported this month, as new coronavirus
cases in the country fell and Beijing doled out measures to
shore up economic growth. The CSI300 index of Shanghai and Shenzhen shares .CSI300
dropped 3.5%, to bring its weekly loss to 5% and the worst since
April.
Oil prices languished at their lowest in more than a year
having plunged 12% this week - the worst since 2016 - while all
the major industrial metals have dropped between 3% and 6%.
MET/L O/R
The appeal of guaranteed income sent high-grade bonds
rallying. U.S. yields - which move inversely to the price -
plunged with benchmark 10-year note yields hitting a record low
of 1.1550% in frenzied European trading. It last stood at
1.1847% US10YT=RR .
That is well below the three-month bill yield of 1.43%
US3MT=RR , deepening the so-called inversion of the yield
curve. Historically an inverted yield curve is one of the most
reliable leading indicators of a U.S. recession.
Expectations the Fed will cut interest rates to cushion the
blow are rising in money markets. Analysts say Fed funds futures
0#FF: are now pricing in about a 75% chance of a 25 basis
point cut at the central bank's March 17-18 meeting.
The European Central Bank historically lags the Fed but it
is now seen cutting by another 10 basis points by June.
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Coronavirus crashes global markets https://tmsnrt.rs/3cgbhXn
Coronacrash wipes $5 off world stocks https://tmsnrt.rs/2wbTwb5
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