* Hubei province reports 14,840 new cases
* European stocks follow Asia lower, U.S. futures down too
* 10-year Treasury yields drop below 1.6%, European yields
dip
* Euro struggles after slumping to near 3-year low
* Gold jumps 0.6%, oil stumbles back
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Feb 13 (Reuters) - A sharp rise in the number of
coronavirus deaths and infections unnerved world markets on
Thursday, as traders halted the rally in stocks and retreated to
the safety of government bonds and gold.
Europe's main markets followed Asia into red with London
FTSE .FTSE , Frankfurt's DAX .GDAXI and Paris' CAC 40 .FCHI
extending losses to 1% to 1.5%, as the euro EUR= also slumped
to near a three-year low against the dollar after a torrid
couple of weeks. .EU /FRX
China reported 254 new deaths, double the previous day's
toll and the fastest rise since the pathogen was identified in
December. Hubei province, where the virus is believed to have
originated, accounted for 242 of them and confirmed 14,840 new
cases, though it was amplified significantly by a switch to
using quicker computerised tomography (CT) scans - which reveal
lung infections - to confirm the virus.
Excluding cases declared using the new methods, the number
of new Hubei cases rose by only 1,508, the official data showed,
though for markets, the net result was more uncertainty about
how long problems are likely to persist.
AXA Investment Management's chief economist Gilles Moec said
the impact of virus could be part of a "perfect storm" for
Europe that hurts the economy for months and then gets
compounded by a heated trade battle with the United States.
"We started with the premise that this virus would be worse
than SARS and that has now become consensus," Moec said.
"So attention turns to who is hit the hardest and Europe is
among the usual suspects and Germany in particular, given China
is its biggest export market. So the reaction of the exchange
rate is probably rational," he added.
The euro bowed as low as $1.0864 EUR= and also crumpled to
a four-and-a-half-year low against the Swiss franc EURCHF= as
wary European FX dealers headed to their usual safe spaces also
wondering whether ECB rate cuts might be back in play.
Japan's yen strengthened past 110 per dollar JPY= , 10-year
U.S. Treasuries fell below 1.6% US10YT=RR and European yields
dropped 3 basis points. Oil slipped again too O/R and E-mini
S&P 500 futures ESc1 were down 0.5%, pointing to a fade in
Wall Street's recent strong rally. .N
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS had snapped two days of 1% gains to end 0.1%
lower as most markets across the region posted modest declines.
"There is no panic on this," said Frank Benzimra, head of
Asia equity strategy at Societe Generale in Hong Kong, since the
dramatic rise seems so far to be contained to Hubei.
The new methodology effectively lowers the bar for
classifying new infections, contributing to the spike in cases.
Chinese officials said the method is only being used in Hubei,
though it was expected to be gradually extended to other
regions.
The virus has also cast a shadow over life in Asia's
financial markets, with Benzimra himself logged in from home and
speaking to clients by phone as meetings are increasingly
cancelled, even in cities not subject to quarantine.
"Most markets were recouping their losses so that has
offered maybe some excuse to sell Asian markets," he said. "But
there is not much energy in this."
Japan's Nikkei .N225 fell 0.1%. Australia's ASX/S&P 200
index .AXJO retreated from a record high. The Shanghai
Composite .SSEC fell 0.6% and Hong Kong's Hang Seng .HSI was
0.3% softer. Gold rose 0.6% XAU= to $1574 per ounce.
FORECASTING GLOOM
There was more drama for Brexit-bound British markets too.
The sudden resignation of the country's finance minister
Sajid Javid caused a jump in both sterling and British
government bond yields amid bets his replacement, the 39
year-old Rishi Sunak, will beef up spending.
Javid's departure comes less than a month before he was due
to deliver his first budget and after just 204 days made him the
shortest-serving chancellor of the exchequer since 1970.
"I suspect he (Sunak) is likely to do whatever Boris Johnson
tells him to do," said Nomura economist George Buckley. "I don't
know what that means for the public finances and fiscal policy
but I doubt it will mean tighter fiscal policy."
The main focus remained the coronavirus though. Markets had
taken comfort from the World Health Organization's (WHO)
emergency programme head describing the apparent slowdown in the
epidemic's spread as "very reassuring".
Yet WHO chief Tedros Adhanom Ghebreyesus had also warned
that it should be viewed with extreme caution. "This outbreak
could still go in any direction," he said. Even before the rise in cases, economists were turning more
bearish on the likely hit to China's growth as factories idle
and supply chains are upended.
Citi on Wednesday again downgraded its 2020 GDP forecast for
China to 5.3%. The bank had forecast it to be 5.8% in its
January outlook, before cutting it to 5.5% two weeks ago.
Morgan Stanley believes a gradual, rather than sharp
recovery is the most likely scenario. That all bodes ill for
regional economies and has weighed on Asian currencies and
commodities.
The Australian dollar AUD=D3 , a liquid proxy for China's
economic health because of Australia's export exposure, retraced
its recent rally and traded 0.3% softer at $0.6716. FRX/
China's yuan was 0.1% weaker CNY= . CNY/ Rallying oil
prices stalled, with Brent crude LCOc1 down at $55.38 per
barrel, 15% below where it was before the coronavirus outbreak.
O/R
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