GLOBAL MARKETS-Stocks, oil hit by China virus fears, safe havens gain

* European shares slump at open
* Yen, Treasury notes in demand
* Many Asian markets closed for new year holiday
* MSCI All Country World Index hits two-week low

By Ritvik Carvalho
LONDON, Jan 27 (Reuters) - World shares fell to their lowest
in two weeks on Monday as worries grew about the economic impact
of China's spreading coronavirus with demand spiking for
safe-haven assets such as Japanese yen and Treasury notes.
The death toll from the coronavirus outbreak in China rose
to 81 and the virus spread to more than 10 countries, including
France, Japan and the United States. Some health experts
questioned whether China can contain the epidemic. The MSCI All-Country World Index .MIWD00000PUS , which
tracks shares across 47 countries, was down 0.42% to its lowest
since Jan. 13.
In Europe, stock markets slumped at the start of trading,
tracking their counterparts in Asia. The pan-European STOXX 600
index fell 1.4% to its lowest level since Jan. 14. .EU
Shares of mining companies .SXPP slumped 3.1%, dragged
down by their exposure to China, the biggest decline among the
major European subsectors.
"The coronavirus is an economic and financial shock. The
extent of that shock still needs to be assessed, but it could
provide the spark for an arguably long-overdue adjustment in the
capital markets," Marc Chandler, chief market strategist at
Bannockburn Securities, told clients.
In Asia, Japan's Nikkei average .N225 slid 2.0%, the
biggest one-day fall in five months. A Tokyo-listed China proxy,
ChinaAMC CSI 300 index ETF 1575.T , fell 2.2%. Many markets in
Asia were closed for the lunar new year holiday.
U.S. S&P 500 mini futures ESc1 were last down 0.9%, after
falling 1.3% in early Asian trade.
The ability of the coronavirus to spread is getting stronger
and infections could continue to rise, China's National Health
Commission said on Sunday. Nearly 2,800 people globally have
been infected and 81 in China killed by the disease.
China announced it will extend the week-long new year
holiday by three days to Feb. 2 and schools will return from
their break later than usual. Chinese-ruled Hong Kong said it
would ban entry to people who have visited Hubei province in the
past 14 days. "With most Asian markets closed, fast-money investors are
buying risk-off hedges like Treasuries and selling the Nikkei,"
said Masahiko Loo, portfolio manager at Alliance Bernstein.
"I think this would continue this week, until China markets
resume trading next week and the coronavirus outbreak subsides."
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was off 0.45%, although markets in China, Hong
Kong, Taiwan, South Korea, Singapore and Australia were closed
on Monday.
All three major Wall Street indexes closed on Friday, with
the S&P 500 seeing its biggest one-day percentage drop in over
three months. The S&P 500 .SPX lost 0.9%, the Dow Jones Industrial
Average .DJI 0.6% and the Nasdaq Composite .IXIC 0.9% after
the Centers for Disease Control and Prevention confirmed a
second case of the virus on U.S. soil. U.S. Treasury prices advanced, pushing down yields. The
benchmark 10-year note's US10YT=RR yield fell to a
three-and-half-month trough of 1.627%.
Elsewhere in bonds, the Italian 10-year yield fell to a
three-month low Monday after right-wing leader Matteo Salvini
failed in his bid to overturn decades of leftist rule in the
northern region of Emilia-Romagna on Sunday. GVD/EUR
In the currency market, the Japanese yen strengthened as
much as 0.5% to 108.73 yen per dollar JPY= , its
two-and-a-half-week high.
The euro EUR= last stood at $1.1031 to the dollar, up from
its eight-week low of $1.1019 on Friday.
The offshore yuan CNH=D3 dropped more than 0.5% to 6.9776
against the dollar, its weakest since Jan. 6.
The coronavirus outbreak also pressured oil and other
commodity prices.
U.S. West Texas Intermediate crude futures CLc1 plummeted
3.8% to a three-and-a-half-month low of $52.15. Brent LCOc1
shed more than 3% to a three-month low of $58.68 per barrel.
O/R
"Investors will react quickly to any sign of negativity and
this is no exception as China announces that the issue has
become an emergency. This could keep oil prices fragile until
the coronavirus shows signs of slowing down," said Mihir
Kapadia, chief executive at Sun Global Investments.
Spot gold XAU= rose as much as 1.0% to $1,585.80 per
ounce, the highest level since Jan. 8, as the coronavirus
outbreak pushed up demand for the safe-haven metal. GOL

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