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GLOBAL MARKETS-Stocks tumble over China epidemic worries

Published 01/30/2020, 05:10 PM
Updated 01/30/2020, 05:16 PM
GLOBAL MARKETS-Stocks tumble over China epidemic worries
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* MSCi world index down 0.5%
* Europe's STOXX 600 loses 0.8%
* Virus toll rises, WHO to reconsider declaring emergency
* Economists slash China growth forecasts
* U.S. yield curve inverts as safe-haven assets sought
* BOE rate decision at 1200 GMT, press conference due at
1230 GMT
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh

(Releads, updates price throughout, adds market comment)
By Tom Wilson
LONDON, Jan 30 (Reuters) - Stocks across the world tumbled
on Thursday as the death toll from a virus spreading in China
reached 170, forcing airlines to cut flights and stores to close
as the potential economic hit from the outbreak came into focus.
MSCI world equity index .MIWD00000PUS , which tracks shares
in 49 countries, fell 0.5% as European shares followed Asian
indexes into the red, stoking demand for the perceived security
of safe-haven assets from bonds to gold.
Europe's broad STOXX 600 .STOXX fell 0.9% in early trade,
with indexes in Frankfurt .GDAXI , Paris .FCHI and London
.FTSE lost between 0.7%-1.3%.
Adding to the gloom, disappointing earnings and trading
updates weighed further on blue-chip stocks. Royal Dutch Shell
RDSa.L fell 4.8% after fourth-quarter profit halved to its
lowest in more than three years. U.S. stock futures ESc1 pointed to a negative open on Wall
Street.
The number of confirmed deaths from the virus in China has
climbed to 170 with 7,711 people infected, and more cases are
being reported around the world. Chinese factories have extended holidays, global airlines
cut flights and Sweden's Ikea said it would shut all stores in
China.
One Chinese government economist said the crisis could cut
first quarter growth in the world's No.2 economy by one point to
5% or lower, with the crisis hitting sectors from mining to
luxury goods. Investment banks also started to put figures on what the
damage could be. Citi has said it expects China's 2020 growth to
slow to 5.5%, after previously predicting it to be 5.8%, with
the sharpest slowdown this quarter.
Still, others cautioned that estimates were hard to make.
"The economic impact will be determined by the extent to
which it spreads," said Michael Bell, global market strategist
at J.P. Morgan Asset Management, adding that hard evidence of a
hit to economic data was needed before the impact of the virus
could be judged.
Benchmark U.S. and German government bond yields fell
sharply, with 10-year German bund yields dropping to a
three-month low.
U.S. 10-year Treasuries also fell 3 basis points to 1.5600%,
their lowest since October US10YT=RR . The yield curve - as
measured by the gap between 10-year and three-month note and a
closely watched indicator of looming recession - fell again into
negative territory.
Gold edged 0.3% higher XAU= .

WHO DECISION
The World Health Organisation's Emergency Committee was due
to reconvene later in the day to decide whether the rapid spread
of the virus now constitutes a global emergency. is some concern about tonight's presser by the WHO.
The fear is that they might raise the alarm bells ... so people
are taking money off the table," said Chris Weston, head of
research at Melbourne brokerage Pepperstone.
Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS fell 2.1% to a seven-week low and
has now dropped for six straight sessions. Indexes in Japan
.N225 and Hong Kong .HSI fell 1.7% and 2.6% respectively.
Taiwan's benchmark index .TWII slumped 5.7% in its first
session since the Lunar New Year break.
Federal Reserve Chairman Jerome Powell acknowledged on
Wednesday the risks from any slowdown in the Chinese economy but
said it was too early to judge the impact on the United
States.
The Fed held interest rates steady on Wednesday at its first
policy meeting of the year, with Powell pointing to continued
moderate economic growth and a "strong" job market. In Europe, the pound GBP=D3 hovered around a one-week low
hit on Wednesday ahead of Bank of England Governor Mark Carney's
final policy vote, where the central bank appears close to
cutting rates for the first time in more than three years.
Financial markets are pricing in a 45% chance that the BOE
would cut rates to 0.5% from 0.75%. Economists polled by Reuters
two weeks ago predicted a 6-3 vote to keep rates on hold.
Elsewhere in currencies, a risk-averse mood ruled, with
exposed Asian currencies and commodities sensitive to Chinese
demand extending losses as economists made deep cuts to their
China growth forecasts.
The Chinese yuan CNH= reversed Wednesday's gains to fall
0.4% to its lowest level since Dec. 30., breaking through the
key level of 7 against the dollar.
The Australian dollar AUD=D3 and the kiwi dollar NZD=D3
both lost 0.3%.
The Japanese yen JPY= rose 0.2% against the dollar, while
the Swiss franc CHF= , also seen as a safe haven, also gained.
The dollar against a basket of six major currencies .DXY
was flat.
Oil prices, a barometer of the expected impact of the virus
on the world's economy, resumed their slide. Brent LCOc1 was
down 95 cents, or 1.8%, at $58.71 a barrel shortly after 0800
GMT. and has dropped 10% since Jan 20. O/R
For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/

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